On paper, it absolutely makes sense why startups and corporations should work together, how they can benefit from each other and how their needs are complementary. In practice, things are a bit more complicated and too often both parties end up disappointed and disillusioned. However, this can be avoided, here’s how.
Startups are hip, innovative and all over the place. Established corporations, “supertankers”, increasingly feel the need to connect with the fast moving startup world, ideally before their own industries are “disrupted”. From the perspective of corporates, working with startups is a strategy to innovate and like all innovation processes it’s not a straightforward, clear-cut road. Cooperation is a balancing act that requires a lot of commitment and attention to detail. And it’s not just about building up a venturing arm, distributing millions and hoping for the best. Here are three steps that corporates need to go through in order to establish mutually beneficial partnerships with startups that work.
Step 1: Finding the Purpose
Strategic cooperation needs to be built on a strong purpose. Both parties need to have absolute clarity regarding which innovation challenge they want to solve. For corporates, this is usually a bit more complex as it commonly involves many people in the organization: R&D, BD, Executives – everyone has a different opinion regarding “Why” cooperation would make sense and what exactly the most imminent innovation needs are. This is what is usually regarded as slow decision making. We find that companies that have a tradition of working with Open Innovation tools and are thus more open to innovation being generated outside the organization are at an advantage here, simply because they are more apt at asking the kind of questions that guide them to external partners. The general rule is: the clearer companies can name, spell out and agree on their innovation objectives and current issues, the more likely it is that the partnership is successful.
Also, the sooner this process of finding the purpose is started, the better. Often corporates only realize the need for innovation when they were already overtaken and by that time they are too busy with themselves to actively pursue partnerships.
Step 2: Working out the details
Cooperation is a fuzzy concept and it’s necessary to define what is actually meant by it. Often people think of financial investment whenever they hear about cooperation between startups and established companies. That’s a bit shortsighted and in fact, we don’t encourage financial investments right away for a client who has never worked with startups before. Financial investment is for the advanced crowd.
Cooperation has many facets. It ranges from workshops about a specific topic that both are interested in, to informal resource sharing, distribution or research partnerships, client relationships and there are many more. Financial investment is at the very top of the ladder. Especially for companies that have never worked with startups before, it is better to start small.
The important point is that the better the innovation needs are defined (step 1), the easier it is to work out what kind of partnership should be aimed for. This is a process of trial and error, of looking at good case practices and learning from previous experiences. At the same time it helps enormously to avoid misunderstandings that come up sooner or later (“What? You want to take us over? No way!”)
Step 3: Connecting Cultures
Cultural barriers are a crucial element once corporates and startups have decided to work together and it’s one that should not be underestimated. Questions with regards to hierarchies, decision-making and working times can potentially destroy an otherwise good relationship – although it is hardly ever regarded as the root cause, which it often is.
Connecting cultures means three different things: understanding how corporates think/work, understanding how startups think/work and moderating the process of coming to agreements. That is why especially at this point intermediaries are extremely helpful. There is a need for unbiased platforms that enable cooperation and are trusted by supertankers and startups alike. The good news is that cultural barriers are easy to overcome if they are anticipated and acknowledged.
These three steps have shown that from the perspective of corporates, cooperating with startups is a major undertaking that should not be underestimated or regarded as “nice to have”. However, with some dedicated intrapreneurs and a commitment to creating partnerships on eye-level, these kind of cooperations have the potential to truly revolutionize the way companies learn and generate innovation.
This is a guest blog post written by Elisabeth Witzani