Open Innovation vs. Venture Clienting
In today’s rapidly evolving markets, traditional corporate R&D is no longer sufficient to sustain competitive advantage. Companies are increasingly looking beyond their four walls to source innovation – a journey that began with the broad embrace of open innovation and is now evolving toward more targeted approaches like venture clienting.
This article explores how these two approaches differ, where they intersect, and why many of Sønr’s clients are transitioning from a generic open innovation strategy to a more nuanced, market-based venture clienting model.
Theoretical Foundations and Strategic Context
Let’s explore the background to both of these a little.
Open Innovation: Coined by Henry Chesbrough in the early 2000s, open innovation disrupted the notion of the self-contained R&D laboratory. It argued for the integration of external knowledge and technologies into the innovation process, encouraging collaborations ranging from academic partnerships to startup alliances. At its core, open innovation acknowledges that not all the smart people work for you – hence, fostering a network of contributors is essential for accelerating product development and market penetration.
Venture Clienting: Introduced by BMW’s Startup Garage, venture clienting – whilst similar in many ways – allows corporations to engage with startups as early customers. This approach allows firms to test and integrate emerging technologies directly into their operations, embedding market feedback into product development cycles.
Key Differences at a Glance
Both open innovation and venture clienting are approaches to collaborating with external innovators, but they differ significantly in their goals, processes, and the nature of the relationships they create.
Here’s a breakdown on how they differ:
| Aspect | Open Innovation | Venture Clienting |
|---|---|---|
| Definition | Uses internal and external ideas and partnerships to drive innovation. | Acts as an early customer for startups, testing and integrating new solutions directly into operations. |
| Knowledge Flow | Actively scouts for innovative ideas while sharing internal expertise, creating a dynamic, two-way exchange of insights. | Scouting emerging technologies for early adoption, with direct feedback from using new solutions in real-world insurance settings. |
| Risk & Investment | Spreads risk among multiple partners; insurers must balance external collaborations with data protection and regulatory challenges. | Lowers financial risk by engaging as a customer rather than an investor, using pilot projects to validate tech before wider rollout. |
| Learning Process | Gains insights gradually through structured projects and formal collaborations with diverse external players. | Fast, hands-on learning by integrating new tech directly into operations, accelerating product refinement based on real-world feedback. |
| Strategic Focus | Offers a wide range of ideas, though insurers must ensure that external innovations align with core risk management and customer needs. | Keeps innovation aligned with business goals by embedding new solutions into key operational processes, ensuring they directly support insurance services. |
| Implementation Challenges | Requires managing multiple partnerships and navigating complex IP and compliance issues, which can be challenging for regulated insurers. | Demands early adoption and internal readiness for change, as insurers must quickly adapt processes to incorporate and scale new technology. |
| Value Capture | Broadens access to new ideas and technologies, potentially speeding up development cycles and offering strategic competitive advantages. | Offers immediate, actionable feedback from real-world usage, reducing uncertainty and guiding efficient, market-driven product improvements. |
| Examples | Licensing deals, joint ventures, academic partnerships, and crowdsourcing initiatives that introduce a variety of innovations. | Pilot projects, proof-of-concept trials, and early-stage engagements that test solutions in live insurance environments. |
| Sønr’s Role | Helps insurers scout and assess a wide range of external innovations, ensuring that opportunities meet strategic and regulatory needs. | Guides insurers through early tech testing and integration, providing hands-on support to validate, refine, and scale new solutions within their operations. |
Application in the Insurance Industry
Open Innovation: Insurers collaborate with external entities to co-develop new products and services. For instance, Generali – a much-loved Sønr client – has actively leveraged open innovation to drive transformation globally. By working with startups and insurtechs they have continuously developed cutting-edge insurance solutions. But for Generali, it’s not a pure open innovation play. They too have made the move to a blended strategy that incorporates venture clienting.
Venture Clienting: Insurers act as early adopters of startup solutions to address immediate business needs. Zurich Insurance is a great example of this – leveraging innovative solutions through their Zurich Innovation Challenge programme.
But which to choose? And why?
The Strategic Dilemma for Insurers
For many insurers, the challenge lies in determining which approach to adopt. Or, how to blend both to best serve their strategic objectives.
Open innovation provides a wealth of external ideas, yet it demands robust mechanisms to manage diverse partnerships and potential intellectual property challenges. Venture Clienting offers more direct learning and operational integration but requires insurers to commit to early adoption, often in uncharted territories.
The key, as is often the case, is to experiment with both methods.
Gauge their impact on your operations, and determine which mix fits your risk profile, regulatory needs, and long-term strategy. Doing this can help you pinpoint the innovation model that drives sustainable growth for your company.
Sønr: Accelerating Insurance Innovation
For insurers, embracing either of these approaches is not optional; it is a strategic imperative.
With Sønr’s expertise and guidance, insurers are equipped to translate external challenges into opportunities, ensuring that they remain competitive in an era defined by rapid technological change.
- Unparalleled Market Intelligence: Sønr continuously tracks tech trends, competitor activity, and emerging business models, giving insurers a clear view of where innovation is happening and where opportunities lie.
- Startup Scouting & Due Diligence: Finding the right startup partners can be challenging. Sønr’s platform and world-class research team identify and assess the most relevant startups aligned with strategic objectives and business needs.
- Bespoke Research & Deep Insights: Whether you’re validating a new market opportunity or assessing the viability of a startup’s technology, Sønr’s custom research capabilities provide clarity and confidence in your decision-making.
- Facilitating Collaboration & Engagement: From making direct introductions to startups to organizing proof-of-concept initiatives, Sønr streamlines the engagement process so insurers can move faster and more effectively.
Conclusion
In today’s fast-paced insurance landscape, open innovation and venture clienting are essential for staying ahead of the curve. Knowing how to leverage and execute these approaches effectively is what truly sets industry leaders apart.
At Sønr, we equip insurers with the data, insights, and research they need to make smarter, faster decisions, driving impactful innovation. Let us help you unlock the full potential of external collaboration to transform your business and sharpen your competitive edge.
Contact us to discover how Sønr can power your next innovation breakthrough.
