offshoring and outsourcing

How Co-Innovation Delivers ROI in Software Product Development

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Editor’s note: How does a co-innovation strategy for R&D produce greater value? What type of company is the ideal partner for co-innovation? K. D. Singh, VP & Vertical Head, Computing – Wipro, explains what to consider in this product development strategy.

SandHill.com: What impact does a co-innovation arrangement have on the R&D investments that a company makes?

K. D. Singh: Co-innovation is handy in developing and establishing competitive positions. When a company invests in R&D, its strongest desire is to get results out of the lab and into the market, fast. The company or ISV often has prized research and engineering talent and impeccable domain knowledge to build the product. But successful deployment and monetization is an altogether different challenge. This takes time to resolve and the role that system integrators (SIs) can play as co-innovators in such instances is remarkable.

SandHill.com: What specific value does a system integrator bring?

K. D. Singh: Based on their broad market and implementation experience, SIs provide learning and insights that improve the product features, increase adoption and thus enhance ROI several fold. The improvements could be related to product versions, to localization, to customer segments, or to user experience and deployment of best practices. ISVs, on their own, have limited insights in this regard.

On the other hand, an SI has field experience. That field experience data can be polled and fed back to R&D to create superior products. This also leads to the happy outcome of shrinking time-to-market.

The question we need to also ask is: which innovation partner delivers the highest ROI? We’d say that working with large SIs tends to produce higher ROI.

SandHill.com: Is cost reduction a benefit of using an SI as a co-innovation partner?

K. D. Singh: Reducing costs should not be the goal or priority of a co-innovation arrangement. A drive for higher revenue is the right impetus for co-innovation.

SandHill.com: It seems that co-innovation is more of a collaborative effort than just strategic cooperation. But some companies are not adept at collaborating. How does this impact the outcome?

K. D. Singh: Unfortunately, it’s true that several companies are not adept at collaboration. Some may be cautious in sharing their knowledge; some may be reluctant to share their resources. This is especially true for very large ISVs that have legacy products and longstanding industry leadership positions. Recognizing these barriers to collaboration and overcoming them is important to success.

To make co-innovation successful, the partner should make a conscious effort to bring two things to the table:

  • Learning and insights of how the product is used / deployed across the industry
  • A seasoned leadership team that has been involved with the ISV and has rich experience working in the ISV’s domain

The first is low hanging fruit and the ISV sees immediate merit in such collaboration. The advantages of this are tough to ignore: The SI partner brings learning from the ecosystem that helps product development and deployment.

The second is what we term “collaboration through impedance match.” Both partners can see what is required. They anticipate requirements and change rather than react to change. It helps both realize their co-innovation goals.

Like everything else, co-innovation also needs to be a targeted process against specific areas. Judicious assessments of areas that need co-innovation improve the chances of success.

SandHill.com: What other skill sets or mindsets, besides collaboration, are necessary for success in co-innovation?

K. D. Singh: For success, both parties must “manage to outcome” as opposed to focusing on optimizing costs. The ISV should not focus on interim milestones (features) but on the final outcome (meeting market needs).

This means that project management and tracking has to be aligned with the philosophy of “manage to outcome.” Such an approach calls for flexibility. Often there will be a need to align and re-align resources to reach the end-state. Does the ISV have the right mindset for this? Is the ISV able to create elevated governance and leadership that can navigate change and drive to achieve a competitive position rather than concern itself with cost management? These are the questions that need answers.

Also, ideally, the co-innovation team should comprise of senior leads who can work in the shoes of the ISV. They should know the key concerns of the ISV and those that are likely to crop up. The team should not be picked with the aim of filling in talent gaps or lowering cost. The focus should be on timely release of the product. So, the expectations of both partners should be aligned rather than be dependent on a risk-reward arrangement for success.

SandHill.com: Please describe an example of a co-innovation arrangement that was structured correctly to achieve the desired benefits.

K. D. Singh: A leading ISV was developing a platform to manage hand held / embedded devices and wanted to get it out in the field within 18 months. The product/ platform did not exist. The ISV was constrained by a lack of readily available in-house resources. It had the option of investing six months to assemble the team or align with a large SI like Wipro that would bring the talent and function as an extension of the ISV. They chose to partner with Wipro.

More importantly, they also sought the benefits of working with a global SI who would bring experience from having deployed and managed embedded devices and funnel that knowledge into their product development cycle.

However, once a product is built, the ISV faces an uphill task in terms of a pilot, acquiring feedback, and putting that knowledge back into product design. Seeking us out as a co-innovation partner proved advantageous to the ISV. We launched a pilot with a large customer on behalf of the ISV.

Broadly, there are some clear benefits that we brought in this instance of co-innovation:

  • Reduced time-to-market
  • Provided access to customers for field trials and pilots
  • Provided quick feedback and assessment
  • Helped build a superior product

SandHill.com: What best practices have you found that help to unlock the full potential of a co-innovation arrangement?

K. D. Singh: Flexibility and adaptability are the keys to unlocking the potential of co-innovation. Next is the ability to anticipate change. Typically, this is rooted in working within the domain that the ISV is involved in. Finally, it is important to have experienced leadership that can champion innovation.

SandHill.com: What hindrances do established ISVs encounter in their efforts at co-innovation that startups don’t face?

K. D. Singh: Most of the barriers to co-innovation faced by established ISVs have to do with legacy products and established business models and practices. They can blindside an ISV to the need for change and can impede innovation. Large ISVs also lack agility and take time to realign the organization. It takes them longer to create an environment conducive to co-innovation. And finally, large ISVs are naturally cautious and concerned about cannibalizing their own products and success.

SandHill.com: I assume a co-innovation arrangement is managed by the top executives, just as with any other partnering relationship.

K. D. Singh: Co-innovation has to be a CEO’s imperative on the ISV’s side. The CEO must be the executive sponsor. The CEO must make the organization work as an extended system of partners. Additionally, the impact of co-innovation on revenue should be tracked.

But that’s only half the story. The other half is for the SI partner to evangelize the product, get it out to the market and monetize it. To do this, it helps to have a SI partner like Wipro who brings scale and has a vast set of resources that the ISV can tap into to build early adopters, acquire feedback and ensure market traction. The value a partner like Wipro can bring to an environment of co-innovation is considerable.

SandHill.com: Is a co-innovation arrangement more like having a strategic alliance partner (such as Wipro) as in an outsourcing arrangement, or do the two companies found a joint organization for innovation programs?

K. D. Singh: Co-innovation works best as a strategic alliance. This allows for flexibility and helps build an ecosystem for sharing ideas and nurturing innovation. A strategic alliance where independent ideas are created and diverse experiences brought in is certainly preferred over a joint venture that can become quite detrimental to independent thinking and where experience can stagnate.

SandHill.com: Do risk-reward contractual arrangements such as gainsharing enhance a co-innovation relationship, or are they not necessary to achieving the desired outcomes?

K. D. Singh: Different ISVs will look at a risk-reward arrangement differently. Large ISVs, however, will not want risk-reward-based contracts. In our experience, risk-reward contractual arrangements are not necessary, nor are they always desirable. What is more important is a proven track record in the industry and experience of the leadership team. The risk-reward model restricts flexibility. It lacks the ability to respond to the needs of co-innovation.

K. D. Singh is a leader in Wipro’s Manufacturing & Hi Tech Business Unit. He is the global head for the Computing Vertical and leads Wipro’s 360° business relationship with HP, EMC and Microsoft. He has 21 years’ IT and BPO experience. In 13 years with Wipro he has worked across domestic and international markets in several leadership positions. He also held executive positions at Keane Inc., KPIT Cummins, Avotus Corp. and was an entrepreneur. For more information, please email isv-services@wipro.com.

Kathleen Goolsby is managing editor at SandHill.com.

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