by José Gutierrez, CRO of ACE
Anyone following innovation trends must have already noticed how much innovation initiatives approximation between large companies and startups are a big trend. But if it is not well designed, this type of initiative can be very frustrating.
In this post I want to analyze the main relationship problems when corporations decide to work with startups. There are several reasons that lead a large company to work with startups, but everything must be analyzed from a strategic point of view for the company and bought by the whole team - starting with leadership. Without this, the chances of going wrong are great.
According to Pedro Waengertner, CEO of ACE, in his book The Radical Innovation Strategy, [su_highlight background = "#42dbb6"]establishing a good organizational design is a priority to be successful with this type of relationships[/ su_highlight]
The most important thing is that working with startups is a consequence of the company's strategy and an objective of innovation plan.
What to consider before starting a relationship with a startups?
Before starting a relationship program with startups, it is essential to be aware of a series of aspects that, when not prioritized, end up damaging - and even ruining - the relationship.
1. Speed and agility
Corporations are very bureaucratic and it is not uncommon for months to pass between the evaluation of a startups and the start of a Proof of Concept (PoC), for example. In the meantime, the startup has to go through different departments of the company and faces dozens of comings and goings with contracts. This undoubtedly "kills" any chance of a good relationship, since for organizations as sensitive as startups, all time is precious - and can mean the difference between the continuity and the end of the company
2. An established goal
When we are not clear on what is the objective that we pursue and what will be the desired output in the relationship with the startup, the tendency is for the relationship to fail. This is because, in these cases, it will not be a priority nor will it be part of the innovation plan. [su_highlight background = "#42dbb6"]These problems are usually accompanied by other errors, such as not having committed to the success of the relationship and no metrics being established to measure the success of the partnership.[/ su_highlight]
3. Degree of customization.
Second Steve Blank, author of the most accepted definition of startup, this type of company "is looking for a viable business model that is repeatable and scalable".
Because of this, she usually solves a single thing very well, with a great focus on the problem she was willing to face and a high level of execution. [su_highlight background = "#42dbb6"]This profile does not further “force” the startup to want to solve many things at the same time[/ su_highlight] or want the company, in addition to the part it already solves, to develop some other features specific to that corporation's need. If this happens, the startup will end up dying and the company having a by-product instead of a solution
4. Looking for solutions, not technology
Many companies are looking for the latest in artificial intelligence, machine learning, blockchain ... When they do that, they end up not focusing on solution of the problem that they want to solve by working with startups. Technology is a means, not an end.
When a corporation decides to work with startups, it is common to try to control the entire process. The result is a culture shock. The giants are usually vertical organizations and horizontal startups. [su_highlight background = "#42dbb6"]Not understanding this and wanting to establish excessive control will damage the relationship and create unnecessary friction.[/ su_highlight] We cannot expect startups to adapt to strict control processes, as this will ultimately be detrimental to their innovative nature.
6. Long-term vision
Innovating is a continuous act, which needs to be carried out with a long-term vision. This means that it is necessary to test the best relationship model with startups, get your hands dirty and wait a while to realize the impact of this type of work. If the goal is to be successful in 6 months, better not even start.
7. The type of relationship to establish
The main models are PoCs, commercial partnerships and corporate venture. Each has its advantages and disadvantages. POr, it is essential to know what the company's strategic objective is with its innovation plan before deciding to apply one or the other model - or even at the same time.[su_highlight background = "#42dbb6"]The choice of what works best will also depend on the company's degree of maturity.[/ su_highlight]
The main reason for failure in the relationship between large companies and startups
The reasons why the relationship between a corporation and a startup does not work can be varied, but behind all of them there is a common cause: nNo organizational design that favors this type of partnership.
Without a model that makes the company as a whole involved in the initiative - from the top of its hierarchy - and that gives real autonomy to innovation projects, no matter what model is adopted to approach startups: everyone will be doomed to failure and to frustration. Now, when the initiative is part of the company's innovation plans - and this is really alive within the organization - the potential of these partnerships is enormous.