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We Require A Shift of Innovation Management Solution Providers

Paul Hobcraft , Agility Innovation Specialists
01 Apr, 2019
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There is still a real reluctance that the supplier of innovation software solutions has to change. They have had a model of a constant growth success for years, yet it is getting harder, as the market is fragmenting and looking for greater flexibility within the range of solutions on offer.

I think with the recognition that innovation occurs across the whole organization the innovation management (IM) providers have to radically alter their business model or recognize they need to broaden out their target market inside organizations.

Innovation is occurring in all corners of the organization today. Secondly, if open innovation has gone way beyond a one to many relationships into a many-to-many then does the reliance on single entity software provision makes sense, focusing on single point of entry into companies? No, we have to think total enterprise software for our innovation management solutions.

Far too much IM solution providers think their models, components, upgrades and yearly showcase upgrades, as the big event. No question any “staged” release is welcomed by clients as they either have been asking for it for long enough, or have been finding their own ways of completing “workarounds” to overcome gaps, then updates are always welcome, as long as they are relevant, not just cosmetic changes. So often client solutions and their needs have considerable lag.

Innovation software is no different from the tides of change sweeping industries, digital transformation is opening up the connected possibilities outside organizations. No one organization can keep pace, or has enough resources, or can cover off solutions that solve “universal” problems, or even ones in a diverse, huge Corporation collaborating across a global business, where functional groups involved are far more diverse than ever before.

The IM software market is stirring

I feel one IM software provider so far is making a well-considered move towards a change in their business model and that is Sopheon. Their enterprise software approach is moving the innovation management market in a very positive way, they are connecting it up progressively. They have taken the view of closing the strategy- execution gap. Their approach to solutions are designed to keep strategy visible and continuously aligned with operational execution, throughout the initiative life cycle and that makes total sense. In my opinion, that connecting up becomes vital so I hope they push this thinking as hard as they can. What they still seem to lack is their need to actually offer a more robust end-to-end innovation software solution as something of a real need. They might feel they have this, I don’t. The idea management side is still light.

Sopheon is delivering the right “on-market” message that they “provide support for speed, agility, and adaptability – all are critical enterprise capabilities in the digital era”. They are claiming they are actively building business partner ecosystems. They want to navigate the new world order of digital disruption. Sounds right.

For me, Sopheon has the right vision. They claim it is solid, I would say perhaps rigid and cautious might be the constraining factor for them. I think the execution is a carefully managed one as they do have a very small business base (revenue of $34million at the end of 2018) . Actually all honesty I think all specialised innovation management software providers, operating in the classic idea management and portfolio space of innovation software solutions do have limited size businesses. Why is that when innovation is occurring in all companies. Is it the business model, is it so much still reliant on spreadsheets and internally designed systems.  It is a very fragmented market, constrained by the existing designs in place and that is the option to grasp.

Can Sopheon break out of the pack or will others make the leap? They, Sopheon, have been generating good cash and have presently a net cash position of $16.7 million. Healthy to begin to accelerate and attract the traction necessary but will they? They are taking a creative lead but is it bold enough? How they accelerate in the coming 12 months will determine this. Platform solution is extremely expensive, building ecosystems equally complex, even in this world of Innovation.They seem not to have a scaling business model or enough representation and conversion appeal.

Here lies the “rub” for Sopheon and all other Innovation software providers “The majority of their license revenue continues to remain perpetual in nature” and that, alone, holds evolution back. It is a rapidly outdated model, it constrains not accelerates.All are very proud of who they hang onto as clients and offering solutions in the cloud, just might alter this model significantly. I think there is enough evidence to say that switching cost is as much as a barrier as the original “one time” purchase. The nature of the business model needs to change to get thid traction, that the markert needs to gain real open innovation exchanges and connectivity both inside and outside the single organization. There is this real need to master product complexity. Stand alone product is fading fast, we have service, digital and changing business models to consider when it comes to todays innovation. Customers are expectinig this within their solutions.

The nature of the present constraints

The whole evaluation of the Business model rests on the decisions in this area for “traditional” IM software providers needs challenging and changing!  In the PLM market they have been wrestling with this for some time and have made significant shifts in their revenue models. If you look at PTC or Aras for example you get a real sense of pre-occupation and effort they have invested in making significant business model changes towards a “pay as you go” model shifting their model from one focused on perpetual software licenses into a more “modern” cloud-focused subscription-based revenue model, in the hope of smoothing out their revenue model from a reliance on achieving constant “big wins” that are not as well understood by the investor, fixated on quarterly results.   I have written about the different changes occurring in PLM here “The Need for Digital Innovation“, here in “Can We Have One of These? A Product Innovation Platform”

The universal software market for innovation solutions is huge.

The part of the market that has significantly moved is in the PLM solution providers domain. The ability to connect, to share, to save and adopt and adjust drafts of complicated designs in digital ways significantly improves through the use of offering a platform solution.

The PLM part that has been connecting engineers, designers, researchers derived out of CAD where electronics, software, and machine or structure drawing needed to be undertaken. This whole area has been rapidly modernizing into a product innovation platforms to support key elements of sustainable solutions that maintain, adapt, upgrade, integrate and keep multiple systems of record for designs that due to the platform approach can be easily shared within, across and outside the old environment.

PLM is undergoing a real architecting of PLM enabling solutions that are flexible, adaptable and capable of working with other solutions that are forming into an Enterprise Application Environment. Take Aras and its solutions.[1]

The whole redesign to collaborate around a single set of processes spanning systems engineering, hardware and software development, variant and options management, part release, manufacturing planning, quality, technical documentation, program management, and more. It delivers end-to-end lifecycle management at the enterprise level, along with cross-functional collaboration capabilities and through-life configuration management.

Adjusting direction can be difficult for companies that are traditionally slow to change and reliant on legacy products that have historically been successful. Outdated enterprise solutions used to support engineering and manufacturing of these products further compounds this problem, holding back the innovation needed to develop the next generation of products required to keep pace with customers’ quickly changing needs.

There is a growing recognition of adapting different types of software that enables the ideation stage and can integrate into all the other parts of the innovation value chain. There is growing specialization and client need for tracking trends, exploring technology solutions, IP patent searches, road mapping, portfolio management, foresight and scouting, collaborative ideas management, crowdsourcing, simply collecting inspiration or market intelligence, scanning environments to detect opportunity. All these have been growing in their focused specialty.

We have to demand Innovation Management Software Providers make some bold decisions

It is time to pull together many different fragmented choices and draw in the many creative tools and methods to generate and help people to help sort and give relevancy.

To do this the move towards ecosystems and platforms, this is becoming essential. The need is for a deeper platform thinking as the first part of this. Designing for platforms around ecosystems is radically different from existing linear designs along the classic innovation process of development.

Innovation needs to help people connect with each other, with ideas out there, to form different associations and it needs to leverage technology in far greater ways than keep talking about the “on-premise only” within one company and those new license wins or renewals. That is so 20th century talk.  We are in a world where open innovation is in the ability to connect across to other organizations and in this mutual collaboration look to generate significant advancements on present generation products, offered by the single company

There is a time to change the metrics. These companies should not be “tapping into technology” in tentative fashion, they should be embracing it full on like the major PLM platform providers!

We need to put in place the solution set that can make that happen. Explicate in design and intention to evolve as the understanding is recognized. Each within an ecosystem can learn from each other, they can improve what they offer, they can form new relationships and learn from each other as ideas move to greater acceleration in action and impact.

The potential addressable market for this opportunity is very substantial but will anyone presently in the market be fully prepared to really break with the pack, in a race to the potential this market has? Let’s hope so, at least the market is finally stirring.

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