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Disruptive Networks as a Driver of Innovation

How the Steinbeis Network can benefit from disruption

In modern times of disruption and digital transformation, innovation networks will need to change fundamentally to meet new challenges. Professor Dr.-Ing. Aleksandar Jovanovic, CEO of Steinbeis EU-VRi, has been looking into the required structural changes for the Steinbeis Network to survive disruptive change.

When Clayton M. Christensen at the Harvard Business School introduced the theory of disruptive innovation in his book The Innovator’s Dilemma, he primarily used the term to describe innovations and innovators that unveil new, previously unknown categories of customers. Exactly how the term is interpreted has changed over time, however, and these days it is also used to describe disruptive new technology, the disruptive use of established technology, or disruptive business models. All descriptions reflect alternatives to conventional innovation, technology, or business models. “Disruptive” thus now encompasses virtually anything in business and society that can undergo sudden or unexpected change, including fundamental shifts in paradigms that have been in place and followed for years.

Disruption can also include the issues that arise when systems have come to the end of their lifetime – or when they’re going to be discontinued. This is also an option that should be considered when striving to achieve agility or resilience. It’s in this context that The Economist suggests investigating what would happen if the financial markets were to collapse.[1] Clearly, complex and sophisticated systems – such as the economic, political, and social structures found in western nations (including innovation networks) – are inherently more vulnerable to unanticipated developments. On the other hand, such systems are also generally less ready to even consider “major disruption.” They are primarily concerned with optimizing their own approaches to lean management or just-in-time deliveries, and overlook aspects such as the global financial crisis, pandemics, or the global collapse of supply chains.

Even if little is said about this at the moment, it is possible to radically change how innovation is financed and supported, and there are first indications that this is starting to happen. The “digital transformation of everything” (also referred to as DX) is an amazing opportunity, but it doesn’t make it any easier to cope with disruption. It can blur the big picture, lead to a false sense of security, and even cause key relationships to be misperceived.

The role played by the DARPA model as a disruption enabler

When President Eisenhower set up the Advanced Research Projects Agency (ARPA) in 1957 and funded it with a budget of $500 million, no one called that disruptive – but it was. When it started out, ARPA had no offices, no laboratories, and no staff on permanent contracts. Its goal was to foresee the unimaginable weapons of the future. Even though it was not entirely clear how that should be done, ARPA and its successor DARPA (the Defense Advanced Research Projects Agency) did just that: They paved the way for groundbreaking technologies such as weather satellites, GPS, drones, PCs, and the internet.

The model has been widely adopted in other countries. The EU, for example, is investing nearly €100 billion in its Horizon Europe program, and the United Kingdom has not only provided funding for this area, it has also made the issue a top priority. In applying the DARPA model, many overlook two important factors, however. First, there is no clearly defined mission, or no planned, tangible outcome. Second, it’s about investment. In 2013, for example, DARPA invested $25 million in a small startup called Moderna with the aim of developing mRNA vaccines – the fruits of which we are benefiting from today. Despite the funding that has been made available, the EU would struggle to point to achievements comparable to those in the US. In Europe, there are no significant differences between domestically funded research and EU research. There is certainly no shortage of output, but little can be pointed to in the way of the desired disruptive innovation, or meeting the “challenges of lunar flights.”

A new kind of disruptive networking

The example of developing and delivering mRNA vaccines in less than a year illustrates the power of new disruptive networking models, which the Boston Consulting Group (BCG) calls “strategic alliances.” Partnerships bringing together pharmaceutical giants, the technical infrastructure required for clinical trials and regulatory approvals, and public support for mass production and distribution, are just some of the many alliance options. There are currently nearly 10,000 registered partnerships, and this number increased dramatically in 2020 and 2021. According to the BCG, the number of partnerships has increased eightfold.

A variety of sectors – such as healthcare, transportation, consumer goods, or the service industry – have identified the clear competitive advantages of such disruptive partnerships, on a number of fronts, seeing them as one of the best ways to address the urgent need for innovation, economies of scale, and rapid time-to-market. That said, setting up these new kinds of partnerships is no mean feat and many fail. There’s a risk faced by companies participating in such partnerships: Months of investing in the unsuccessful joint development of a leading-edge product can cause major losses. At the same time, this risk can be an opportunity for those who consider it crucial to support “red-hot” industries revolving around disruptive networks.

Successful networks are based on clear agreements on medium- to long-term partnerships, with each partner making their contribution to a common goal based on a commitment to collaborate more closely and become more flexible, even if it’s often uncertain what the ultimate outcome will be. Such partnerships are much easier to set up or dissolve than joint ventures or mergers. They can revolve around shared work on a single product line or tackle projects of an experimental nature. Steinbeis EU-VRi, the European Risk & Resilience Institute, has many years of experience with new forms of partnership, both within the EU and in the rest of the world.

Disruption – an opportunity for Steinbeis Enterprises

The organization behind Steinbeis is based on a network comprising a large number of Steinbeis Enterprises, although it’s not necessarily about forming networks in itself or disruptive networking. Nonetheless, as the very cornerstones of the Steinbeis Network, networking, innovation, and technology transfer will be even more strongly affected by the aforementioned forms of disruption, now and in the future. Currently, the networks formed with external partners are generally stronger than the internal networks (which are more about pooling resources), and this is the result of current innovation funding. It Steinbeis Enterprises want to galvanize their position and secure a permanent place in disruptive networks, they should therefore define their offering and problem-solving capabilities as part of a “portfolio game.”

Since partnerships are more flexible than other forms of collaboration, they should be used more often in the Steinbeis Network. In doing so, care should be taken to ensure that partners are an ideal match and a perfect fit with the topic. It’s also important that their interests and strategies match – there’s no room for “overhead partners .” The contribution each partner makes to the portfolio must be defined in precise terms. For example, in the area of electric vehicles, Daimler has direct partnerships with China’s BAIC Group and the American electric bus manufacturer Proterra; in autonomous driving it has partnerships with BMW, Bosch, and Torc Robotics; in electric infrastructure it has partnerships with ChargePoint. All partnerships, however, are direct and lean. If Steinbeis wants to be part of all this, the value it adds should be clearly defined and apparent to all, as it should be for all other partners.

Among other things, a good starting point for companies and Steinbeis Enterprises would be to increasingly bank on experience gathered with approaches such as the DX model, for example Micro Testbeds, the Industrial Internet Consortium (IIC), virtual institute mechanisms, or the major international industrial DX projects of Steinbeis EU-VRi. Nonetheless, success will ultimately be dictated by two things: the required scaling/upscaling, and determining a clear business strategy for dealing with the change brought about by DX models – change that is highly disruptive today and will be particularly disruptive in the future!


Prof. Dr.-Ing. Aleksandar Jovanovic (author)
Steinbeis EU-VRI GmbH
European Risk & Resilience Institute (Stuttgart)

[1] Economist, 12. Februar 2022