We talk a lot about collaboration between corporates and startups. However, there is anecdotal evidence of rising frustration among corporates as neither practical nor financial partnerships with startups are bearing the expected fruits.
For most corporates, the challenge is not seeing or recruiting startups but trying to find new ways to get a Return on Collaboration!
Be resolute -or let go of collaboration altogether
Whether you work in retail, industry, finance, service industries, or in health care, more and more enterprises value external sources of innovation, such as startups, as well as internally-generated sources, or even better.
Startups offer positive energy, prototyped solutions plus emerging technology applications bringing tomorrow into today.
Nowadays, many corporate-startup engagements are ad hoc, opportunistic and notorious for moving slowly with no to minimal return besides countless coffee cups, sticky notes, and product demos.
While I do not think that anyone knows what the future of business holds, it urges companies to innovate at digital speed to stay relevant. It is becoming increasingly clear that in this digital age, you cannot work alone. Therefore, alliances and especially partnerships with startups will expectedly soar.
It means that corporates should let go of tech tourism involving PR-driven trips to events and demo days. Or, skip informal partnerships rather than longer-term models that will see corporates setting up structured collaboration programmes that result in quantifiable innovation outcomes.
Date before you marry
When considering partnerships, many corporate companies seem to be fixated on acquiring equity. The equity game is not relevant until there is ample proof that corporate-startup collaboration is beneficial to both sides and, more importantly, to the market.
Rather than investing millions of Euros on an acquisition that doesn't fit with the business in the long-term, trials, pilots or experiments in the Euro 20K – 50K range are a better way to go.
Whether it is through collaboration models like Venture Clienting, Incubation, Acceleration or Co-development, key is to run well-structured experiments that address a particular, pressing issue in which the startup can demonstrate its value in a measurable form.
The secret is to make collaborative work safe and simple for both organizations, with clear expectations. Less is more. Pilots should thus be quick and easy to run, centered around a mutually desired need and outcome.
Moreover, Corporate-Startup collaboration assumes a distinct do-it-and-do-it-again flavor. So, trials, experiments, and pilots should live as ongoing processes, not as one-off affairs or discrete events.
It sharply contrasts with typical corporate behavior giving priority to discussions on startup governance and legal aspects. It also unnecessarily creates cultural and organizational hurdles which are often (and rightly so) critiqued by startups.
Experiment outcomes and even the failures offer actionable insights on what to do next. Possibly then, equity investment through Corporate Venture Capital (CVC) could be considered as one of the options.
Run experiments first, then change the culture
Recently, Scoutely concluded literature and field research rubricating obstacles and enablers to effective Corporate-Startup collaboration. In summary, the results are the following:
- Startups often mentioned that there is no single point of contact at the corporate level. A Startup Recruitment webpage may solve this issue.
- At the corporate side, company politics, turf wars, lack of interest and misalignment were, not surprisingly, the most significant obstacles.
The exemplary answer to more Return on Collaboration is to embark on an organizational change program first. However, in my experience the route to collaborative success is to take fast, simple and relatively cheap trials, experiments and pilots seriously. When the corporate boards see how a speedy pilot can deliver insights or stuff that matters, they will most probably take action to change the bureaucratic processes and structures that get in the way. Tiny steps can have a significant impact.
As to startup sourcing, be advised that the startup landscape is in a period of both hyper-growth and hyper-consolidation. The dust won’t settle for several years. So, don’t wait for the best startup to arrive at your doorstep.
In sum, Corporate - Startup collaboration has become a strategic aid to growth, for both parties. Diligently planned and executed, the benefits of partnering – getting a peek into each other’s kitchen, receiving exposure to technical newness, establishing innovation progress, and achieving solution validation – typically outweigh the financial and organizational cost.