Open Innovation’s “Multiunit Back-End Problem”: How Corporations Can Overcome Business Unit Rivalry

Abstract

This article examines the “multiunit back-end problem” of open innovation based on a case study of the Banque Populaire Caisse d’Epargne (BPCE) Group, a large French bank with two business units. The multiunit back-end problem occurs when internal business units who consider themselves rivals are asked to collaborate for the success of an open innovation initiative. BPCE failed several times to use external startups to accelerate its digital transformation due to rivalry between its internal business units. This article presents guidelines that firms with rival business units can use to align their front-end and back-end when working with startups to accelerate their digital transformation program.

Open Innovation and Coopetition

“…It is also important to note that there is an additional way how open innovation can learn from the literature on managing coopetition. Some research with an open innovation lens such as Seran and Bez (2021) shows that internal competition between business units were jeopardizing open initiatives, and -of particular concern to this paper -cooperative start-up engagements.…”

Extending Open Innovation: Orchestrating Knowledge Flows from Corporate Venture Capital Investments

“…Moreover, the extant OI literature has failed to provide answers to some of its most pressing challenges, such as the "Multiunit Back-End Problem" -an issue that occurs when internal business units who consider themselves rivals are asked to collaborate for the success of an OI initiative. 22 For instance, due to rivalry between internal business units, the large French bank group Banque Populaire Caisse d'Epargne (BPCE) failed numerous times to collaborate with external startups to accelerate its digital transformation. This is closely related to the presence of knowledge boundaries (often called silos) among business units, where local actors have the ability and motivation to limit the sharing of knowledge under their control.…”

Building Innovation Capacity

“…Other legacy obstacles are inherent in the company culture. New research sheds light on the difficulties of getting the front end of innovations talk to the back end (Chesbrough, 2020; Seran & Bez, 2021). Seran and Bez for example found that a major obstacle for seizing the innovations in the organization was rivalry between two business units in the back end.…”