The Time Is Now for Co-Innovation: Three Reasons Why

Traditionally, Cisco’s innovation strategy has been built around four foundational pillars: build, buy, partner, and invest. Recently, however, a fifth pillar—co-innovation —has become more prominent. In my last blog, I introduced the idea that innovation doesn’t happen in a vacuum—it requires diverse skill sets and multiple points of view. But it’s only been in the last few years that co-innovation as a formal, structured process with customers and partners has burst on the scene.

Why now? Three reasons come to mind:

First, our customers demand it. They want to partner with us, not just buy from us. They don’t want to be passive recipients of our products, occasionally consulted by a product manager or asked to test our beta. They want to bring their own needs and know-how to the table and work on solutions together. And I don’t think that our customers are making this demand simply because they can’t let go of control or don’t have enough to do on their own. They want to be actively involved because it’s a way to speed the innovation process (see point three below). They want to see faster return on investment, more ease-of-use, and seamless integration with a variety of applications relevant for them and their industry. And, by the way, it’s not just customers who want to co-innovate. Suppliers, startups, and academia are also looking for ways to partner to develop innovative solutions more quickly.

Second, line-of-business (LoB) organizations have become a major buying center for technology. Traditionally, the technology industry has focused on selling to three buying centers: service providers, consumers, and IT organizations. However, over the past 10 years, LoBs—the people who run operations, logistics, or other business functions—have emerged as a fourth buying center. This trend has increased as IT and operational technology (OT) converge to accommodate the requirements of Internet of Things (IoT) deployments. With powerful IoT use cases on the rise, the entire enterprise needs to get connected and work together.

The lines of business leaders are solely focused on business outcomes—they run the business after all. They expect not just technology solutions but business solutions that help them solve their key business challenges. As a result, CIOs are more focused on understanding and aligning with the business needs of the LoBs. As I have said before, most business solutions can’t be developed by one company alone. Co-innovating the right outcome usually requires several partners, large and small, bringing to the table different technology and market knowledge, as well as specialized skillsets. Putting together such a complex multi-vendor solution can be tricky, but if done right, it is often game-changing.
Traditional linear development methodologies have been replaced by ongoing cycles of rapid iteration.

Third, co-innovation is a core element of modern development methodologies. Before the turn of this century, the established development and innovation model was linear, and the development mindset was often technology-out. Product manager met with customers and partners to gather product requirements, then captured them in a product requirements document (PRD). The document guided engineering in building the product, then the beta version was tested with customers. The product specifications might be changed as a result of customer feedback, and eventually the product would be released to the market. But this model proved to be slow, incremental, and often missed the fast-changing customer requirements.

The new Agile and DevOps methodologies that have emerged over the last few years address many of these limitations and have driven the shift to a customer-in innovation mentality. Today, development teams must move at the speed of digital and are adopting “lean” startup methodologies to bring products and solutions into being. The process moves quickly from understanding customer needs to a series of rapid prototyping cycles (no more PRDs!), with customers co-developing the product all along the way. No more product first customer ship—the product continues to evolve with instant feedback. The development team can adjust the product, experiment with different options, and test new prototypes almost continuously. Customers and partners are an integral part of this model. Waiting for beta testing at the end of the process takes too long.

Thus, co-innovation has evolved very quickly from an intriguing idea to the core requirement for technology companies across the globe. I am reminded of a meeting I attended last year with one of our service provider customers. It was a challenging meeting, but toward the end of the session, we brought up the fact that we have an Innovation Center in their region where they could co-innovate the next solution with us. Suddenly, the tension was broken and entire meeting changed. “Finally, Cisco, you are getting it,” said one of the customer executives.

In my next blog, I’ll discuss best practices, how vendors, partners and customers can benefit from co-innovation, and also how they can avoid some of its traps and pitfalls.