Total Innovation Podcast

17: Tim Bernstein: Unlocking Impact from Open Innovation

• Season 2 • Episode 17

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Tim helps large companies overcome internal hurdles to ignite externally sourced open innovation and technology acquisition, and facilitate technology transfer deals.

He spends significant time delivering a wide range of IP and open innovation consulting services to clients, from open innovation system diagnostics to detailed technology and technology need evaluations to deal-assessment and execution.

In addition to hands-on experience, Tim has an educational background in the IP industry including a Masters Thesis which recommended improved licensing strategies for technology licensing out of universities.

Read Tim's ebook Unlocking Impact from Open Innovation here


Brought to you by The Infinite Loop – Where Ideas Evolve, Knowledge Flows, and Innovation Never Stops.

Simon Hill:

Welcome to another episode of the Total Innovation podcast. As always, I'm your host, Simon Hill. Innovation does not happen in isolation. It's not just about ideas, patents, or technologies. At the heart of it all, it's about people. And at the heart of every breakthrough deal is a delicate dance of partnerships between organizations with different cultures, working styles and expectations. So how do you build trust and align diverse stakeholders to bring innovations to life? Our guest today knows this challenge better than most. With a career spanning over two decades in open innovation, technology transfer, and partnership building, he has been at the forefront of helping some of the world's biggest companies scout for cu Scouts for cutting edge technologies, broker deals, and unlock the power of external innovation ecosystems. He's a Yale and Stanford graduates, an entrepreneur at heart, and the leader who has helped shape how fortune 500 companies and startups collaborate to solve some of the world's toughest problems. As CEO of YET2, he has guided corporations through the complexities of technology scouting, licensing, and deal making, all while navigating the human elements of partnerships, trust, communication, and cultural differences. In today's episode, we'll be exploring YET2's three bands of appropriateness. A framework designed to help organizations understand and adjust to the diverse working styles, behaviors, and expectations that can make or break innovation deals. We'll discuss how companies can move beyond transactional partnerships and build trust based collaborations that drive real results. So whether you're a corporate leader looking to harness external innovation, Or a startup founder hoping to work with large companies. You're in for a treat. You'll walk away with practical insights on how to navigate partnerships, build trust and close impactful deals. And with that, it's my absolute pleasure to welcome Tim Bernstein, CEO of Yet2 to the Total Innovation Podcast. Welcome, Tim.

Tim Bernstein:

Simon. I'm honored and pleased to be able to join you today. Many thanks for having us

Simon Hill:

now. I'm looking, I'm looking forward to this, and I enjoyed in the, uh, in the planning behind this, the conversation that we had and piecing this together because there's a lot of experience here, and it's a very important part of, uh, the innovation ecosystems in which we live and breathe. We're going to dive straight in and look at the reasons why innovation partnerships partnerships. Fail, or maybe if we take the positive lens succeed, right? You've got a lot of experience as my introduction set said, um, what do you see as some of the biggest reasons why these partnerships fail or maybe succeed? Are we being positive or negative today?

Tim Bernstein:

We're going to start negative and then we're going to shift positive because we're optimistic people. Um,

Simon Hill:

yeah, it's,

Tim Bernstein:

uh, 25 years in this industry, 50, 000 deals that should have happened. Uh, over 25 years at YET2, and, uh, we've been successful. I think we're up to 340 now or something like that. So if you subtract 340 from 50, 000, uh, it's not a good hit rate, uh, and there are lots of scars on our back and lots of learnings. Hopefully, uh, we've incorporated and distilled the learnings and we're starting to be able to teach them effectively and partner well with our clients. Uh, and we've seen great, uh, ramp up great increase in our success rates. So, uh, hopefully Simon, I think we ended up being positive at the end of the day.

Simon Hill:

Yeah, and help, help move that percentage a little bit upwards as well, right? You know, 340 good ones, but I'm sure many more, many more to come and many more that should have happened. And the loss is the value as well, right? So let's, let's talk around that, right? What are, what are some of the reasons that, you know, I'm not going to do that math quickly in my head, but there's 49, 000, whatever it is, 900 or whatever, 600 and something didn't happen.

Tim Bernstein:

650. Yeah. Um, you know, it's funny. There, there are a bunch of reasons. We've actually built, uh, an eight module open innovation training course just, uh, to talk about, uh, this set of dynamics. So there's really kind of eight large buckets there that we turn to, um, If I was to go to the very top of the list, uh, we, we have a, I think a somewhat non intuitive one that we think is the most fragile part of the whole process of, of partnering externally in, in technology and, and that's the relationship between. The open innovation scout inside our client. So that external facing person whose job it is to go out and find what's possible out there in the world. And we'll talk a bunch more about what's possible in a few minutes, uh, their relationship with their internal clients, uh, with the heads of R and D. With the brand owners, with the product development leads, that scouts relationship with those internal clients is the place where we see the, the, the most number of deals fail, uh, even right up through today, even after trying to coach, uh, all of our clients on the fragility of that step. Um, and you know, happy to get into details about why that internal piece actually is the hardest part of this.

Simon Hill:

Yeah, it's a, it's a good one. I think people may not have. Necessarily gone there to start with, right? And there's lots of other reasons. I'm sure we'll, we'll pick up and chew on, maybe just talk a little bit more about what, what that means, right? Peel that onion back another layer or, or, or two in terms of what you see breaking down in those, in those relationships.

Tim Bernstein:

Yeah. Um, then, you know, it's funny. We started out, uh, you know, first couple of years were rosy eyed and all excited and, and then the deal start to fail and then we'll get more failures and then you get jaded and all that good stuff. Um, early on, we talked about things like expectations, culture and trust. And it was just, it was too fuzzy, too ephemeral for me because there was, there was nothing you could point to that a large company could go to differently. And so we've evolved a lot, uh, over time since then, we like to think a lot about incentives. Uh, so what are the incentives acting on the various people inside the room and how do we counter those incentives when those incentives, uh, would, would yield toward killing the deal instead of, instead of making a deal. Um, so we think that incentives is absolutely critical. Uh, we've also built a concept we call pinches. And by pinches, we mean if you got my name wrong, I'm not going to worry too much about it, but then if you say my title incorrectly and you get the name of my company wrong, now I'm starting to get annoyed at you. And this dynamic of pinches between the large company and the startup or the external solution provider, it is so easy for the large company to pinch the startup. Uh, and if that builds up over time, you get to the point where, uh, toward the end of Of the flow from introduction through evaluation into deal negotiation. One of the concepts we talk about when we teach deal negotiation is what we call a ZOPA, a zone of possible agreement. Uh, and if the large co has pinched the, the startup 7, 8, 10 times, The startup's going to be much less excited about sticking their necks out to try to increase that Zopa to increase the chances of a deal, uh, at, at the back end. So incentives and pinches are two pieces of this that we talk a lot about. Um, and, and just to build a little bit further on the incentives, we think about, um, generally inside large companies, you have brand stewards. You have senior stakeholders, you have all of the support functions, legal, procurement, regulatory, manufacturing, all of those support functions, and then you have this poor entrepreneur trying to make something happen at the corporate boundary, uh, aligned against all of these incentives that, that, uh, that run counter to getting an external deal done. Um, so, so we've actually gotten much more clinical. We've applied a lot of game theory, uh, and now we can give very concrete, very specific recommendations about how to realign to increase the chances of deal.

Simon Hill:

It takes me back to some of the conversations even we have with clients where they walk in the room with their senior legal counsel from three different business areas and external advisory and ask where ours are. And I say, I'm here. And I'm acting with 57 different hats on in that, in that capacity as, you know, is it even a sort of smaller size mid cap, but you know, like it's, it's a, it's a very daunting experience, especially if, you know, if, if all you're really trying to do is just get in for a proof of concept to build something thereafter as well. Um, but also, you know, you can set yourself up for immediate failure on that side, right? If you, uh, you don't really know what you're getting yourself into.

Tim Bernstein:

I, I think we, we actually, um, uh, counted out the standard set of steps from, um, first introduction all the way through to deal negotiated. And it's like 47 steps across a standard process for main areas of activity, but 47 individual steps. There are lots of ways to kill a deal every single one of those 47 steps.

Simon Hill:

So we said we're going to tilt into some of the positive sides and I, I mentioned this framework. Exactly. I mentioned this framework up front, the yet to three bands of appropriateness framework. Let's, uh, let's talk about that. Sounds cool, right?

Tim Bernstein:

Yeah. Again, uh, you know, 49, 650 cars on our back. Not that I've memorized that number. Um, So when we talk about bands of appropriateness, there's a set of, if you think about the intro to deal process is having these four main phases. Phase one is non confidential, uh, introductions. Phase two is confidential evaluation. Phase three is due diligence and phase four is deal negotiation. And all large companies have slight variations on that. And they use a lot of different language, but that's actually what we've seen across, I don't know, almost a thousand large codes. Now that's a pretty good approximation of the process. They all go through. Um, if you think about the flow through those four phases, uh, from non confidential intro through to deal negotiation, there's a set of behaviors. For both the large co and for the startups that are appropriate and what we mean by appropriate, we're absolutely using a judgment with that term. What we mean by that is behaviors, actions, activities, questions, tasks that. Increase the chances of getting a deal done down the road, uh, beyond each of those phases. And then outside of that band of appropriateness, there are two bands of inappropriateness, one for the large coast and one for the startups. Uh, and so that's how we got to the three bands of appropriateness, actually one band of appropriateness and then two bands of, of a whole bunch of muck.

Simon Hill:

Great. All right. And I know I slightly misinterpreted that in my pre read notes, so apologies, but that actually makes a lot of, a lot of sense. Um, which one should we pull on? Maybe I quite, let's start with maybe the, the, the inappropriateness from, uh, from the startup side, because it's not necessarily the obvious place to start, right? What are some examples of, of things in there? And then we'll build up from there back to the appropriate.

Tim Bernstein:

Right. So inappropriateness for startups would generally, uh, run around, um, refusing to share information, uh, unwillingness to build trust, uh, that, that's kind of where we see most startups struggling most with, with bands of inappropriateness. Um, because

Simon Hill:

of skepticism and nervousness, do you think? Yeah,

Tim Bernstein:

there's, there's, you know, if you're, uh, an inventor, a founder, an entrepreneur. Uh, you've heard stories of large companies swinging in and, and stealing the crown jewels and then you're this little guy and you can't afford a lawyer and so they know they can beat on you, right? You know, those, those, uh, those tales from the, from the, the innovation community are, you know, are fairly widespread. Uh, so a lot of people come in and, and a bunch of entrepreneurs have been through this dance before and had really poor outcomes. So sometimes they're acting directly from personal experience as well.

Simon Hill:

Yeah, they've already been in the 49, 600 and whatever beforehand before.

Tim Bernstein:

Yeah, exactly. Rodeo

Simon Hill:

2 and 3 is coming around.

Tim Bernstein:

Exactly.

Simon Hill:

And from the, from the corporate side?

Tim Bernstein:

From the corporate side, um, The, so as I said, the most fragile piece of this whole system is the relationship between the scout and their internal clients. Uh, we see lots of issues where, uh, the scout doesn't manage the expectations. Uh, or the requests from the internal clients very well. Uh, and so the scouts feeling like I need to have your cogs and your IP filings and your investment plans, uh, and, um, and the, the profiles of your limited partners and your investors. I need that today in order to minimize all possible risk for, for that brand steward that I'm working for. Uh, as opposed to. Uh, that scout really should be taking that brand story through the concept of bands of appropriateness and saying, yes, ultimately we're going to need all that information. But today in a first call, our primary goal is to figure out if they have an advantage, what we call a comparative value proposition, uh, and to build trust. Those are the only two things we need to do today, and the rest of this we have to get to, but it's going to be way more appropriate if we do that down the road when we're all, uh, a lot more excited about the opportunity here.

Simon Hill:

When we talk about deals, and I'm going to take us slightly outside of some of the stuff we've discussed, I think it's just worth putting a bit of clarification over what we might mean, right? Like what, what, what are some examples and where do the, where do the corners live in some of this broad word of sort of, you know, partnerships and deal making?

Tim Bernstein:

Right. And I'm almost not going to help very much because for us, deal is a very broad concept that encompasses a lot of different constructs. Uh, but the, the, the, the, the. The form of deal that we see most often is usually a joint research, uh, where the startup has a really interesting platform, but now we need to prove it in the large codes application. Uh, and let's go, uh, very carefully milestone, milestone our way into a, uh, a product headed toward market where the first step might be as small as a 25 or 50, 000 or 50, 000 euro, uh, joint research effort. On one key dimension of performance. And let's go prove that startups platform in my application in that joint research effort. So that would be kind of the most common form of deal, but they can run the gamut all the way from, from small joint research to. Uh, uh, investment to joint development, uh, to full acquisition. So when we say deal, uh, the large co is generally writing a check of some form for something more than just a 1, 000 of samples. There's actually value being transferred between the two parties.

Simon Hill:

Right. A greater level of sort of symbiotic relationship and in some way, shape or form. Um, great. Thank you. And what would be an example, right? You know, you've spoken a little bit of those, but what would be an example of a successful partnership where This mindset of, of the appropriateness, inappropriateness helped to create a, you know, an outcome that would otherwise perhaps have not been successful in one of the, one of the 340 rather than the other, the other side of that equation.

Tim Bernstein:

Yeah. We have all sorts of examples. A great example, uh, where the LargeCo is an oil and gas player, uh, was looking for a textile ply on top of a rubber substrate, uh, for an oil gas application. The, you know, the substrate needed to bend and the textile needed to stay adhered to the, to the, to the rubber substrate, uh, and there was this, all this issue around modulus of elasticity and shape memory, uh, and the, um, The, the large code, uh, gave a testing protocol, an ASTM, uh, requirement, uh, around, um, uh, adhesion. Uh, so does the textile stay on, uh, the rubber substrate at various temperatures and, and, uh, pressures and, and humidities and all that stuff. And the large coat didn't tell the startup that they were going to bend that thing 90 degrees and see what happened. So the startup optimized on a, on a rigid fixed. Uh, linear, uh, uh, adhesive, uh, to get as strong a bonding as possible across the various, uh, uh, ambient environments. Uh, and then the large co failed, failed the test, failed the test and failed the startup because they were bending it and the thing peeled off. Um, uh, and so our recommendation was let's confirm those testing protocols before we send the startup into the lab to build their custom samples. Uh, let's, let's confirm those pretty carefully. And the large code didn't want to have that meeting. Uh, and then afterward when the, when the sample failed, uh, and we asked why it failed and they said, well, we, because it bent 90 degrees and it completely peeled off. We're like, Whoa, we'd never heard anything about the bending. The startup certainly didn't. Maybe we should go back to them and ask again. And now we've started to lose trust already by that point. So, so that was a, that was a negative example where the deal died. Uh, because the large co wasn't communicating well on fairly simple dimensions back out to the startup. So a big violation of our bands of appropriateness, uh, is, is poor communication when the communication should be easy. Um, another, another great example, uh, natural deodorant ingredient, uh, the, the large co asked for 10 kilograms of a custom sample, uh, before they had gotten senior. Buy into the opportunity, uh, and before they had budget available to pay the startup to go build that 10 kilograms of custom sample. So we didn't send that request on to the startup. We pinged it. This is a common tactic for us. We pinged it back to the large co and said, we think these three things need to be in order. Before we're okay. Sending that request to the startup, because if we send it as is, you're just going to diminish trust and piss and pinch them and piss them off. And so we pinged it back. So they, we forced, uh, the external, the external facing scout to go to his internal clients and to those senior stakeholders get buy in yes, this does look like a really promising alternative, a natural version, uh, the data, the initial data on it looks great. Then we're all agreed to 10 kilograms of a custom sample. You know, we should be willing to pay 5, 000 bucks for that. Uh, and so here's budget. Uh, we're now empowering the team, uh, go to town, go, go do the confidential evaluations, and if that looks really promising, then we'll move into due diligence. So that pinging back. To protect the large company from their own stepping outside those bands of appropriateness was, was incredibly effective in that case, uh, and that products now on market. I'm very excited to say

Simon Hill:

cool and some, some good examples of positives and negatives in there from the, from the three different bands as well,

Tim Bernstein:

and

Simon Hill:

a wealth of data points to reinforce all of this. I'm going to bridge a little bit now because I think this sort of falls into. Some of the band's thinking, but also perhaps what happens next as well, um, uh, is the human side, right, of this. And it's not a surprise, I guess, to anybody listening to this, that, you know, there's very often contrasting working styles and cultures to, Whether it's a research organization or a nimble startup, and then the large co right there and their ways of working. So in seeking to bridge those kind of differences, other tactics that can be employed, employed and other things that people on both sides of that table should be thinking about, not just to get you over the line with a deal. But I can tell you once you've signed something, you've got to start to work and deliver it. You have to work together. I think that's probably what is even more jarring on the reason that it. Even the best deals quite often fail to scale, to impact, right?

Tim Bernstein:

Right, and we've seen deals where the one or both sides were so frustrated with each other the moment the deal got the deal signed, but then they have to, exactly as you said, they have to work together to get to market. And they're so frustrated at that point that, you know, it was destined for failure even though the deal was signed.

Simon Hill:

Exactly. Do you even see, because one of the things I find slightly bizarre sometimes around The interactions between the large organizations and these kind of things is that a totally different team would work on the deal side than the next side. And so even if you have built great bridges, it almost is irrelevant because that seems moved on another team moves through. Is that common or is that, you know, is that one of the things that we need to do more work on between the between people or what do you see?

Tim Bernstein:

Yeah, it's, you know, it's, it's, I think, um, 20 years ago, I would have answered this question very differently because I had only been through one cycle of watching a large company innovate, uh, or large companies, uh, plural, uh, but I've been through like four or five cycles of how these large companies do this and they bounce back and forth fairly. So we, uh, we, uh, uh, routinely do benchmarking of open innovation systems. Uh, and this is a question that comes up every time, uh, the person who built the trust with the startup. In getting the deal done, can they now become the relationship manager moving forward? That's a really hard question for a large co because that person's day job Is to go find the next 25 startups and to make sure that that either they're partnered with somebody who's internal facing Or that they themselves are very very tightly connected to their internal clients And that most fragile step of the whole system and if you're now peeling off part of their time and effort To, to program manage or to to relationship manage, uh, a post deal toward, uh, toward commercialization. Uh, now you have a real resourcing issue. Uh, you know, do you ramp up the next person into that scouting role and let this person manage the three relationships on the three big deals? That it's a really tough question for large goes. Um, where, where, where we land on it is if the deal's important enough. Uh, if this is a big enough, uh, product launch slot for your brand and, you know, over their, their five year roadmap, yeah, you probably want to keep continuity of that relationship manager. It's probably important enough to disrupt, uh, kind of your standard open innovation workflows to, to do that. So that's not every deal, but, but on the big important ones, yes. Uh, we do recommend that

Simon Hill:

back to my back to my question before I took us off on a slight tangent. Thank you In looking to bridge those different working styles. Um, what are some of the I don't know. We don't know whether we can call them anything more than tactics, right? But what have you what have you seen to help try and bridge? I guess also having a somewhat independent third party in between those helps massively as well But you don't always have that person there all the time. So what else hopefully,

Tim Bernstein:

uh, hopefully we're helpful. We're not positive Uh, I think so. I, you know, with the, the, with the feedback we get and all that good stuff, but, um, so in that, in that middle band of actual appropriateness, there's a whole set of steps that we recommend for the large codes toward the top of the list. Um, Can you resource somebody external facing whose job it is to communicate something, even if it's a non communication, even if I don't have anything to say. There's no news. We're still in committee. I'm still waiting on internal alignment. Uh, but at least you're touching the, communicating out to that startup and they know that it's not their fault. You haven't rejected them out of hand. It's, it's your internal decision making process. Um, so that, that's a first piece is, is resourcing somebody to be consistently external facing, external touching. Uh, and in fact, our best practice would be if you're, if, if you're going to have a scouting function. Resource it in two segments. One segment is external facing and the other is internal facing. And then those two scouts, they partner, they sit, uh, you know, at desks next to each other every day. They naturally are talking all the time. The internal facing is doing the really hard job of staying very tightly connected to the latest, greatest strategy shifts and nuances internally, and the external facing is doing things like getting back to that startup we haven't talked to in six weeks. Because we're stuck deciding what we want to do to go forward with them. Um, that, that we find is a really, really powerful, uh, structure, internal plus external facing. Uh, so that would probably be toward top of our list. Um, another dynamic, just as an example, and I could talk all day about this. Um, I get really passionate about this topic, um, empower. That project team that's exploring the opportunity at the edge, uh, empower them to be able to make simple decisions very quickly. Like, for example, give them budgets before the project starts to go spend 25, 000 on samples across five or seven of the best solution providers. Don't make them go internally into the stakeholders and the support functions and the brand stewards and turn that into a three month decision process. Just to spend, just to spend 5, 000 bucks on the first evaluation samples and empower them early, or at least empower them once you see that there's real, uh, intriguing, what's possible opportunity out there. Uh, so that's, that's another thing we really love around best practices for the large companies.

Simon Hill:

Great. Great. I guess one of the challenges at the front end of this process, if we sort of walk back up there a little bit, is that early dance, right? That bit between Trying to figure the startup super nervous, right? They don't want to give too much away that the information in their head, which isn't as protected as maybe the intellectual property might be wrapped inside a large code, the competitive advance, the nervousness on and then this wants on the other side of the table for as much information as possible. Yes. How do you balance building trust with that sort of IP protection and other things again, looking at both sides of that relationship?

Tim Bernstein:

Right. Um, so, uh, we actually often teach both the large co and the startup simultaneously on there. There are two really important concepts here around around I P. The first, the large co wants to hold off. It's in the large code's interest to hold off on, on moving to confidentiality, moving to NDAs until they're really confident that this is an opportunity worth, worth taking on that obligation of confidentiality of that startup's information. Uh, and there's one dimension to this as well. What if they're talking to other startups? And you took on an obligation of confidentiality with these guys, but then you want to go to a deal with those guys and their technology looks kind of similar. And you have this obligation to keep these guys IP confidential. And yet you want to go to market with this and you go to market. And then these guys say, you stole my idea and launched it. Now you're in court and that just. things. Um, so this concept of, of protecting from IP contamination is important one, probably more important than something that we just don't see the large coast talking about today is this concept we call inventive step. Uh, and by that, what we mean is, uh, the large co is really, really good at, uh, unearthing, uh, unmet needs, uh, little known unmet needs out there in, in their consumer, in their customer marketplace. And the startups, by definition, have found some new to the world what's possible concept. Uh, so when you marry, uh, an unmet need with a, with a new to the world, uh, technology, that is ripe environment for inventive step. The large co wants to file IP. Uh, that they own completely by themselves. If you sign an NDA with that startup, you're almost forced to share the IP with them if, if your technical people and their technical people start brainstorming and you come up with an inventive step new idea. And now you're completely beholden to them in terms of control of that IP and where you go with it and how you compete against your competitor. So, the longer you can hold off on that NDA, And then we teach the startups, tell us as much as you can about the what, what does your technology do, what does it accomplish, what kind of data do you have showing its performance and efficacy, but don't share anything about the how. How did you get there? What's the proprietary information? What did you file in your patents? What's new and different? Uh, what, what's the inventive step? What's the uniqueness? Uh, let's not share any of that until the large co has decided that it's worth the obligation of moving to that NDA step. And here's why that's in your interest and your interest. So that concept on holding off on confidentiality until, uh, the large co has decided it's worth the obligation. And, and, uh, during that first introductory phase, the startup's actually not taking much risk by saying that we have a 20 percent performance improvement. Um, you know, they should be trumpeting that from the treetops. That's completely non confidential. So what versus how? Inventive step, uh, anti contamination. There's, there's some really important tools there, uh, for, uh, protecting the large companies, IP interests. Um, and some of those large companies are fairly fluent at, and some of them we don't hear much about. So we're often doing a lot of teaching there.

Simon Hill:

Yeah. And I, I think teaching both sides is important. I think there is, there's a tendency to rush to NDA much, much too quickly. Right. Um, and spend, and burn a lot of time and energy on that process that you, as you've said, Delivers very little in that first front piece. It might actually cause you more problems down the line rather than

Tim Bernstein:

a great project going right now where the client's looking for alternative seaweeds for an ingredient for a cool application. Uh, and we found nine. Uh, startup companies with phenomenal new platform approaches to alternative seaweeds. Uh, and the large co, uh, you know, so they ran their internal deliberations, took our prioritization recommendations and said, all right, we want to go ahead with all nine. Can you get NDA started with them? Like, Whoa, wait a four of them are direct competitors with exactly the same platforms and no, we're not going ahead with all nine. And so we had to teach them about inventive step in contamination. And, you know, so they went ahead with, with NDAs, with four really different. Approaches across, uh, you know, with only four of those nine, uh, to start with one of the four has already fallen out. So we're ending that, uh, NDA relationship and we're moving it on to the fifth company, you know, but, um, it's a, it's a really colorful example where the large company got really excited. And we're like, Oh, you gotta be careful here.

Simon Hill:

Yeah. I think that's a, that's a, that's a great example. And you know, none of. It's amazing how much infrastructure sits behind the people in large organizations. And when it, when you want it to get out of the way, it's really hard to move. And sometimes when you need it to operate, it's not there right to be like that. And so that's really where the value of this type of thing comes in. Right. And the real expertise.

Tim Bernstein:

You go right back to that that concept of incentives. What are the incentives operating on those support functions? They have day jobs. They have KPIs. They have bosses expecting deliverables and you're not part of that. You know, it's it's the job of intrapreneur scout inside the large co it's it's a Fascinating job.

Simon Hill:

Yeah, I'm gonna muse a little bit more on that As we were talking through earlier of, you know, your job is to find more, not necessarily to nurture the thing. I think the incentive there is, is arguably misaligned and maybe more parallels between, I don't know, the way that it might traditionally work in a, you know, in a, in a sort of venture back backing situation, like a VC or something where typically the person leading that deal then does take that on and does become a part of the, uh, The board of directors or whatever stays close to that, that thing. And therefore they're picking things that they really want to be involved in and backing. Again, the incentives could be off in some of these scenarios because you may just not care about the problem you're working on at all. I was still like the business, but there's a, there's a challenge in, in, in, in both sides. I can understand, but I feel like if you're handing over the relationship to a brand new team, typically human intuit human nature doesn't like that. Right. You know, Just because someone's my best friend doesn't mean they're going to be yours if I suddenly hand them over and then you're going to find the same values in the things that I found values in or whatever. So it

Tim Bernstein:

sounds clean on paper, but the human nature of it. Yeah. You cannot overestimate the importance of that.

Simon Hill:

I want to, I want to pull out, you know, in that three 40, you spoke about this, but there must be some, some real diamonds, like the ones you really, the ones you're like, okay, if I could just make everyone like this, like, can you talk us through one of those real success stories and like, what. Yeah. Is there any, was there anything, was it just lucky or was it something like that's repeatable one really shine?

Tim Bernstein:

Right. Um, yeah, and I can do that like struggling, which, which story do I tell? Uh, luckily we have, which is

Simon Hill:

good. Having so many is great.

Tim Bernstein:

We have 350 good ones. So yeah, we're going to end on a positive note here. I love that. Um, so, uh, happy to talk about, um, uh, uh, PNG crest whitening strips. Um, Uh, and this is a deal from a few years back, so there's no longer anything proprietary about it. Uh, we found, uh, a whitening technology, uh, and it turned out the, the whitening itself, the, the actives that, that generate the whitening, that's fairly well known. Not a whole lot of innovation going on there in the pure actives, but how you get the active to stay engaged with the enamel of the tooth for an appropriate amount of time at an appropriate amount of bonding. And then be able to unbond it, uh, without doing any damage. Uh, that's the trick with, uh, that's where, where we're seeing a lot of the innovation in whitening these days. Uh, and so we found a technology that had phenomenal ability to adhere. Uh, at home and kind of standard, uh, consumer environments, uh, and then had very easy trigger, uh, for unbinding. Uh, our client, uh, had been working on this for 20 years, uh, big, very expensive internal R and D efforts. Uh, very excited about their own approaches. And yet when we showed the data about, you know, do you only need 40 minutes? To get this amount of percentage increase in whitening. And then 98 percent of consumers can trigger the unlatching, uh, in, in less than two seconds with, with, uh, with no stress or tension, uh, that kind of performance data. Should have been really compelling inside our client and the scouts loved it. So they were, let's get samples. Let's run our own versions of these tests. Let's do some control studies. Uh, and the data keeps coming back that this external platform is looking really phenomenal. And the internal R and D teams are trying to find as many ways as possible to shoot this thing down. Uh, so those incentives to. Uh, getting the, uh, the brand stewards, uh, the internal R and D senior stakeholders to getting them aligned around the truth of the science here. Uh, and then being able to structure the deal in a way where it was very low risk upfront, uh, to, uh, to the large company, to PNG in this case, uh, in case there was actually something wrong as you tried to scale the technology. So we're not committing too much upfront to this external partner. Um, so that deal died, uh, three times. Uh, and each time, uh, we partnered with the, um, with the external facing scout, uh, to revive the deal. Uh, you know, and there were all, all these issues around budget, around too rich a license, uh, around, uh, we found our own intern, our own internal latest effort has turned a corner now, we're really excited about it. And then that bubble, you know, and then that bubble burst, um, that was a great example of a deal where, uh, we played the bands of appropriateness with the startup really, really well because we partnered really well with the external facing scout. Uh, but then all of the incentives acting on that external scout internally to kill this deal three times, uh, eventually we had to go to an SVP. Uh, to override that the head of R and D and get this deal done. Uh, and then it ended up being a billion dollar brand, uh, for P and D, one of their billion dollar launches, uh, back about a decade ago. Uh, so enormous success. Uh, once you got those bands of appropriateness aligned, well,

Simon Hill:

It's a, it's a great example. And also one that, you know, as you said, you had to do CPR on this thing to keep it alive. There must've been huge amounts of nervousness on the side of the, the, the research company or the startup as well, that, you know, I see this all the time that, you know, well, they're just running away with my idea and they'll find a creative way to not do that, but they are just doing that. No, they're not. Right. And it is this internal incentives piece that makes it so hard.

Tim Bernstein:

Internal incentives. And we had been rigorously. Consistent about building trust and being transparent and communicating really well with the startup. So they knew every, they weren't surprised when the deal died the second time. We had warned them, we can't control this dynamic, this head of R& D is going to shoot this down. We have a path forward, but we're going to have to let her kill it first. And then, uh, we'll play our cards there. So the startup was very well communicated. That building trust and avoiding pinches was a huge part of them, uh, sticking around and have the perseverance, uh, to, to get through the, the fourth, the fourth round of CPR and then through to deal

Simon Hill:

paramedics as well. It's, uh,

Tim Bernstein:

all

Simon Hill:

part of who knew exactly. So as you said, we could talk for weeks on this, but, um, I'm going to start wrapping us up towards, towards the close and. Um, for folks that want to dig deeper into this, we're going to share some resources afterwards as well. So maybe let's just, you know, we've, we've given a lot in this and there's lots more that, that, that we, that we can do. If we, if I ask you to do the impossible and distill this down for me, right? Some actionable insights for listeners. And let's take that on the side of the corporate and then the side of the startup, right? What's the one thing that a large corporate could do today, tomorrow to improve? Their innovation partnerships performance,

Tim Bernstein:

right? Um, you know, I can't just do one, but I, but I did distill it down to three for you, Simon. So, uh, arm the scouts, uh, to be able to make simple momentum building decisions, uh, you know, in real time. Rather than forcing them to go back internally to all of those diverse stakeholders, uh, that's probably pretty high on the list. Resource that external facing function, uh, to have a partnership external facing plus internal facing, uh, because it's two full time jobs. And if you ask one person to do it, they're going to drop critical balls and deals, good deals are going to die. Um, uh, and then, you know, things like setting aside budget, uh, to, to be able to move ahead quickly. Um, Uh, uh, probably, sorry, last piece, um, communicating well with the startup. Even if it's non communication. So here's what our interest is. I know that seems revolutionary and really scary, but telling the startup why you're interested in them, you'd be amazed how many times that's a controversial decision inside the large coast. So that's, you know, it's all around that arming. Scouts, uh, and then, and then being transparent with the, with the startups.

Simon Hill:

I'll give you one in four. I think communication wraps as a theme around a lot of that as, as, as well. Right. And, and obviously, and obviously the resourcing piece and from the startup side, what's the one thing or more than one thing that you should be keeping in mind? I

Tim Bernstein:

got, I got down to one with the startup. Um, My team's going to kill me, but we have a concept internally we call SLCCB, uh, which stands for standard large company corporate behavior. And all it means is, uh, you're dealing with a 40 or 50, 000 person organization. That's 40 or 50, 000. Different, uh, individual sets of incentives, uh, goals and agendas do not think of that large company as, as a monolith making rational decisions on behalf of the, the, the infamous shareholders, uh, uh, you know, the ownership of the company, think of it instead as these individuals operating in this very complex environment. And if you have that mindset, and then you're going to partner with the external scout, uh, to arm that external scout to. To paint the best possible story for your opportunity, that army mindset in the face of diverse incentives, uh, that would probably be the single biggest takeaway for startups.

Simon Hill:

Yeah. I, uh, I think I would echo those things. I think staying authentic to the, to the, to the business you have as well and trying to not stick. I know you would, you would echo that as well, but sometimes you try and mirror the business that's there too much, I think. And I actually. Part of what they want is for you to not do that as well. So listen, Tim, thank you very much. Thank you for sharing openly, for a good, healthy discussion. Your insights into the human side of innovation partnerships, I think are, you know, not just invaluable, but not many people have this much experience of walking this walk. And, uh, So hands on as well. So to all of our listeners, if you're looking to build better innovation partnerships or want to learn more about yet two's work, head to yet two do com or find Tim on LinkedIn and I know he'll be happy to connect and, and share more. Yet. Two, we're also kindly offering all listeners a free copy of their ebook, which you can access in the link shared with this episode. Thank you, Tim. Thanks yet two for that. And as always, everybody, thank you for listening. If you enjoyed this episode, and I hope you did, please let us know why. Share with others, hit subscribe. And Tim, thank you very much once again. And for everyone until next time, keep innovating. Thank you very much.

Tim Bernstein:

Thanks very much for the opportunity.

Simon Hill:

My pleasure. Welcome to another episode of the Total Innovation podcast. As always, I'm your host, Simon Hill. Innovation does not happen in isolation. It's not just about ideas, patents, or technologies. At the heart of it all, it's about people. And at the heart of every breakthrough deal is a delicate dance of partnerships between organizations with different cultures, working styles and expectations. So how do you build trust and align diverse stakeholders to bring innovations to life? Our guest today knows this challenge better than most. With a career spanning over two decades in open innovation, technology transfer, and partnership building, he has been at the forefront of helping some of the world's biggest companies scout for cu Scouts for cutting edge technologies, broker deals, and unlock the power of external innovation ecosystems. He's a Yale and Stanford graduates, an entrepreneur at heart, and the leader who has helped shape how fortune 500 companies and startups collaborate to solve some of the world's toughest problems. As CEO of YET2, he has guided corporations through the complexities of technology scouting, licensing, and deal making, all while navigating the human elements of partnerships, trust, communication, and cultural differences. In today's episode, we'll be exploring YET2's three bands of appropriateness. A framework designed to help organizations understand and adjust to the diverse working styles, behaviors, and expectations that can make or break innovation deals. We'll discuss how companies can move beyond transactional partnerships and build trust based collaborations that drive real results. So whether you're a corporate leader looking to harness external innovation, Or a startup founder hoping to work with large companies. You're in for a treat. You'll walk away with practical insights on how to navigate partnerships, build trust and close impactful deals. And with that, it's my absolute pleasure to welcome Tim Bernstein, CEO of Yet2 to the Total Innovation Podcast. Welcome, Tim. Simon. I'm honored and pleased to be able to join you today. Many thanks for having us now. I'm looking, I'm looking forward to this, and I enjoyed in the, uh, in the planning behind this, the conversation that we had and piecing this together because there's a lot of experience here, and it's a very important part of, uh, the innovation ecosystems in which we live and breathe. We're going to dive straight in and look at the reasons why innovation partnerships partnerships. Fail, or maybe if we take the positive lens succeed, right? You've got a lot of experience as my introduction set said, um, what do you see as some of the biggest reasons why these partnerships fail or maybe succeed? Are we being positive or negative today? We're going to start negative and then we're going to shift positive because we're optimistic people. Um, yeah, it's, uh, 25 years in this industry, 50, 000 deals that should have happened. Uh, over 25 years at YET2, and, uh, we've been successful. I think we're up to 340 now or something like that. So if you subtract 340 from 50, 000, uh, it's not a good hit rate, uh, and there are lots of scars on our back and lots of learnings. Hopefully, uh, we've incorporated and distilled the learnings and we're starting to be able to teach them effectively and partner well with our clients. Uh, and we've seen great, uh, ramp up great increase in our success rates. So, uh, hopefully Simon, I think we ended up being positive at the end of the day. Yeah, and help, help move that percentage a little bit upwards as well, right? You know, 340 good ones, but I'm sure many more, many more to come and many more that should have happened. And the loss is the value as well, right? So let's, let's talk around that, right? What are, what are some of the reasons that, you know, I'm not going to do that math quickly in my head, but there's 49, 000, whatever it is, 900 or whatever, 600 and something didn't happen. 650. Yeah. Um, you know, it's funny. There, there are a bunch of reasons. We've actually built, uh, an eight module open innovation training course just, uh, to talk about, uh, this set of dynamics. So there's really kind of eight large buckets there that we turn to, um, If I was to go to the very top of the list, uh, we, we have a, I think a somewhat non intuitive one that we think is the most fragile part of the whole process of, of partnering externally in, in technology and, and that's the relationship between. The open innovation scout inside our client. So that external facing person whose job it is to go out and find what's possible out there in the world. And we'll talk a bunch more about what's possible in a few minutes, uh, their relationship with their internal clients, uh, with the heads of R and D. With the brand owners, with the product development leads, that scouts relationship with those internal clients is the place where we see the, the, the most number of deals fail, uh, even right up through today, even after trying to coach, uh, all of our clients on the fragility of that step. Um, and you know, happy to get into details about why that internal piece actually is the hardest part of this. Yeah, it's a, it's a good one. I think people may not have. Necessarily gone there to start with, right? And there's lots of other reasons. I'm sure we'll, we'll pick up and chew on, maybe just talk a little bit more about what, what that means, right? Peel that onion back another layer or, or, or two in terms of what you see breaking down in those, in those relationships. Yeah. Um, then, you know, it's funny. We started out, uh, you know, first couple of years were rosy eyed and all excited and, and then the deal start to fail and then we'll get more failures and then you get jaded and all that good stuff. Um, early on, we talked about things like expectations, culture and trust. And it was just, it was too fuzzy, too ephemeral for me because there was, there was nothing you could point to that a large company could go to differently. And so we've evolved a lot, uh, over time since then, we like to think a lot about incentives. Uh, so what are the incentives acting on the various people inside the room and how do we counter those incentives when those incentives, uh, would, would yield toward killing the deal instead of, instead of making a deal. Um, so we think that incentives is absolutely critical. Uh, we've also built a concept we call pinches. And by pinches, we mean if you got my name wrong, I'm not going to worry too much about it, but then if you say my title incorrectly and you get the name of my company wrong, now I'm starting to get annoyed at you. And this dynamic of pinches between the large company and the startup or the external solution provider, it is so easy for the large company to pinch the startup. Uh, and if that builds up over time, you get to the point where, uh, toward the end of Of the flow from introduction through evaluation into deal negotiation. One of the concepts we talk about when we teach deal negotiation is what we call a ZOPA, a zone of possible agreement. Uh, and if the large co has pinched the, the startup 7, 8, 10 times, The startup's going to be much less excited about sticking their necks out to try to increase that Zopa to increase the chances of a deal, uh, at, at the back end. So incentives and pinches are two pieces of this that we talk a lot about. Um, and, and just to build a little bit further on the incentives, we think about, um, generally inside large companies, you have brand stewards. You have senior stakeholders, you have all of the support functions, legal, procurement, regulatory, manufacturing, all of those support functions, and then you have this poor entrepreneur trying to make something happen at the corporate boundary, uh, aligned against all of these incentives that, that, uh, that run counter to getting an external deal done. Um, so, so we've actually gotten much more clinical. We've applied a lot of game theory, uh, and now we can give very concrete, very specific recommendations about how to realign to increase the chances of deal. It takes me back to some of the conversations even we have with clients where they walk in the room with their senior legal counsel from three different business areas and external advisory and ask where ours are. And I say, I'm here. And I'm acting with 57 different hats on in that, in that capacity as, you know, is it even a sort of smaller size mid cap, but you know, like it's, it's a, it's a very daunting experience, especially if, you know, if, if all you're really trying to do is just get in for a proof of concept to build something thereafter as well. Um, but also, you know, you can set yourself up for immediate failure on that side, right? If you, uh, you don't really know what you're getting yourself into. I, I think we, we actually, um, uh, counted out the standard set of steps from, um, first introduction all the way through to deal negotiated. And it's like 47 steps across a standard process for main areas of activity, but 47 individual steps. There are lots of ways to kill a deal every single one of those 47 steps. So we said we're going to tilt into some of the positive sides and I, I mentioned this framework. Exactly. I mentioned this framework up front, the yet to three bands of appropriateness framework. Let's, uh, let's talk about that. Sounds cool, right? Yeah. Again, uh, you know, 49, 650 cars on our back. Not that I've memorized that number. Um, So when we talk about bands of appropriateness, there's a set of, if you think about the intro to deal process is having these four main phases. Phase one is non confidential, uh, introductions. Phase two is confidential evaluation. Phase three is due diligence and phase four is deal negotiation. And all large companies have slight variations on that. And they use a lot of different language, but that's actually what we've seen across, I don't know, almost a thousand large codes. Now that's a pretty good approximation of the process. They all go through. Um, if you think about the flow through those four phases, uh, from non confidential intro through to deal negotiation, there's a set of behaviors. For both the large co and for the startups that are appropriate and what we mean by appropriate, we're absolutely using a judgment with that term. What we mean by that is behaviors, actions, activities, questions, tasks that. Increase the chances of getting a deal done down the road, uh, beyond each of those phases. And then outside of that band of appropriateness, there are two bands of inappropriateness, one for the large coast and one for the startups. Uh, and so that's how we got to the three bands of appropriateness, actually one band of appropriateness and then two bands of, of a whole bunch of muck. Great. All right. And I know I slightly misinterpreted that in my pre read notes, so apologies, but that actually makes a lot of, a lot of sense. Um, which one should we pull on? Maybe I quite, let's start with maybe the, the, the inappropriateness from, uh, from the startup side, because it's not necessarily the obvious place to start, right? What are some examples of, of things in there? And then we'll build up from there back to the appropriate. Right. So inappropriateness for startups would generally, uh, run around, um, refusing to share information, uh, unwillingness to build trust, uh, that, that's kind of where we see most startups struggling most with, with bands of inappropriateness. Um, because of skepticism and nervousness, do you think? Yeah, there's, there's, you know, if you're, uh, an inventor, a founder, an entrepreneur. Uh, you've heard stories of large companies swinging in and, and stealing the crown jewels and then you're this little guy and you can't afford a lawyer and so they know they can beat on you, right? You know, those, those, uh, those tales from the, from the, the innovation community are, you know, are fairly widespread. Uh, so a lot of people come in and, and a bunch of entrepreneurs have been through this dance before and had really poor outcomes. So sometimes they're acting directly from personal experience as well. Yeah, they've already been in the 49, 600 and whatever beforehand before. Yeah, exactly. Rodeo 2 and 3 is coming around. Exactly. And from the, from the corporate side? From the corporate side, um, The, so as I said, the most fragile piece of this whole system is the relationship between the scout and their internal clients. Uh, we see lots of issues where, uh, the scout doesn't manage the expectations. Uh, or the requests from the internal clients very well. Uh, and so the scouts feeling like I need to have your cogs and your IP filings and your investment plans, uh, and, um, and the, the profiles of your limited partners and your investors. I need that today in order to minimize all possible risk for, for that brand steward that I'm working for. Uh, as opposed to. Uh, that scout really should be taking that brand story through the concept of bands of appropriateness and saying, yes, ultimately we're going to need all that information. But today in a first call, our primary goal is to figure out if they have an advantage, what we call a comparative value proposition, uh, and to build trust. Those are the only two things we need to do today, and the rest of this we have to get to, but it's going to be way more appropriate if we do that down the road when we're all, uh, a lot more excited about the opportunity here. When we talk about deals, and I'm going to take us slightly outside of some of the stuff we've discussed, I think it's just worth putting a bit of clarification over what we might mean, right? Like what, what, what are some examples and where do the, where do the corners live in some of this broad word of sort of, you know, partnerships and deal making? Right. And I'm almost not going to help very much because for us, deal is a very broad concept that encompasses a lot of different constructs. Uh, but the, the, the, the, the. The form of deal that we see most often is usually a joint research, uh, where the startup has a really interesting platform, but now we need to prove it in the large codes application. Uh, and let's go, uh, very carefully milestone, milestone our way into a, uh, a product headed toward market where the first step might be as small as a 25 or 50, 000 or 50, 000 euro, uh, joint research effort. On one key dimension of performance. And let's go prove that startups platform in my application in that joint research effort. So that would be kind of the most common form of deal, but they can run the gamut all the way from, from small joint research to. Uh, uh, investment to joint development, uh, to full acquisition. So when we say deal, uh, the large co is generally writing a check of some form for something more than just a 1, 000 of samples. There's actually value being transferred between the two parties. Right. A greater level of sort of symbiotic relationship and in some way, shape or form. Um, great. Thank you. And what would be an example, right? You know, you've spoken a little bit of those, but what would be an example of a successful partnership where This mindset of, of the appropriateness, inappropriateness helped to create a, you know, an outcome that would otherwise perhaps have not been successful in one of the, one of the 340 rather than the other, the other side of that equation. Yeah. We have all sorts of examples. A great example, uh, where the LargeCo is an oil and gas player, uh, was looking for a textile ply on top of a rubber substrate, uh, for an oil gas application. The, you know, the substrate needed to bend and the textile needed to stay adhered to the, to the, to the rubber substrate, uh, and there was this, all this issue around modulus of elasticity and shape memory, uh, and the, um, The, the large code, uh, gave a testing protocol, an ASTM, uh, requirement, uh, around, um, uh, adhesion. Uh, so does the textile stay on, uh, the rubber substrate at various temperatures and, and, uh, pressures and, and humidities and all that stuff. And the large coat didn't tell the startup that they were going to bend that thing 90 degrees and see what happened. So the startup optimized on a, on a rigid fixed. Uh, linear, uh, uh, adhesive, uh, to get as strong a bonding as possible across the various, uh, uh, ambient environments. Uh, and then the large co failed, failed the test, failed the test and failed the startup because they were bending it and the thing peeled off. Um, uh, and so our recommendation was let's confirm those testing protocols before we send the startup into the lab to build their custom samples. Uh, let's, let's confirm those pretty carefully. And the large code didn't want to have that meeting. Uh, and then afterward when the, when the sample failed, uh, and we asked why it failed and they said, well, we, because it bent 90 degrees and it completely peeled off. We're like, Whoa, we'd never heard anything about the bending. The startup certainly didn't. Maybe we should go back to them and ask again. And now we've started to lose trust already by that point. So, so that was a, that was a negative example where the deal died. Uh, because the large co wasn't communicating well on fairly simple dimensions back out to the startup. So a big violation of our bands of appropriateness, uh, is, is poor communication when the communication should be easy. Um, another, another great example, uh, natural deodorant ingredient, uh, the, the large co asked for 10 kilograms of a custom sample, uh, before they had gotten senior. Buy into the opportunity, uh, and before they had budget available to pay the startup to go build that 10 kilograms of custom sample. So we didn't send that request on to the startup. We pinged it. This is a common tactic for us. We pinged it back to the large co and said, we think these three things need to be in order. Before we're okay. Sending that request to the startup, because if we send it as is, you're just going to diminish trust and piss and pinch them and piss them off. And so we pinged it back. So they, we forced, uh, the external, the external facing scout to go to his internal clients and to those senior stakeholders get buy in yes, this does look like a really promising alternative, a natural version, uh, the data, the initial data on it looks great. Then we're all agreed to 10 kilograms of a custom sample. You know, we should be willing to pay 5, 000 bucks for that. Uh, and so here's budget. Uh, we're now empowering the team, uh, go to town, go, go do the confidential evaluations, and if that looks really promising, then we'll move into due diligence. So that pinging back. To protect the large company from their own stepping outside those bands of appropriateness was, was incredibly effective in that case, uh, and that products now on market. I'm very excited to say cool and some, some good examples of positives and negatives in there from the, from the three different bands as well, and a wealth of data points to reinforce all of this. I'm going to bridge a little bit now because I think this sort of falls into. Some of the band's thinking, but also perhaps what happens next as well, um, uh, is the human side, right, of this. And it's not a surprise, I guess, to anybody listening to this, that, you know, there's very often contrasting working styles and cultures to, Whether it's a research organization or a nimble startup, and then the large co right there and their ways of working. So in seeking to bridge those kind of differences, other tactics that can be employed, employed and other things that people on both sides of that table should be thinking about, not just to get you over the line with a deal. But I can tell you once you've signed something, you've got to start to work and deliver it. You have to work together. I think that's probably what is even more jarring on the reason that it. Even the best deals quite often fail to scale, to impact, right? Right, and we've seen deals where the one or both sides were so frustrated with each other the moment the deal got the deal signed, but then they have to, exactly as you said, they have to work together to get to market. And they're so frustrated at that point that, you know, it was destined for failure even though the deal was signed. Exactly. Do you even see, because one of the things I find slightly bizarre sometimes around The interactions between the large organizations and these kind of things is that a totally different team would work on the deal side than the next side. And so even if you have built great bridges, it almost is irrelevant because that seems moved on another team moves through. Is that common or is that, you know, is that one of the things that we need to do more work on between the between people or what do you see? Yeah, it's, you know, it's, it's, I think, um, 20 years ago, I would have answered this question very differently because I had only been through one cycle of watching a large company innovate, uh, or large companies, uh, plural, uh, but I've been through like four or five cycles of how these large companies do this and they bounce back and forth fairly. So we, uh, we, uh, uh, routinely do benchmarking of open innovation systems. Uh, and this is a question that comes up every time, uh, the person who built the trust with the startup. In getting the deal done, can they now become the relationship manager moving forward? That's a really hard question for a large co because that person's day job Is to go find the next 25 startups and to make sure that that either they're partnered with somebody who's internal facing Or that they themselves are very very tightly connected to their internal clients And that most fragile step of the whole system and if you're now peeling off part of their time and effort To, to program manage or to to relationship manage, uh, a post deal toward, uh, toward commercialization. Uh, now you have a real resourcing issue. Uh, you know, do you ramp up the next person into that scouting role and let this person manage the three relationships on the three big deals? That it's a really tough question for large goes. Um, where, where, where we land on it is if the deal's important enough. Uh, if this is a big enough, uh, product launch slot for your brand and, you know, over their, their five year roadmap, yeah, you probably want to keep continuity of that relationship manager. It's probably important enough to disrupt, uh, kind of your standard open innovation workflows to, to do that. So that's not every deal, but, but on the big important ones, yes. Uh, we do recommend that back to my back to my question before I took us off on a slight tangent. Thank you In looking to bridge those different working styles. Um, what are some of the I don't know. We don't know whether we can call them anything more than tactics, right? But what have you what have you seen to help try and bridge? I guess also having a somewhat independent third party in between those helps massively as well But you don't always have that person there all the time. So what else hopefully, uh, hopefully we're helpful. We're not positive Uh, I think so. I, you know, with the, the, with the feedback we get and all that good stuff, but, um, so in that, in that middle band of actual appropriateness, there's a whole set of steps that we recommend for the large codes toward the top of the list. Um, Can you resource somebody external facing whose job it is to communicate something, even if it's a non communication, even if I don't have anything to say. There's no news. We're still in committee. I'm still waiting on internal alignment. Uh, but at least you're touching the, communicating out to that startup and they know that it's not their fault. You haven't rejected them out of hand. It's, it's your internal decision making process. Um, so that, that's a first piece is, is resourcing somebody to be consistently external facing, external touching. Uh, and in fact, our best practice would be if you're, if, if you're going to have a scouting function. Resource it in two segments. One segment is external facing and the other is internal facing. And then those two scouts, they partner, they sit, uh, you know, at desks next to each other every day. They naturally are talking all the time. The internal facing is doing the really hard job of staying very tightly connected to the latest, greatest strategy shifts and nuances internally, and the external facing is doing things like getting back to that startup we haven't talked to in six weeks. Because we're stuck deciding what we want to do to go forward with them. Um, that, that we find is a really, really powerful, uh, structure, internal plus external facing. Uh, so that would probably be toward top of our list. Um, another dynamic, just as an example, and I could talk all day about this. Um, I get really passionate about this topic, um, empower. That project team that's exploring the opportunity at the edge, uh, empower them to be able to make simple decisions very quickly. Like, for example, give them budgets before the project starts to go spend 25, 000 on samples across five or seven of the best solution providers. Don't make them go internally into the stakeholders and the support functions and the brand stewards and turn that into a three month decision process. Just to spend, just to spend 5, 000 bucks on the first evaluation samples and empower them early, or at least empower them once you see that there's real, uh, intriguing, what's possible opportunity out there. Uh, so that's, that's another thing we really love around best practices for the large companies. Great. Great. I guess one of the challenges at the front end of this process, if we sort of walk back up there a little bit, is that early dance, right? That bit between Trying to figure the startup super nervous, right? They don't want to give too much away that the information in their head, which isn't as protected as maybe the intellectual property might be wrapped inside a large code, the competitive advance, the nervousness on and then this wants on the other side of the table for as much information as possible. Yes. How do you balance building trust with that sort of IP protection and other things again, looking at both sides of that relationship? Right. Um, so, uh, we actually often teach both the large co and the startup simultaneously on there. There are two really important concepts here around around I P. The first, the large co wants to hold off. It's in the large code's interest to hold off on, on moving to confidentiality, moving to NDAs until they're really confident that this is an opportunity worth, worth taking on that obligation of confidentiality of that startup's information. Uh, and there's one dimension to this as well. What if they're talking to other startups? And you took on an obligation of confidentiality with these guys, but then you want to go to a deal with those guys and their technology looks kind of similar. And you have this obligation to keep these guys IP confidential. And yet you want to go to market with this and you go to market. And then these guys say, you stole my idea and launched it. Now you're in court and that just. things. Um, so this concept of, of protecting from IP contamination is important one, probably more important than something that we just don't see the large coast talking about today is this concept we call inventive step. Uh, and by that, what we mean is, uh, the large co is really, really good at, uh, unearthing, uh, unmet needs, uh, little known unmet needs out there in, in their consumer, in their customer marketplace. And the startups, by definition, have found some new to the world what's possible concept. Uh, so when you marry, uh, an unmet need with a, with a new to the world, uh, technology, that is ripe environment for inventive step. The large co wants to file IP. Uh, that they own completely by themselves. If you sign an NDA with that startup, you're almost forced to share the IP with them if, if your technical people and their technical people start brainstorming and you come up with an inventive step new idea. And now you're completely beholden to them in terms of control of that IP and where you go with it and how you compete against your competitor. So, the longer you can hold off on that NDA, And then we teach the startups, tell us as much as you can about the what, what does your technology do, what does it accomplish, what kind of data do you have showing its performance and efficacy, but don't share anything about the how. How did you get there? What's the proprietary information? What did you file in your patents? What's new and different? Uh, what, what's the inventive step? What's the uniqueness? Uh, let's not share any of that until the large co has decided that it's worth the obligation of moving to that NDA step. And here's why that's in your interest and your interest. So that concept on holding off on confidentiality until, uh, the large co has decided it's worth the obligation. And, and, uh, during that first introductory phase, the startup's actually not taking much risk by saying that we have a 20 percent performance improvement. Um, you know, they should be trumpeting that from the treetops. That's completely non confidential. So what versus how? Inventive step, uh, anti contamination. There's, there's some really important tools there, uh, for, uh, protecting the large companies, IP interests. Um, and some of those large companies are fairly fluent at, and some of them we don't hear much about. So we're often doing a lot of teaching there. Yeah. And I, I think teaching both sides is important. I think there is, there's a tendency to rush to NDA much, much too quickly. Right. Um, and spend, and burn a lot of time and energy on that process that you, as you've said, Delivers very little in that first front piece. It might actually cause you more problems down the line rather than a great project going right now where the client's looking for alternative seaweeds for an ingredient for a cool application. Uh, and we found nine. Uh, startup companies with phenomenal new platform approaches to alternative seaweeds. Uh, and the large co, uh, you know, so they ran their internal deliberations, took our prioritization recommendations and said, all right, we want to go ahead with all nine. Can you get NDA started with them? Like, Whoa, wait a four of them are direct competitors with exactly the same platforms and no, we're not going ahead with all nine. And so we had to teach them about inventive step in contamination. And, you know, so they went ahead with, with NDAs, with four really different. Approaches across, uh, you know, with only four of those nine, uh, to start with one of the four has already fallen out. So we're ending that, uh, NDA relationship and we're moving it on to the fifth company, you know, but, um, it's a, it's a really colorful example where the large company got really excited. And we're like, Oh, you gotta be careful here. Yeah. I think that's a, that's a, that's a great example. And you know, none of. It's amazing how much infrastructure sits behind the people in large organizations. And when it, when you want it to get out of the way, it's really hard to move. And sometimes when you need it to operate, it's not there right to be like that. And so that's really where the value of this type of thing comes in. Right. And the real expertise. You go right back to that that concept of incentives. What are the incentives operating on those support functions? They have day jobs. They have KPIs. They have bosses expecting deliverables and you're not part of that. You know, it's it's the job of intrapreneur scout inside the large co it's it's a Fascinating job. Yeah, I'm gonna muse a little bit more on that As we were talking through earlier of, you know, your job is to find more, not necessarily to nurture the thing. I think the incentive there is, is arguably misaligned and maybe more parallels between, I don't know, the way that it might traditionally work in a, you know, in a, in a sort of venture back backing situation, like a VC or something where typically the person leading that deal then does take that on and does become a part of the, uh, The board of directors or whatever stays close to that, that thing. And therefore they're picking things that they really want to be involved in and backing. Again, the incentives could be off in some of these scenarios because you may just not care about the problem you're working on at all. I was still like the business, but there's a, there's a challenge in, in, in, in both sides. I can understand, but I feel like if you're handing over the relationship to a brand new team, typically human intuit human nature doesn't like that. Right. You know, Just because someone's my best friend doesn't mean they're going to be yours if I suddenly hand them over and then you're going to find the same values in the things that I found values in or whatever. So it sounds clean on paper, but the human nature of it. Yeah. You cannot overestimate the importance of that. I want to, I want to pull out, you know, in that three 40, you spoke about this, but there must be some, some real diamonds, like the ones you really, the ones you're like, okay, if I could just make everyone like this, like, can you talk us through one of those real success stories and like, what. Yeah. Is there any, was there anything, was it just lucky or was it something like that's repeatable one really shine? Right. Um, yeah, and I can do that like struggling, which, which story do I tell? Uh, luckily we have, which is good. Having so many is great. We have 350 good ones. So yeah, we're going to end on a positive note here. I love that. Um, so, uh, happy to talk about, um, uh, uh, PNG crest whitening strips. Um, Uh, and this is a deal from a few years back, so there's no longer anything proprietary about it. Uh, we found, uh, a whitening technology, uh, and it turned out the, the whitening itself, the, the actives that, that generate the whitening, that's fairly well known. Not a whole lot of innovation going on there in the pure actives, but how you get the active to stay engaged with the enamel of the tooth for an appropriate amount of time at an appropriate amount of bonding. And then be able to unbond it, uh, without doing any damage. Uh, that's the trick with, uh, that's where, where we're seeing a lot of the innovation in whitening these days. Uh, and so we found a technology that had phenomenal ability to adhere. Uh, at home and kind of standard, uh, consumer environments, uh, and then had very easy trigger, uh, for unbinding. Uh, our client, uh, had been working on this for 20 years, uh, big, very expensive internal R and D efforts. Uh, very excited about their own approaches. And yet when we showed the data about, you know, do you only need 40 minutes? To get this amount of percentage increase in whitening. And then 98 percent of consumers can trigger the unlatching, uh, in, in less than two seconds with, with, uh, with no stress or tension, uh, that kind of performance data. Should have been really compelling inside our client and the scouts loved it. So they were, let's get samples. Let's run our own versions of these tests. Let's do some control studies. Uh, and the data keeps coming back that this external platform is looking really phenomenal. And the internal R and D teams are trying to find as many ways as possible to shoot this thing down. Uh, so those incentives to. Uh, getting the, uh, the brand stewards, uh, the internal R and D senior stakeholders to getting them aligned around the truth of the science here. Uh, and then being able to structure the deal in a way where it was very low risk upfront, uh, to, uh, to the large company, to PNG in this case, uh, in case there was actually something wrong as you tried to scale the technology. So we're not committing too much upfront to this external partner. Um, so that deal died, uh, three times. Uh, and each time, uh, we partnered with the, um, with the external facing scout, uh, to revive the deal. Uh, you know, and there were all, all these issues around budget, around too rich a license, uh, around, uh, we found our own intern, our own internal latest effort has turned a corner now, we're really excited about it. And then that bubble, you know, and then that bubble burst, um, that was a great example of a deal where, uh, we played the bands of appropriateness with the startup really, really well because we partnered really well with the external facing scout. Uh, but then all of the incentives acting on that external scout internally to kill this deal three times, uh, eventually we had to go to an SVP. Uh, to override that the head of R and D and get this deal done. Uh, and then it ended up being a billion dollar brand, uh, for P and D, one of their billion dollar launches, uh, back about a decade ago. Uh, so enormous success. Uh, once you got those bands of appropriateness aligned, well, It's a, it's a great example. And also one that, you know, as you said, you had to do CPR on this thing to keep it alive. There must've been huge amounts of nervousness on the side of the, the, the research company or the startup as well, that, you know, I see this all the time that, you know, well, they're just running away with my idea and they'll find a creative way to not do that, but they are just doing that. No, they're not. Right. And it is this internal incentives piece that makes it so hard. Internal incentives. And we had been rigorously. Consistent about building trust and being transparent and communicating really well with the startup. So they knew every, they weren't surprised when the deal died the second time. We had warned them, we can't control this dynamic, this head of R& D is going to shoot this down. We have a path forward, but we're going to have to let her kill it first. And then, uh, we'll play our cards there. So the startup was very well communicated. That building trust and avoiding pinches was a huge part of them, uh, sticking around and have the perseverance, uh, to, to get through the, the fourth, the fourth round of CPR and then through to deal paramedics as well. It's, uh, all part of who knew exactly. So as you said, we could talk for weeks on this, but, um, I'm going to start wrapping us up towards, towards the close and. Um, for folks that want to dig deeper into this, we're going to share some resources afterwards as well. So maybe let's just, you know, we've, we've given a lot in this and there's lots more that, that, that we, that we can do. If we, if I ask you to do the impossible and distill this down for me, right? Some actionable insights for listeners. And let's take that on the side of the corporate and then the side of the startup, right? What's the one thing that a large corporate could do today, tomorrow to improve? Their innovation partnerships performance, right? Um, you know, I can't just do one, but I, but I did distill it down to three for you, Simon. So, uh, arm the scouts, uh, to be able to make simple momentum building decisions, uh, you know, in real time. Rather than forcing them to go back internally to all of those diverse stakeholders, uh, that's probably pretty high on the list. Resource that external facing function, uh, to have a partnership external facing plus internal facing, uh, because it's two full time jobs. And if you ask one person to do it, they're going to drop critical balls and deals, good deals are going to die. Um, uh, and then, you know, things like setting aside budget, uh, to, to be able to move ahead quickly. Um, Uh, uh, probably, sorry, last piece, um, communicating well with the startup. Even if it's non communication. So here's what our interest is. I know that seems revolutionary and really scary, but telling the startup why you're interested in them, you'd be amazed how many times that's a controversial decision inside the large coast. So that's, you know, it's all around that arming. Scouts, uh, and then, and then being transparent with the, with the startups. I'll give you one in four. I think communication wraps as a theme around a lot of that as, as, as well. Right. And, and obviously, and obviously the resourcing piece and from the startup side, what's the one thing or more than one thing that you should be keeping in mind? I got, I got down to one with the startup. Um, My team's going to kill me, but we have a concept internally we call SLCCB, uh, which stands for standard large company corporate behavior. And all it means is, uh, you're dealing with a 40 or 50, 000 person organization. That's 40 or 50, 000. Different, uh, individual sets of incentives, uh, goals and agendas do not think of that large company as, as a monolith making rational decisions on behalf of the, the, the infamous shareholders, uh, uh, you know, the ownership of the company, think of it instead as these individuals operating in this very complex environment. And if you have that mindset, and then you're going to partner with the external scout, uh, to arm that external scout to. To paint the best possible story for your opportunity, that army mindset in the face of diverse incentives, uh, that would probably be the single biggest takeaway for startups. Yeah. I, uh, I think I would echo those things. I think staying authentic to the, to the, to the business you have as well and trying to not stick. I know you would, you would echo that as well, but sometimes you try and mirror the business that's there too much, I think. And I actually. Part of what they want is for you to not do that as well. So listen, Tim, thank you very much. Thank you for sharing openly, for a good, healthy discussion. Your insights into the human side of innovation partnerships, I think are, you know, not just invaluable, but not many people have this much experience of walking this walk. And, uh, So hands on as well. So to all of our listeners, if you're looking to build better innovation partnerships or want to learn more about yet two's work, head to yet two do com or find Tim on LinkedIn and I know he'll be happy to connect and, and share more. Yet. Two, we're also kindly offering all listeners a free copy of their ebook, which you can access in the link shared with this episode. Thank you, Tim. Thanks yet two for that. And as always, everybody, thank you for listening. If you enjoyed this episode, and I hope you did, please let us know why. Share with others, hit subscribe. And Tim, thank you very much once again. And for everyone until next time, keep innovating. Thank you very much. Thanks very much for the opportunity. My pleasure.

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