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Getting Ahead in Industry 4.0 with Open Innovation

Industry 4.0 is no longer just a corporate buzzword, but a reality that companies need to grapple with in order to thrive in the foreseeable future. The industrial and technological transformations that are now taking place will radically change the way companies manufacture products, fulfill service promises and operate.

While big multi-national companies are able to leverage these changes for greater growth, the same cannot be said for Singapore’s Small and Medium Enterprises (SMEs). These businesses often have limited resources, making it even more challenging for them to leverage technological disruptions and grow.

Also, SMEs may not be well-equipped to devise new innovations that will allow them to take on their larger competitors and go the distance in an Industry 4.0 future. Essentially, SMEs must find a way to adapt to constant change and disruption as this will determine their ability to survive.

A good case in point is a particular SME in the Information Communication Technology (ICT) sector, which is often seen as a particularly volatile and capricious space.

Established in 1993, the company’s forte is in offering data analytics solutions. However, following Singapore’s efforts to transform into a Smart Nation, market demands have necessitated its focus from plain data analytics solutions to include integrated solutions. For instance, Internet-of-Things (IoT) sensors are being integrated with more varied analytics capabilities such as video analytics.

While the company aspired to grow in this market space, it was handicapped by the lack of video analytics and IoT capabilities. Nonetheless, it overcame its limitation within a relatively short time by collaborating with other ICT companies with complementary capabilities to offer innovative integrated solutions.

Evidently, capitalising on partner companies’ knowledge resources and capabilities to innovate, the company in question had demonstrated what is known as open innovation.

Clearly, open innovation enables companies to overcome resource and capability limitations and gain speed to market.

Embracing open innovation


For SMEs to be successful in their open innovation efforts, business leaders must hone their ability to:

  • Practise humility

SME bosses must acknowledge that not all smart people work for them and that more capable people and better products and services may be offered by other companies in the same or related sectors. That is why collaboration can be mutually beneficial.

That said, while intuitive, humility often fail to surface among successful and charismatic SME bosses. To put it plainly, these business leaders often let pride get the better of them. 

  • Create “coopetitive” partnerships

Some SME bosses may still think that business relationships among firms must either be competitive or cooperative.

However, in the fields of management and economics, a dualistic understanding of such relationships as “coopetitive” has gained traction over the decades. “Coopetition” refers to cooperation among business competitors with the intent to achieve mutually beneficial outcomes.

If SME business leaders can look past their egos and start harnessing opportunities to strike “coopetitive” partnerships, there could be hope for their businesses to grow even further.

  • Build trust

Cooperative and coopetitive relationships can present conflict of interest among partners. Thus, in order to foster collaboration among competitors, the interest of each party needs to be addressed and safeguarded.

This can be done by establishing some binding pact including important information such as defining how each partner’s interest is safeguarded, how they will be compensated and how rewards will be apportioned. Such a pact will go toward establishing a stronger sense of trust among companies for genuine collaboration to happen.

Empowered for excellence in Industry 4.0 

In an Industry 4.0 future, SMEs need to transcend their traditional boundaries and collaborate even with their competitors to grow in the face of disruption.

If SMEs do not start adopting open innovation to help them go further, they will find it increasingly difficult to survive just by continuing with their traditional self-sufficient and inward-looking modus operandi.

They must exercise humility in acknowledging their companies’ inadequacies, accept that cooperation with competitors can be beneficial and be mindful to establish trust for genuine collaboration to take place.

This article has been adapted from an earlier commentary: "SMEs need open innovation for Fourth Industrial Revolution" by Associate Professor Calvin Chan, Director of the Office of Graduate Studies, School of Business, Singapore University of Social Sciences (SUSS).


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