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Spot these three biases when partnering with startups

We all go through life, seeing everything from your perspective. It’s called bias. And it might put a brake on corporates working with startups.

 

Why? How to recognize it? And what to do about it?

Framing bias

Innovation leads are in sales mode all the time. They sense new opportunities, and then they have to rally support for it from the business.

When asking for a decision, the innovation lead usually frames a proposal in a way that might help best to understand the situation and to trigger a positive reaction.

For example, if you want the company to partner with startups, he/she might frame it to business and innovation colleagues as a strategic opportunity to quickly acquire new solutions. Framing it as an effort to change the entire innovation agenda may have rejected it instantly.

We continuously frame issues conveying vastly different perspectives. Let’s look at two messages I tested among several innovation leads in a particular industry:

“Working with startups has become an imperative, and its uptake increased 30% last year, across the board, in our industry.

“Our company will greatly benefit from partnering with startups also to shake up our industry.”

Both headlines introduced the case for entering into partnerships with startups. Guess which one was best memorized and served as a call for action?

The first one. Because it contained hard data, so I heard.

Okay, I bear all the criticism for flying high over. However, my point here is that we can be nudged in a particular direction by subtle words or cues. In marketing, this is standard practice.

Anchoring bias

 

Most enterprises have woken up to the necessity of creating the new through partnering with startups. And they have several tools for innovating together. Think of idea challenges, aka hackathons, co-creation, venture clienting, or sponsoring accelerator programs.

 

Let’s zoom in on accelerators. Worldwide, there are over 10.000. And executives travel to these startup hubs to get their fix of inspiration.

 

Regardless of whether accelerators represent an opportunity or wasted time, in my research, I found that many innovation leads to struggle with it.

 

When I asked them about their rationale for a decision to yes or no sponsor a particular accelerator program, they often forego transparent and objectively verifiable reasons. Sometimes, it seems they do it because competitors are doing it.

 

Put differently; we tend to rely heavily on impressions when making decisions. You get anchored to pieces of information you encounter, whether real or false.

Confirmation bias

Partnering with startups is a new territory and requires an open mind on both sides. Little is known about how to organize a corporate/startup partnership best to get a positive Return on Collaboration?

Therefore, we like to hang on to old theories in the face of new experiences. It is called confirmation bias. You interpret new information or approach new situations in a biased way to confirm preexisting beliefs.

From corporate decision-makers, for example, I frequently hear the misconception that investing in innovation through partnering with startups is too cumbersome and that it is better to acquire a controlling stake. They succumb to confirmation bias.

There is a reason why this happens. In an enterprise, all processes and management controls are focused on the execution of the here and now.

In a startup, there is a 100% focus on discovering the new. They are not rooted in existing paradigms. Their reputations aren’t at stake when they question the status quo.

Confirmation bias is hard to overcome and related to the so-called backfire effect. When an innovation lead tries to change the mind of a corporate decision-maker, with objective facts and figures, it might have the opposite effect. The corporate decision-maker digs his/her heels in and becomes more entrenched in his/her original position.

This bias also explains why stating the case for corporate/startup collaboration can be a difficult task.

What to do about it?

 

There are several mental models a corporate innovation lead can use for influence in situations related to framing, anchoring, and confirmation bias.

  • Recall how framing a message can change the perception of it, causing the listener to take away different conclusions. For example, frame the case for collaboration from several perspectives – not just from an industry perspective in trying to win decision-makers over to your point of view.
  • In complex decision-making situations (E.g., decisions taken by innovation boards where there is a multitude of competing innovation proposals on the table), an external expert might be pulled in to help clarify what is under debate. This solution attempts to frame a partnership away from being just one of the competing projects and the politics which come with it.
  • An approach to dealing with confirmation bias is the carrot-and-stick model, which uses a promise of a reward (the carrot) and at the same time, a threat of punishment (the stick) to discourage unwanted behavior. It’s a form of good guy, bad guy. Or, you can raise the question: What if we did nothing? In the context of partnering with startups, the idea is to state the urgency of innovating faster through partnering without which negative consequences might unfold in predetermined sequences like key-people leaving or anticipated competitive actions.

Takeaway

 

The fact is that anywhere in life, your success rate will drop if you have to perform tasks or to make decisions that are out of your comfort zone or circle of competence.

 

Cleary, working with startups, falls in this category. And it is thus prone to uncertainties and biases like the confirmation bias and the backfire effect.

 

Recognizing and overcoming these, therefore, is an essential and often overlooked element in securing adoption and approval for entering into partnerships.

Sources: Teeming, G. Weinberg/L. McCann, BCG.

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