Engaging with startups can bring much-needed new technologies into the business, drive cultural change, optimise operations, reduce costs and bolster profits. Becoming a more innovative organisation also helps attract and retain talent. Through startup collaborations, large organisations can realise these business benefits and often in shorter timeframes than usual.
“If an engagement is approached with a clear view of the objectives and benefits for both parties, then you vastly increase the potential of a successful collaboration.”
Joe Scarboro, Founder, Touchpaper.org
Startup collaborations represent a greater risk than more established supplier relationships. Reflect on your overall strategy and goals as well as on how you can add value to your startup partners. Begin with clear desired outcomes and you’ll waste less time engaging potential partners that don’t fit these objectives.
Beware inadvertent ‘startup tourism’. This is when corporates fall into the trap of endless startup meetings and information gathering, without moving towards a particular goal or outcome. This wastes valuable time and resources.
If you’re new to the process, take the time to understand the startup perspective and be sensitive to differences in business culture.
Remember that generally, a startup is:
A small, agile organisation that can make decisions very quickly.
A young business, with evolving procedures and processes.
Focussed towards driving product/market fit and/or growth.
A startup is not:
A quick, short-term solution that will futureproof your business.
An easy or passive way to augment your products or services and provide extra value to your customers.
“Innovation is a long game, but one that also needs to move fast.”
Innovation is a long game, but one that also needs to move fast. Creating a one-year plan to engage startups is unlikely to yield significant results. Innovation is a more strategic operation that will improve and develop over time as you iterate to achieve the best results possible.
Startups move fast. Your innovation performance will be significantly impeded if you are unable to allow startup engagement to move more quickly than business as usual. Specific, non-standard procedures and processes for your organisation may be needed.
Corporations need a clear purpose for engaging startups, as well as a vision for what the engagement looks like and how it will achieve its goals.
With numerous startups in the ecosystem, it’s relatively easy to find a startup to work with and begin trialling various products or services. While this type of corporate-startup engagement is common, what is less common in corporates is a defined path forward for the relationship after successful trials (or even unsuccessful ones).
Without procedures or processes designed specifically for innovation, startups can be left to the ‘business as usual’ procurement and legal processes once a trial is complete—and this is where many engagements fall down. Often, standard corporate procedures are not fit for startup collaboration purposes, leading to frustration and delays.
“In terms of the value corporates add, it's access to their people and processes.”
Chris Platts, Co-Founder, ThriveMap (Source: Touchpaper research)
Having established the purpose of the startup engagement, corporates must also be clear about why startups would want to engage with them. An appropriate value exchange is key to a successful partnership. Don’t forget, it’s not always funding and resources that are of most value to startups—knowledge and experience, network and profile in certain industries are other important drivers.
Corporate organisations can provide value to startups in many ways. However, it is virtually impossible for any startup engagement strategy to be successful without allocating sufficient time, resource and budget. This might mean creating a new cost centre or making hard decisions about diverting budget from other areas of the business.
The level of resourcing needed will depend on the programme itself. A common pitfall is to allocate responsibility for a startup engagement to a team member without changing their existing responsibilities to reflect their new mandate. As a result, the startup engagement might be treated as a lower priority to their day job and sets a dangerous precedent for the innovation programme as a whole.
“They [existing business and new growth businesses] have to be distinct, linked in the right sort of way, but if you don't separate it and manage those differently, you get yourself in a whole heap of trouble.”
Scott D. Anthony, Managing Partner, Innosight and Author of Dual Transformation
(Source: HBR Ideacast)
Measuring the performance of innovation engagements can be difficult, with varying objectives across digital transformation programmes, product impacts and cultural changes. Traditional KPIs rarely apply. But by setting out your strategy and goals, there will at least be a clear set of outcomes to aim for.
Often, there’s a focus on the metrics that are easy to record, rather than the more telling ones that signal good performance. Performance should be measured over a longer period, ideally through a portfolio approach rather than an individual engagement approach. Don’t forget, even failures will help refine the strategy—they are an important part of the measurement process.
There are many different ways that corporate organisations can engage startups. The below chart from Nesta’s ‘Winning Together’ report is a useful breakdown of the resources required for each of these activities. The full report is also a really useful source of insight and information on engaging startups.
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