Successfully working with startups is something many enterprises strive to do – to benefit from venture technology / product / service as well as their innovation capabilities plus the ingenuity and enthusiasm of the people.
However, from an Accenture study, even when enterprises are very interested in collaborating with young companies, few do it well. For example, many enterprises struggle with integrating startup technology / product / services – even as a ” skunk works “, within their business ! What’s more, when startup founders came into large companies, the vast majority leave because of the way their entrepreneurial capabilities and instincts were stifled, the frustrations in working through processes and policies of a large organization, etc. Further, there was little incentive to share their ideas and expertise since they view any benefits to doing so accrue to enterprise personnel.
While a common way for enterprises to engage with startups is through the corporate venture fund, there are other options that are typically less risky and expensive avenues to explore collaborating. These include enterprise personnel becoming more immersed in the startup ecosystem through incubators, accelerators, venture forums and conferences, pursuing opportunities with startups, showing interest in buying the startup product / service, investing in the venture, etc.
To accelerate innovation progress in enterprises, the main strategies are –
- Challenges, Competitions and Hackathons – these events have become a staple of open innovation to improve outcomes within the enterprise and expand opportunities for startups
- Having an Accelerator Program – while much more involved, 64 companies in the Forbes Global 500 provide this forum to startups
…. to improve the probability of startups meaningfully improving outcomes from innovation in the enterprise
With there being no guarantees of success, as illustrated by a recent paper from IESE Business School, insights from nearly 100 chief innovation officers provide a good understanding of what enterprises are thinking about when working with startups – either directly or via an intermediary. This research indicates that many enterprises use proximity and potential impact on their core business as the primary criteria in assessing whether to work directly with a startup, to develop internal capabilities, or for access to curated opportunities. In other words, they’re looking at whether the engagement will improve their core business, and whether they have the skills and resources internally to cultivate the effective relationships. This is important to “Innovate for Impact“ so the enterprise is better positioned to – achieve corporate objectives, evolve the business model, develop a more entrepreneurial culture, etc.
To facilitate enterprise growth, intermediaries (ie: incubators, accelerators, research centers, venture investors (VCs, Angels, etc.)) are increasingly being used to help with identifying and engaging with startups. Further, since every day the products, services and capabilities of mature businesses are being commoditized, they need to complement and extend their abilities with new competencies and the capabilities with other parties. This is important to have more opportunities to move the enterprise forward, make innovation more rewarding, and reduce risk. Bottomline, knowing how to partner with startups and others in the venture and innovation ecosystems dramatically improves business outcomes, reduces risk, and better positions the enterprise to “ Disrupt ” – rather than be “ Disrupted ”.
A second paper from IESE published last year provides further guidance on how to overcome challenges of engaging startups to effect change and innovate for impact in enterprises. Based on insights from over 120 enterprise chief innovation officers, the main challenges to address when engaging with startups are –
A. Getting buy-in from enterprises Corporate / Business Executives.
When they recognize the importance of engaging with startups, then it’s much more likely new technology, products, services and abilities will be utilized and integrated into the enterprise.
B. The need to find the right startups to partner with.
If this is difficult because there aren’t many startups to choose from in your specific market, then extend the search to assess startups associated with universities, research institutions, other markets / function, and/or ventures having a platform / technology / tool that could be applied to their industry (ie: AI, ML, AR, VR, Analytics, Mobile, etc.).
C. Identifying and resolving potential conflicts of interest between the startup and within the enterprise.
These differences often emerge because of fundamentally different ways of dealing with change / uncertainties, culture, decision making, business strategy / priority / competencies / processes / performance, etc.
To achieve the best results from enterprise / startup collaboration :
- Design metrics and incentives oriented towards value creation and integration
- Have Innovation objectives and agility metrics
- Involve a sponsor from the enterprise Executive Committee – re: decision making, strategy, finances, etc.
- Ensure all stakeholders are on the same page – re: objectives, milestones, rewards, reporting cycles, etc.
- Setup the initiative as an independent cost center
- Do a self assessment of current enterprise capabilities, mindset, ability to adapt (learn and do new things), look ahead, interest in creating value and meaningful wealth, risk tolerance, etc.
Sept 10, 2020 by CAIL / Adi Gaskell – Innovation commentary info@cail.com