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Technology scouting: on the trail of hidden innovators

With the proliferation of technologies and the growing complexity of products and services, it no longer seems possible for any company, as large as it may be, to innovate alone. How to identify the right partners and develop a partnership over time? How to ensure successful exchanges? Technology scouting strives to bring answers to these issues. If developed correctly, it paves the way to technological intelligence. However, effective scouting implies many changes in the organization of the company regarding innovation.

November 2014
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With the proliferation of technologies and the growing complexity of products and services, it no longer seems possible for any company, as large as it may be, to innovate alone. How to identify the right partners and develop a partnership over time? How to ensure successful exchanges? Technology scouting strives to bring answers to these issues. If developed correctly, it paves the way to technological intelligence. However, effective scouting implies many changes in the organization of the company regarding innovation.

Faced with the proliferation of technologies and the growing complexity of products and services in a global economy, it no longer seems possible for any company, as large as it may be, to merely innovate: the human, technological and financial resources of any organization are limited. Besides, the need to reach their market as quickly as possible while minimizing risks pushes companies to open up and share their knowledge in (hopefully) win-win partnerships. In the most competitive sectors, relations based on the buyer/contractor model tend to disappear and give way to collaborative projects.

Networked innovation

The Open Innovation approach was not born yesterday. It was popularized by Henry Chesbrough through the comparative study of practices from Lucent Technologies and Cisco Systems: namely, the opposition between a cutting-edge but completed internalized R&D activity within the Bell Labs of Lucent and an innovation practice opened to its academic and entrepreneurial ecosystem in CISCO. If the image of the perforated funnel has now pervaded the world of innovation, one question remains: how can we identify and qualify the right partner(s) to develop a collaboration over time? Technology scouting, whose main aim is to help a firm identify and take ownership of the strategic skills or knowledge necessary for its future from outside its traditional ecosystem, provides a way to answer these questions.


It also has a little story of its own. The adventure of Procter & Gamble Group is often used as an example. In the early 2000s, the group wanted to make its crackers more fun. An employee came up with the idea of printing images on potato chips using inkjet technology. The project looked simple at first but quickly turned into a headache: researchers at Procter & Gamble (P&G) found out that each chip had to be printed as soon as it had been fried, while humid and at high temperature; besides, the process also required multiple colors, good resolution on thousands of chips per minute, using food inks that met stringent health and safety requirements.

P&G decided to proceed differently by writing a specification of the problem which was broadcast in the private and institutional network of the group, to see if a solution was not already known. A bakery in Bologna, Italy, happened to offer an answer. It was led by a researcher who also manufactured equipment. He had already had the idea to print images on breads and cakes and only needed a few adjustments to meet the needs of P&G. In 2004, "Pringles Print", with questions and jokes printed directly on the chips, was launched and experienced great commercial success. The product was developed in less than a year and cost only a fraction of what it would have if the project had been developed internally.

Building on this success, the group moved from a centralized approach of innovation towards an approach operating in a globalized internal network (“Managing Across the Border”) and set up its Connect and Develop (C&D) program designed to stimulate the internal Research and Development (R&D) of the company by drawing on external expertise. On a global scale, this led to the creation of a network of over 70 scouts – i.e. employees responsible for identifying these skills. Their mission: support and inform the company in its technological renewal.

Outsource scouting?

All companies do not have the resources of P&G. Depending on its size, the type of industry, its maturity regarding innovation and its openness to the outside world, a firm will be able to implement several strategies.

Initially, outsourcing technology scouting could be tempting. It is easy indeed for an external company to provide a technological solution to a problem. Among the pioneers, we include NineSigma, created in 2000 in the United States, which offers to connect companies with technological problems with organizations that are able to resolve them (universities, private laboratories, startups, consultants...) by writing a summary which describes the technological problem to overcome and then by organizing the relationship. Since then, other companies have been created, for example Presans or IdexLab in France. They are at the heart of the knowledge economy, by developing sophisticated search engines, analyzing publications, patents, conference proceedings. Among the millions of experts available on the planet, they are able to qualify and retain those that can offer a relevant solution, are open to collaboration. Last but not least, they help establishing the relation. Others, such as the B2Brains project, aim at using professional social networks like LinkedIn to identify experts. More recently, the Deucalion platform offered an original approach by proposing to technology holders to diversify their potential applications while acting as intermediary with companies that have a problem to solve.

The small world of innovation brokers or innovation intermediaries is experiencing rapid growth with numerous initiatives promoted by young companies but also by the public authorities. In another vein, regional agencies (in France: competitiveness clusters, SATT, Regional Agencies for Economic Development) also includes these intermediation services between technology providers, whether university laboratories or companies, and firms with specific needs. Often free, this service covers a much smaller geographical or technological space than private offers. Technology scouting often starts with a perfect integration into its territory and the knowledge of the ecosystem of regional and national innovation. This last fact is crucial for SMEs that generally lack the resources to lead an international network.

However, privacy or organization problems may quickly lead the company to fully or partially internalize its technology scouting activity. This cultural change aims primarily large groups and revolves around actions of external technological renewal.

Corporate strategies

First of all, although it may seem obvious, companies need to work on their reputation to become a “Partner of Choice” for innovation research labs and startups: Philips is on that path. Other companies, such as Google, build an image of "model employer" to target specific individuals, future employees with particularly sought-after skills. This allows the company to attract the best talents and to have the choice of its exclusive partners.

Very quickly, this implies an organization that facilitates the relationship between the SME and the large group, starting with the expression of needs and the collection of responses. This includes, for example, the creation of a website on the model of the SEB Group with a back office that processes the proposals within a reasonable time. It also involves a set of best practices such as internal and effective tools of knowledge management for project monitoring, a specific functioning in procurement (SME treasuries are often fragile), intellectual property policies favorable to SMEs allowing them room for maneuver and keeping their independence from their major customers, an opportunity to talk about partnership... The crucial problem of the relationship between a large group and an SME - a problem in its own right - is also the first barrier that needs to be overcome when addressing the topic of Open Innovation and technology scouting. This issue is now widely explored: it is worth mentioning the initiative of the Paris Region Lab and its Open Innovation Club which comprises most of the major groups based in France and a very large number of startups aimed at providing concrete answers.

Effective scouting measures always cover two types of activities. One is rather sedentary and involves extensive analysis of the scientific and patent literature databases with the aim of identifying the best research teams, mapping collaborative networks or developing technology roadmaps. It can be complemented by an analysis of financial flows (mergers/acquisitions, fund raising) and funded collaborative projects. While the implementation of these tools is already an important step towards a better understanding of the external environment, it certainly isn't enough, for two reasons. The first is directly related to the subject matter: a project takes time in taking shape; a publication is the result of a research and will be published almost a year after obtaining results; a patent remains confidential during 18 months; the analysis of databases is a picture of the situation about a year and a half later. Furthermore, an innovation project needs to build up on a relationship of trust, which requires early contact with the holders of the technology.

This is why in addition to technological intelligence software tools, a network of experienced individuals is also necessary. These scouts are often experienced, they possess a detailed knowledge of the innovation process and good interpersonal skills; they are bilingual, with a strong credibility within their firm; they have a broad technological expertise; they are autonomous, managed remotely without clearly defined objectives. Scouts have a very special and rare profile. All the more so, because their integration in their hunting grounds will take time and they will often end up hunted themselves for the network they have been able to establish and their extensive knowledge.

The most remarkable initiatives have emerged from the most competitive sectors. In France, the STELLab (Science Technologies Exploratory Lean Laboratory) project, initiated in 2011 by the scientific governance of PSA Peugeot Citroën is remarkable because it allows the company to have a complete and efficient coverage of its technological environment. By providing long-term visibility and being present with academic partners in the OpenLabs, by rolling out a network of "technology scouts", both within centers of scientific excellence such as the EPFL in Lausanne and in Singapore (the so-called STELLab@xxx) and within its production facilities in Wuhan (China), Sao Paulo (Brazil) and Vigo (Spain), the group become a preferred partner of research laboratories, startups and SMEs that have technologies to offer. An experienced contact will then actively promote these innovations in the group's headquarters.

Among the pitfalls lying on the way of ideas stemming from the outside, the most common is, indeed, the issue of integration within the internal operating processes of company. When the innovation project steps from the exploration phase into the development, production or marketing phase, its success is closely linked to the company's integration capacity defined as its ability to recognize, transform and apply new external information to commercial use. The organization is then confronted with a truly new problem or expertise: it has to overcome its operational routine and define the financial and human efforts needed in order to absorb innovation. This shows the specifics of the issue for large groups. The latter must take the decision to sacrifice part of their short-term resources and possible benefits related to specialization in order for their engineers to open up to knowledge from new fields. The “sponsorship” of the discovery into its most advanced phases is therefore crucial and large organizations that adopt a policy of open innovation often establish a project incubation process. Everything will be made to change the famous NIH (Not Invented Here) into PFE, Proudly Found Elsewhere.

Among the technological scouting tools, another tool has gained momentum in the recent years: corporate venture capital. Looking for technological innovations, large industrial groups have created investment funds to be able to make investments in high-potential startups and SMEs related to their activity. This may be a way to "capture" new technologies but also to position themselves for new use or even, for an industrial group, to shift back gradually into the service sector by taking shares in a startup that could be leading in activities based on the group's products a close future. For example, General Motors' participation in the RelayRides startup in the US or, in the field of car sharing, the Google’s noted investment in Uber. Generally, the profitability isn't the main driver as for traditional investment funds. The most obvious benefit of this Vertical Coporate Venturing is the ability of the startup to contribute to the open innovation policy and develop the activity of industrial owner(s) of the investment fund. In order to achieve this, they often put their resources at the service of the SME and thus have a leverage effect on the activity of the latter by facilitating its production or its market access, while strengthening its capital to make it a financially strong partner. Besides from the possibility of strengthening scouted startups, these funds are often an observation post for new trends, new business models and the use of new technologies. The innovation or prospective management of the group that owns the fund should be represented there...

From scouting to technological intelligence

Based on the organization set up by Deutsche Telekom, René Rohrbeck showed that for technology scouting to be effective, it requires a change in the organization of the company regarding innovation. This opens new perspectives. If, as we have seen, technology scouting aims at identifying and facilitating the absorption of key technologies by a firm, it also feeds directly two other crucial activities. First of all, the technology management, whose role is to understand and build a business case for specific technologies within the organization, including arbitrating on R&D budgets. Then, technology forecasting which aims at imagining the future, planning and setting priorities regarding the R&D projects that need to be undertaken.

An organization that is open to external innovation has all the tools and methodologies it needs to switch to the technological intelligence. When a firm is able to identify the technology leaders who will become its future suppliers or partners, to analyze inventive activities and strategic acquisitions of its competitors and partners, to monitor technologies that could replace its own, to analyze new uses related to new technologies on a global scale, we are in the field of external strategic analysis.

As the offensive part of economic intelligence, this field has developed mainly in the United States, India and more recently in China, around the work of Michael Porter. European countries have adopted the idea of having a genuine economic intelligence policy, but very often, only the defensive part – the protection of strategic information – is actually implemented. This part is now obsolete. First of all, because most acts of espionage are linked to internal factors or to the mobility of employees. But mostly because with the emergence knowledge economy, knowledge producers are encouraged to disclose their science. Researchers publish among other reasons because it is part of their evaluation, public authorities themselves encourage SMEs to lodge patents they don't have the means to defend themselves in court; startups meet investors; employees are increasingly mobile and disclose their expertise and their availability on professional social networks; it is easy to trace technology partnerships through collaborative projects...

Searching for information, analyzing weak signals has become a strategic activity for companies. There can be no innovation and competitiveness without full awareness of the environment: to create new things, one must know of the existing ones. Technology scouting and intelligence will therefore become, beyond any doubt, in the coming years, a key activity for any management of innovation and strategy.

Michael Haddad
Chairman, X Open Innovation, Applied Optics & Algorithmics Pole Manager, L'Oréal Recherche & Innovation