A successful collaboration between a large firm and a startup does not happen overnight. Both parties are wired differently as startups are generally searching for a viable business model whereas established companies have been executing a robust one for decades that has made them what they are today.
While a traditional firm has a structure that makes it hard for it to adapt to emerging trends, a startup will have the ability to seize opportunities. Linking forces makes sense for both parties.
In this post, I will talk from the perspective of a large organisation. There are a few questions business leaders need to ask themselves in order to achieve successful corporate-startup engagements.
1. What is your objective?
Gaining visibility and PR coverage may matter to your top management and may be deemed necessary but we need to be honest with ourselves: Innovation initiatives with PR coverage and social media mentions as the main objective are not designed to have a lasting impact on any large firm’s business.
Now this could be considered as the beginning of an inception so that people in your organisation become more open and receptive to working with startups and change the way they do business but that can’t be the end game (hint: that inception approach won’t work!).
This is actually how I got started in my previous firm as innovation manager. I knew I would not achieve much business impact as I had to spearhead the firm’s first global innovation challenge, but I figured this could be a first seed planted in the minds of the top management to kickstart the journey.
We managed to have some of our partners provide mentorship and much needed advice to young entrepreneurs in several locations across the globe and we also had decent coverage for a firm like ours. Encouraging? Yes, but far from enough! An innovation challenge will usually fail to deliver commercial impact for your firm’s business units as most of the time, there’s a lack of BU ownership for these competitions right off the bat.
Also read: 5 most common issues of intrapreneurship
Somebody with a penchant for paranoia could say “They want me to run innovation challenges for the business and BUs to keep doing BAU (Business As Usual)!”. That could be true. Nonetheless, and this is something I wish I had known, you could use your time and resources differently to achieve that AND more.
The objective for any business leader and corporate innovator needs to be achieving commercial impact.
2. How do you fill your corporate-startup engagement funnel?
As mentioned above and from what we hear from business leaders, the main vehicles used to identify startups are innovation challenges, hackathons as well as attending events and startup pitch competitions. It’s good to be seen in the ecosystem as proactive and out there with a genuine interest in collaboration. However, that can’t be your only play as it won’t be enough to find the right partners. In fact, you will miss out on the best ones and will have to deal with the PoC Posse.
Having a digital marketing and communication background, I used to think the best strategy for acquisition was inbound marketing: Come up with the right problem statement, a great pitch and the great startups will come to you! Well, it’s not that simple. From experience, the startups you will end up with are the early stage ones craving for funds, mentorship and support from a large corporate.
Does that mean they are ready to work with you? They will not be ready to battle with your procurement department while being busy raising funds for their growth. Your $50K check will not be enough.
Long story short, you also need to source startups and come up with an outbound strategy backed by research and analysis. I referred to disruption mapping and capability mapping in my previous piece about FOMO and innovation strategy. I will do a lengthier post on these two elements being crucial for the elaboration of an innovation thesis, ultimately giving your firm the focus it needs when considering strategic partnerships.
3. Which type of startups should you target?
The startups you want to collaborate with for a commercial pilot won’t apply to your innovation challenge and won’t show up for pitch competitions. They are too busy chasing users and customers, reducing their churn rate and pleasing their investors to secure a future round of funding. They have a set of priorities to follow and will happily stay away from all the noise. They are late-stage, mature startups.
There are two main elements that define late-stage startups: competence and corporate readiness.
It must have figured out its business model as it can’t sustainably rely on technology alone. Their maturity and financial resources obtained organically or through funding are paramount. Late-stage startups have the ability to engage and scale across a large organization and commercially implement their solution. Series A+ startups would be matching these characteristics.
4. Do you have the right pilot structure and governance?
Large corporates’ demands and processes can be quite tedious when it comes to new commercial partnerships. Having the usual suspects – legal, compliance and procurement – asking for tons of documents can be a massive deterrent that could endanger any collaboration before anything could take place.
Moreover, after the right startup was chosen and got through the paperwork, it is only the beginning of the journey. In order to get the startup from the top to the bottom of your engagement funnel, you need the right structure for the management of your commercial pilot. The right people inside your organization will follow up with the startup throughout the engagement.
Should the commercial pilot be conducted by your innovation department or should it be driven from within a business unit? If you are running a pilot in isolation from the business, your success selling it back to the targeted business unit will be compromised. You need to have at least a dedicated resource within business units for better project management and ownership of this pilot.
Answering these four questions will allow you to define a corporate-startup engagement strategy that makes sense for your firm.
This article was originally published on LinkedIn.com.
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