Why Brazil Must Learn to Trust in Collaborative Innovation. Executive summary By Armen Ovanessoff, Eduardo Plastino and Flaviano Faleiro

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1 Why Brazil Must Learn to Trust in Collaborative Innovation Executive summary By Armen Ovanessoff, Eduardo Plastino and Flaviano Faleiro

2 Global innovation leaders increasingly collaborate across company, sector and national boundaries. Brazilian companies have largely avoided this trend, which explains in part why Brazil currently ranks low on key global indexes of innovation. To help the country move up, Brazilian companies must learn to build trust beyond their borders, resolve key questions about effective collaboration and develop critical new capabilities. Authors: By Armen Ovanessoff, Eduardo Plastino and Flaviano Faleiro. Imigrantes highway between the cities of São Paulo and Santos, Brazil 2

3 Despite boasting the world s seventhlargest economy, Brazil as a whole struggles to innovate. According to one benchmark, the Global Innovation Index, Brazil ranked sixty-first in Collaboration with other companies regardless of their sector or location has become critical to the development of many marketshaping innovations. Yet many Brazilian companies seem reluctant to engage with this evolving trend. In a 2013 Accenture study in which 500 executives were interviewed in 10 major economies, Brazilians proved to be, by far, the most likely to expect to achieve business growth in new areas through in-house ventures. They were also the least, or among the least, likely to place their bets on collaborative arrangements, such as joint ventures and strategic alliances. (See Figures 1 and 2.) Nor is this the only data pointing to Brazil s challenges with collaboration. An OECD comparison of innovative companies from 30 economies published in 2013 shows Brazilian firms in the third-lowest position. The latest data from Brazil s national statistics office found that even among companies identified as innovative in Brazil, less than 20 percent collaborated with other organizations. This is surprising, because both in person and increasingly in the digital world, Brazilians are natural connectors. What is holding Brazil back? Figure 1: Keeping it in-house By far higher percentages than their counterparts in other major economies, Brazil s senior executives expect to grow their business in new areas through in-house ventures. Italy China India Germany France UK Spain US Russia Brazil % Source: Accenture global business leaders survey 2013 Figure 2: Fewer allies As Brazil s executives are more likely to seek growth in-house, they are also less likely than those in other major economies to see strategic alliances and joint ventures as paths to growth Brazil UK Italy India Russia US Germany France Spain China Strategic alliances Joint ventures Source: Accenture global business leaders survey

4 Who do you trust? It is easy to blame Custo Brasil, the hurdles imposed by excessive red tape, infrastructure deficits and a complex tax system. But bureaucracy and volatility exist in many countries where executives are more open to collaboration. Accenture research and experience point to another culprit in Brazil: gaps in social trust. Trust is the foundation on which collaboration rests in business relationships as surely as in personal connections. An international comparison of interpersonal trust levels in 59 countries shows Brazil in fifty-fourth place. It is hard to interpret those figures as anything less than worrisome for the prospects of greater business collaboration. How can Brazilian companies address the country s trust deficit, and step up their ability to engage in collaborative innovation? We suggest specific steps businesses can take to build up trust with potential partners. We also pose the key questions leaders should ask themselves and identify the key capabilities needed for collaborative innovation. Squaring the circle You need trust to work together, but you need to work together to build trust. The question for businesses is how to square that circle. Consider how Samba Tech, an online video platform pioneer, established the trust needed for collaborative innovation. Its CEO, Gustavo Caetano, explained to us that partnerships must be built gradually. Samba Tech has a productive relationship with a large European multinational. In the exploratory stages of the collaboration, Caetano welcomed different executives from the company to Samba Tech s offices, showing them how Samba Tech creates products, manages its key performance indicators and even shapes its own culture. He also paid several visits to the European company s Brazilian headquarters, talking to people from different departments and spending time with the company s CEO and other board members. Only then was collaboration possible. True collaboration requires a profound understanding of your partner s underlying interests. This can only come about through constructive conversations aimed at building trust and shared goals, rather than leaping into contractual negotiations. Key questions for leaders Some reluctance to collaborate is natural. It s risky business if you don t do it right. To avoid making serious mistakes, companies must answer three critical questions. The first such question is deciding the parts of the business that should be open. Companies will need to analyze trends and scenarios and consider counterfactuals: What is the upside to collaboration? What happens if it backfires? Then comes the question of the number of collaborators a business should have. In principle, more sounds like it should be better. But there are trade-offs. With a large network of collaborators, managers may soon face the problem of information overflow. The best choice for your company will depend on how much information about partners you are able to manage, as well as on your ability to absorb new knowledge. Finally, companies face the question of who within their ranks should collaborate externally. The collaborative spirit, especially of younger staff, is highly valuable. But they must learn that not everything can be shared publicly. Moreover, the greater the number of people collaborating externally, the greater the chance that sensitive information 4

5 will leak beyond corporate walls. Capabilities for the future Many Brazilian companies still lack the key capabilities they need to collaborate effectively on innovation. Others, however, offer clear examples of how these capabilities can be developed. For example, Tecnisa knows that the ability to find partners is crucial. Once a month, company executives devote half a day to Fast Dating sessions in the company s São Paulo headquarters and other locations in Brazil. These 10-minute meetings, during which start-ups and other firms pitch their innovations to the construction company, have led to dozens of partnerships. Companies must also strengthen hard skills, such as the ability to draft complex contracts, and nurture soft skills, such as the ability to work effectively across cultures. Even more important is the ability to combine the hard with the soft. Petrochemical giant Braskem, for example, has collaboration contracts with a number of partners. They are all based on the same template but tailored to reflect the specifics of each collaborator and project, the company s vice president for Technology and Innovation, Edmundo Aires, explained to us. Brazil s companies must also make themselves attractive as potential partners. For a multinational, robust annual sales and strong brands convey attractiveness. For a start-up, innovative technology will attract others. In 2013 Hive, a small Brazilian game developer and digital marketing company, opened an office in San Francisco to boost its innovation efforts through new connections and alliances. Hive s partnership with the Silicon Valley startup Leap Motion led to the development of a movementactivated interactive mirror. Activating a cycle of trust and collaboration You need collaborators to collaborate with. A critical mass of executives with open mindsets is a prerequisite to setting off the virtuous cycle of greater collaboration and more and more valuable innovation. And a crucial prerequisite to open Brazilian minds is to improve levels of trust. Executives in Brazil must now take the necessary steps toward greater collaboration beyond their organizational borders. By doing so, they can help Brazil build on its natural strengths to play a significant role in the global innovation ecosystem. Rio-Niterói bridge, Rio de Janeiro, Brazil. 5

6 About the Authors Armen Ovanessoff is a principal director in the Accenture Institute for High Performance Eduardo Plastino (e.plastino@accenture.com) is a research fellow in the Accenture Institute for High Performance Flaviano Faleiro (flaviano.faleiro@accenture.com) is a managing director with Accenture in Brazil 6

7 Estaiada bridge, São Paulo, Brazil. 7

8 About Accenture Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions underpinned by the world s largest delivery network Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 358,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at About the Accenture Institute for High Performance The Accenture Institute for High Performance develops and communicates breakthrough ideas and practical insights on management issues, economic trends and the impact of new and improving technologies. Its worldwide team of researchers collaborates with Accenture s strategy, digital, technology and operations leadership to demonstrate, through original, rigorous research and analysis, how organizations become and remain high performers. Copyright 2015 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. Proprietary and confidential