Inside The New Route To Innovation

Paul Brody, Global Innovation Leader, Blockchain Technology at EY, discusses the necessity of collaboration, and how a concept called digital mash-up could be the new route to innovation.

Traditionally speaking, business is about competition and survival of the fittest. Although many companies still embrace the concept influenced by the famous Darwinian evolutionary theory, this thinking appears to have its limitations. In order to meet today’s changing demands, EY takes a different direction and asks: Can we win together?

Paul Brody—Global Innovation Leader of Blockchain Technology at EY and Writer of a Harvard Business Review piece “Is Collaboration the New Innovation”—believes we can. In fact, it may even be necessary. “At EY, we are often asked to help companies explore new opportunities,” says the innovation expert. With the rise of disruptive digital technologies—cloud computing, mobility, big data analytics, social media, blockchain technology, and the Internet of Things—becoming powerful new platforms for rapid innovation, business transformations have not only become a necessity, but a much greater challenge. Consequently, 40 percent of the respondents at EY have opted to form alliances to tackle this and help create value from underutilized assets. Given the potential complexities of such collaborative arrangements, companies must take caution on everything from selection of partners to preparing and planning the process for smooth execution. Given the professional services firm’s experience in fostering successful collaborations and partnerships, this is where EY usually comes in. Moreover, deciphering the ins-and-outs of each step, is almost second nature to the multinational firm. As the business world is transforming to become a digital deal economy, Brody has noticed a paradigm shift from the typical mergers and acquisitions (M&A) plus joint ventures (JVs). “Due to the speed of digital disruption, long established partnership structures such as mergers and JVs can be too slow, costly, and cumbersome for even the largest companies, who are eager to take advantage of the new technologies that will help their businesses succeed.”

As a result, a new version of partnerships and collaborations has emerged; something EY calls “industrial mash-ups.” This concept is an “integration between companies that is more ‘virtual’ than traditional. As the term suggests, this collaboration is executed digitally, which means new services that combine stand-alone solutions into integrated offerings,” explains Brody. The benefits of “industrial mash-ups” are manifold. Many world-class companies profit from their ability to deeply integrate solutions and deliver end-to-end services. For instance, companies such as UPS and FedEx earn a premium because they can pick up a package anywhere and deliver it everywhere. This amounts to three times more profit than un-integrated trucking companies, which only operate in bulk, and in selected regions.

Moreover, digital mash-ups are relatively easy. For companies not organizationally integrated, there is the advantage of offering services to rival larger competitors without adding significant overhead. Granted, some types of companies are better suited than others. To capitalize on digital mash-ups, “companies must be able to organize and deliver a reliable solution through a digital application interface without lots of human resource,” notes Brody.

As for selecting a potential partner, some of the critically important traits include consistency and reliability. “Digital integrations do not have many human overhead for extra evaluations. If you have to micromanage the people involved to get things right, it is going to be very difficult,” says Brody. Considering how repeatability and consistency in quality are some of the key ingredients of successful digital mash-ups, the reality is not many companies or services are ready for it yet.
At the cusp of a major change, with new business landscape challenging companies to move fast or risk lagging behind, the idea of industrial mash-ups certainly require companies to meet the digital standards and engage in a more flexible approach to asset ownership.

Nevertheless, this transitional period could be perfect for Swedish companies. Helena Robertsson—Partner and Head of EMEIA Family Business & Private Client Services at EY, says “As a small country, Sweden has always depended on well-functioning collaborations. Yet, we are also known for our innovative spirit, so I believe that with an open mindset and through co-creation, we will see an even more promising future.”

Moving forward, digital and mature companies looking to embrace the challenge of collaboration would be hard pressed not to consider mash-ups as a 21st-century deal making approach. Ultimately, this will also be a fast track to innovation and growth.