Pros and cons of start-ups collaborating with giants

Pros and cons of start-ups  collaborating with giants

A strategic alliance between companies is an essential ingredient for the successes of a business say several researchers and authors. They urge traditional companies to embrace the digital economy in order to survive and continue succeeding as a business venture.

There are pros and cons to collaborations across sectors and different organizational cultures such as large, cumbersome corporations and nimble start-ups.

One of my passions as a Business Mentor is connecting people across start-ups, corporations and community organizations as I firmly belief there is simply no reason to reinvent the wheel, work in isolation and to disregard the opportunity for creative solutions.

Although most of the research around collaboration zooms in on technology start-ups, we can apply the learnings to the larger setting. Lets look at the advantages and the challenges of collaboration for all involved.


Advantages of collaboration between giants and start-ups

Start-ups begin their business life with an idea. That idea may not always be innovative yet is certainly developed with the knowledge of a niche market or a particular pain point. This thought leadership that goes into developing something anew is why established companies are interested in meeting with start-ups. A big part of wanting to connect with start-ups is around “staying in the loop”. Specifically, how consumers expect to engage with their brand. Start-ups then have the function to accelerate innovative customer strategies.

Research by Dosdoce (How to collaborate with start-ups) concludes that new business models are considered for the “book world” (including libraries and publishing companies) in this new digital era. Lori Kozlowski suggests film studios can streamline processes and focus on summer blockbusters while start-ups focus on what they are good at, taking on talented up-and-coming filmmakers. Other benefits mentioned for considering collaboration are easier access to resources, increased organizational capacity and delivery of more services and products.


Cons of start-ups working with established businesses

Start-ups often focus on one particular paint point and erase this through solid product development. However, integrating these products into the overall environment is not always an easy feat. Another challenge collaborators face is the lacking of a common language. Imagine nimble start-ups, bureaucratic corporations and technology professionals speaking to one another with different perspectives, expectations and understanding of (niche) markets.

This ties into the challenge of creating a successful collaboration agreement that clarifies the language, objectives and more. In other words, such an agreement is the groundwork for other vital ingredients to make the partnership work well: how to maintain and evaluate the relationship.


Recommendations for proper guidance

In 2014 the NTT Group, a large Japanese telecommunications business, set up the NTT Innovation Institute Inc. (NTT i3) to develop new products that other subsidiaries can sell or use themselves. The Chief Executive Srini Koushik says that it acts like a Venture Capitalist with pitching and an extensive approval system.

Martin Zwilling on Forbes writes that lessons include that collaboration needs to start at the top. This is something I would like to highlight because a successful partnership starts with a firm foundation laid by management. It is management that needs to ask itself why they want a partnership, whether they are ready and what kind of relationship they want.

In the Dosdoce research paper, the recommendation to have a Startups Relations Officer at established companies holds true for me. A visionary that can identify interesting start-ups with their impact on the company and explore potential strategic collaborations would fill the position. This person could then also act as a mentor, with the objective to create “a new, more open, fresh and creative corporate culture”. 


Lisette Andreyko Pros and cons of start-ups  collaborating with giants

This is a guest blog post written by Lisette Andreyko. 

As Business Mentor, Lisette Andreyko provides strategic focus to aspiring and new entrepreneurs through her B2B online mentoring platform and customized experiential workshops. You can find Lisette online on Twitter, LinkedIn, Facebook and Google+.