Corporates and startups face big challenges in working together, given their different sizes and cultures.
However, corporate-startup relationships offer untapped potential. So better to find ways to stay ahead of challenges before they threaten possible outcomes.
During our recent Innov8rs Connect on Startup Collaboration & Ecosystem Engagement, Jan Paul Grollé (Head of Research at Scoutely) shared the findings from their recent study among 43 startups and 48 corporates.
The study shows what specific conditions are important to achieve actual results from the corporate-startup collaboration and how those differ for the various typical outcomes corporates seek when working with startups, and vice versa.
Fundamentally, if you are clear what kind of outcome a collaboration is supposed to deliver for both parties, you can focus on the right circumstances to achieve it.
Corporate – Startup Relationships: Managing Expectations
Scoutely teamed up with the Rotterdam School of Management to figure out what actually works and what doesn't when it comes to collaborating with startups. They've looked at what both sides of the collaboration try to achieve from the relationship.
From a systematic literature review of over 140 articles, they first identified eight typical outcomes (or goals) that both corporates and startups try to obtain when working together. Then they looked at what conditions (or factors) can play a role in having success or not. Thus, they surveyed 43 startups and 48 corporates in Europe about tangible outcomes achieved from recent collaborations to test the literature assumptions.
Across the board, corporates seem happier than startups. The majority of startups expressed their dissatisfaction with the performance of collaborations and the realization of goals they set. This may come down to managing expectations. Startups may have too high expectations before entering in the partnership, which will be a challenge during a collaboration.
For example, corporate decision-making is often a lengthy process. The formality of communication and reporting systems, on top of the many processes and structures, slow down the momentum of a collaboration. which is hard for startups to accept.
To survive on the market, startups need to grow constantly. Therefore, they tend to cut down steps that may prevent them from making progress. They perform at a faster pace than corporates. As a result of the slow corporate decision cycles, there is a mismatch in speed and this poses a threat to a startups' sales and sustainability of operations.
This scenario may hint at why corporates did not express extreme dissatisfaction in collaboration. For the sake of their business, the driven nature of startups helps in pushing progress faster. Undoubtedly, it's a pleasant by-product of the collaboration for corporates.
The bottom line is each party manages expectations differently. So, they end up having different opinions about the results of their collaborations, which can negatively affect the partnership success.
To counter this, each party must openly talk to each other about the future progress of their collaboration's milestones. Along the way, startups and corporates may address the mismatch in their perceptions so that they can avoid future conflicts about ‘what’ they are trying to achieve together. Aside from ascertaining their plans, this also builds trust in the relationship.
Getting The Most Of Collaboration: Different Perspectives
It’s normal to have differences in what people from two different worlds – corporate vs. startup – expect from the relationship itself. And the study aimed to find what outcomes both parties have achieved through collaboration.
From the research Jan Paul did, eight typical outcomes for corporates are:
- Recognition of emerging opportunities and threats
- Development of new technology, products, and more
- Expanding into new market segments
- Making internal processes more effective
- Energizing or inspiring their employees
- Engaging in social innovation
- Increasing their innovation pace
- Attracting talent
Eight typical outcomes for startups are:
- Validation of the problems which they are solving
- Developing test solutions (mock-up, prototype)
- Getting trial users or customers
- Developing a working solution
- Improving production or operations
- Adding promotion or distribution channels
- Increasing credibility or legitimacy
- Attracting financial capital
What kind of outcomes corporates and startups each aim for makes a big difference in ‘how’ they should work together. As can be expected, the key conditions for success are quite different for one type of outcome versus another.
Success Factors And Underlying Conditions
There are six main factors potentially influencing the success of corporate-startup partnerships:
- Alignment of goals
- Communication quality
- Fit (industry, market, technology)
- Allocation of resources
- Structured collaboration (formalized processes)
- Internal alignment (for the corporate only)
Jan Paul found that for startups, the factors 'alignment of goals' and 'communication' mainly correlate with collaboration’s success. And this contrasts quite clearly with what is key for corporates: resources allocation, structured collaboration, and internal alignment.
Another interesting result Jan Paul shares is that the success factor ‘fit’ never showed up, neither from the startups' side nor from the corporates'. According to Jan Paul, that's probably because too many similarities – in terms of industry, market, and technology – may eventually invalidate the benefits that each party can offer/gain.
The research shows that each outcome seems to rely on its own set of critical conditions. Ultimately, not everything is important to reach every outcome. But some conditions like “communication” are crucial for both sides of the collaboration, even if with some differences in terms of specific goals.
For instance, communication fosters the possibility of recognizing emerging opportunities and threats, and inspiring employees for corporates, whilst it attracts financial capital and increases the credibility/legitimacy for startups.
Monitoring Alignment Is Key
Talking with participants in the research, Jan Paul sensed hesitance to bring up things that were not going well in the collaboration, especially on the side of startups. They can be afraid to affect the mood with their corporate partner, or as some startup called it, to “poison the water we drink from”.
It seems that in many if not most collaborations, there is a lot of talking about ‘what’ corporates and startups are trying to achieve together, but much less attention to ‘how’ the collaboration is going.
Jan Paul advises first of all, to make sure partners are clear on each others’ desired outcomes. And then not to stop at the details of ‘what’ they want to achieve together, but also pay attention to the ‘how’: the conditions that are most important for the specific kinds of outcomes.
A monitoring alignment tool may also come in handy. With the help of an alignment tool, you can both identify your desired outcomes. From there, you may proceed to rate the presence of the critical conditions. After corporates and startups suggested this, Jan Paul has built such a tool called Scoutely Pulse, now being tested in an alpha version (if you're interested to give it a try, go to https://www.scoutely.com/pulse)
Regardless of your method, make sure you track the sentiment in both teams from time to time. Address your differences before they can become problems. By ongoing focus on getting and keeping alignment on the “what” and the “how” for both parties, your collaboration is best positioned for delivering upon the expected outcomes.