Co-innovation: myths and reality

innovationSoftware vendors are cozying up to customers big time. The market for greenfield sales is done, there will be an occasional shuffling of the deck chairs but that’s pretty much it. Any future growth and especially in ERP has to come from revisiting the customer base to sell them more. But what do you do if they have the full ERP suite? This is where co-innovation comes in.

Earlier in the week, I was musing on the topic with Vijay Vijayasankar, formerly associate partner at IBM and now part of Vishal Sikka, executive board member SAP’s team who are tasked with helping customers build new classes of application. The idea is that customers take advantage of HANA, SAP’s much discussed in-memory database and development environment. To date, much of the action has been around working with customers on the one hand and encouraging the developer community on the other hand.

In a piece entitled, Co-innovation – It Takes Two To Tango, Vijay makes a number of important points, starting with:

I am of the firm opinion that a vendor should not claim innovation on any product or service – only a customer should. I am in two minds these days on whether analysts and bloggers are good judges of innovation. But till I get some clarity of thought, I am going to stick with customers as the sole judge.

I am with Vijay on this. Customers are always the final arbiters of what is and is not innovation. But then he makes the crucially important observation:

One reason for this balance being hard to strike is because vendor solutions are not always outcome based. Almost every customer has budget to make more money – be it revenue increases or cost reductions. But not all vendors and customers can articulate IT solutions in the context of a business solution. It is an in-exact science to begin with.

This is where we diverge. My sense is that technology companies are overly fond of talking technology without necessarily engaging the business in ways that matter. Customers on the other hand also do a less than stellar job in articulating what needs to happen. End result? Often chaotic, rarely optimal and a continuation of the ‘geek v suits’ arguments that plague the industry and deliver little value back to customers.

I have met customers who do ‘get it’ and will be publishing a video I shot with one CIO who talks about two issues: speed to outcome and change management.  What needs to change?

Four steps to successful co-innovation

  1. Customers and vendors need to meet each other half way. It’s not enough to finger point when things don’t work out the way they were initially thought.
  2. Consultants need to spend far more time in the pre-blueprinting phase getting to know about customer needs. Starting off with ‘we need a bank systems refresh’ is hardly a good basis for project and technical assessment.
  3. Vendors – or rather the consulting organizations – need to get away from the constant change order mentality that says something like: ‘anything that deviates from plan is a change order and you need to pay us more money because we didn’t budget for that.’
  4. Much is made of top level buy in but in reality you need top level engagement all the way through to the people who will end up using the new system. Engage users early and often, iterating along the way.

This is not an exhaustive list but it is a good place to start and one for which there is evidence of success. And in fairness to Vijay, he makes many of the points in his own way. There is one more step though that the industry sorely needs. Vijay kind of references it where he says:

Vendors will need a solution that they can lift and shift to other customers . That will typically mean – some features specific to the given customer they are working with might not fit a “framework” model. Customers on the other hand will want an out of the box solution that they don’t need to customize any more.

The days of having a solution custom built that will deliver single business value are done. Sooner or later, everything gets commoditized. Going one step further, value achieved is not about the functionality a company thinks will give it an edge but about the way it implements, the degree to which it handles change and the way it uses the softwares in the context of the business process problems it is solving. The truly innovative companies quickly discover this and once they have siphoned off value, move onto the next thing.

Vendors on the other hand should always be looking for ways in which they can take what they’ve learned from projects and push it to a wider audience. Claiming ‘custom’ for everything doesn’t wash. If, after the first iteration, the vendor cannot offer 80 percent to other customers then there is something wrong.

Times are changing and customers demand more for less. There now needs to be a fresh kind of partnership between vendors and customers. One that allows innovation to thrive but doesn’t do so at the expense of the market as a whole. One that leaves lawyers at the door because the work is being done between trusted partners.

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