Like any relationship, it takes work to make the best out of your startup collaborations.
Often, these relationships start with excitement and optimism, but once that honeymoon period is over, frustration can set in as one or both partners wake up to the reality that they are not achieving all of their goals and expectations.
During our recent Innov8rs Connect on Startup Collaboration & Ecosystem Engagement, we explored these questions with several corporate venturing experts to identify the principles and practices that can help you maximize the corporate-startup relationship and avoid pitfalls along the way.
Here’s a checklist you can follow to understand how you’re doing now and how you could improve.
1. A Fundamentally Different Approach
Alex Bastos, Head of Front End Innovation at Givaudan, begins by sharing that Givaudan invests around 8 to 10% of revenue in technology and innovation. And that’s because they see innovation as one of the main sources of differentiation in their industry.
To maximize the returns on those investments, given the pace of change happening around the world, they realized they couldn't hold on to outdated paradigms of managing innovation. As Alex explains, they have shifted from making a few big bets to making lots of small bets, and from making decisions based on in-depth business cases to relying on "reasons to believe”.
For this relationship to work, before you even start – know that it requires a fundamentally different approach.
2. Forge A Two-Way Relationship
You might be “the big corporate”, but that in and of itself is no longer enough to attract the right startups. In fact, it might just be enough to keep your potentially best matches far away.
Corporates no longer dominate the relationship because of their history or size. They need startups at least as much as they might need you.
Simon Boonen, FinTech Partnership Lead for ING Neo, is clear about the benefits. “There’s a lot beyond the boundaries of your corporate’s walls these days. So why limit yourself to the organization's restrictions?”, he wonders.
In the snippet of his session, Simon explains that the collaborations ING establishes with Fintechs precisely serve that purpose. Through these relationships, ING makes the banking experience more personal and also as relevant and seamless as possible.
It follows that working with startups allows large corporates to identify actual customers' pain points and take targeted actions to address them. Startups typically have the ability to work tirelessly and stay focused on providing a specific solution to real, rising needs.
3. Be Clear About What You Want To Get Out Of It
Both corporates and startups benefit from building a relationship: the former gain agility, the latter stability. And Ilanit Kabessa - Agrifood Tech & Corporate Venturing Expert - believes that the first step to making them work is that corporates define what they want to achieve, outline what challenges they want to solve and, above all, understand why they want to innovate. All of this before embarking on collaborations with external partners.
4. Commit Before You Commit
Søren Nielsen, Author of “Death by Innovation Theater” and COO at Subaio, explains that the biggest issue of this relationship is that the parties frequently waste each other's time – simply because both the startup and the corporate are not ready to work together.
As you can hear from the snippet above, Søren remembers when he, his startup, and five other Fintechs were presenting their products to different types of banks in Canada. While they were pitching their product, lunch came in, and the corporates suddenly changed their focus. And that’s a clear sign of indifference.
Accordingly, before you even start dating, make sure you are ready to commit when you’ve got your first match.
5. Balance Both Parties’ Needs
And this directly reflects the need to balance both the corporate and startup needs. Typically, startups operate outside that kind of corporate culture that contrasts failures. They have the ability and the willingness to constantly ideate, try, fail, and repeat pivots until they find a way to win. On their side, corporates are risk-averse and act in highly-regulated industries. They're slow and scared to explore disruptive innovation.
Menno believes that getting and managing the stakeholders’ engagement throughout the process is the biggest challenge to handle. And corporate innovators – or the ‘middlemen’ as he defines this role – have to balance both the corporations’ and the startups’ interests.
6. Be Vocal About Differences And Expectations
Setting mutual ambitions and aligning languages and expectations up front is probably one of the most crucial keys to maximizing the corporate-startup relationship.
“For your relationship to be successful, ambitions, differences, and specific needs must be clear from the beginning”, suggests Artem Khlebnikov, Strategic Partnerships Director at Danone Nutricia Research.
It’s normal to “speak different languages”, to have different purposes. But problems arise when you can't bridge that gap and act in the same ecosystem accordingly. And if you fail to understand the other side, any great idea may risk dying an early death.
As mentioned, corporate innovators should try to build that kind of mutual understanding so that both parties can communicate. It would help if you translated what you hear from the organization to the outside innovators – the startups or any other external counterparty – and then you have to translate back internally what the innovators have said in a language that your organization understands.
7. Open Up The Relationship To Other Partners (Even Competitors)
Allowing competitors as partners in your relationship can be tough, blurry, and time-consuming. But, it can help address some of the biggest challenges of today’s world – e.g., sustainability – states Ilanit. And even some startups you’re partnering with today can become competitors over time. Is that a concern, something to prevent, or could there be anything else?
When new entrants come into your market, it actually raises the sense of urgency to pick up the innovation pace of your company. And this even speeds up innovation within corporations not directly threatened (or at least not threatened in the short run).
The wisest thing to do when disruption is coming your way, says Alex, is to stay close to it, engage with those startups, and co-create – not avoid or contrast them. Nothing works better in motivating corporates when an unknown competitor starts to nibble away at their market. And this happens a lot, especially in the digital industry.
