Winning at Corporate — Start Up Collaboration
“ The battle between every start up and incumbent comes down to whether the start up gets distribution before the incumbent gets innovation.” — Alex Rampell, Andreessen Howrowitz
Unless you’re a corporate with an unlimited budget & resources and are clairvoyant about the future, you’re going to most likely need to collaborate with a Start Up or an early stage company at some point in time. Corporate — Start Up collaborations are a norm today. Big businesses simply do not have the visibility to emerging technologies and consumer trends nor the resources to pursue every shiny object out there. Big businesses are very good at exploiting a known business model but probably not very good when it comes to exploring future business models.
But as any CEO will tell you, achieving a balance between Exploitation & Exploration is the holy grail of Corporate Innovation. That’s where Start Ups can help corporations. How? Check out this graphic from CBInsights, or just google “Unbundle + (industry of your choice)”
Now imagine Starwood chasing each of these disrupters. It’s exactly this dis-aggregation of the Value Proposition that poses the greatest threat to companies. It’s not the competition that they need to worry about, it’s the death by a thousand cuts.
But start up collaboration isn’t as easy as a usual collaboration effort. For one, there’s the difference in motive. Start Ups are looking to scale (mostly), and that’s where a collaboration with an established business brings them closer to a larger market. For corporates, working with a start up usually follows one of the following three objectives,
Developing an entrepreneurial mindset within the organization
Access to new technology
A purely transactional relationship to address a business need
Apart from the differences in motives, there’s the obvious difference in size. And that results in friction because there’s a difference in expectation resulting from processes, or lack thereof.
Having lead collaboration efforts for a while now, here’s what I’ve learnt the hard way,
What’s your objective?
I can’t stress enough the importance of being absolutely clear about your objectives before you collaborate with a start up. This clarity should filter through the entire organization. Your objective will ultimately decide the type of collaboration, the processes and framework within which you collaborate. I’ve found the following framework very useful in deciding your objective,
A hackathon might be a super idea if your objective is to rejuvenate the entrepreneurial spirit within your company, but is probably not the best form of collaboration if your objective is access to new technologies & channels.
Similarly, a co-development partnership is a great form of collaboration if you’re looking to address a specific business problem, but not the best approach if you’re looking to build an entrepreneurial culture.
Just a word of caution here ; when you decide your objective, I’ve found it extremely critical to ensure that all the key decision makers within your company are aligned to that objective and not have differing expectations from the collaboration. One of the worst things to happen to any nascent collaboration effort is to have it second guessed within your own organization. Not only does this slow down the process, but it also tends to rear its ugly head at more critical times later, such as project reviews and billing.
Once you’re clear about your objectives, you need to move on to the business end of the collaboration,
Working the Collaboration
Before embarking on a start up collaboration effort, it’ll be wise to have a good look at the possible barriers that may arise and have a plan ready for them. Barriers to a collaboration effort can be both Internal as well as External.
External barriers include Searching for the right start up, Lack of information regarding the start up, Dealing with post collaboration changes such as a change in strategic priorities at the start up (by their very definition, Start Ups are “searching” for a repeatable & profitable business model and hence may change tracks which may adversely impact your association. In fact, one of the biggest external barriers to working with a start up in my opinion is the unpredictability of the long term survival of that start up. And that unpredictability often prevents established companies from working with start ups in any meaningful way). Some of these external barriers can be addressed through ensuring you get access to information. If you can, work with companies such as CB Insights & Traxcn that can provide you insights into the start up ecosystem.
Internal barriers are a different game altogether.
Addressing internal barriers very often means addressing organizational biases. And that means working with individual & collective norms and behaviors that have been built up over years. That’s a hard task.
The good news is that it can be done. The first step of course, is to acknowledge these biases and norms. When I was leading the start up collaboration efforts initially, one of the most evident, but not necessarily surprising, was the misconception of what a start up is. A start up isn’t a miniature version of a company. Educating the organization of what the start up can and will do was one of the most challenging tasks I had. If you’re a corporate getting into start up collaboration for the first time, you’re certain to face this. The only way to address is through patient education. The older or more established your company is, the more patient you’ll need to be.
Another challenge that comes up is speed of response. A study by Nesta, an Innovation foundation based in the UK, put Slow decision making on the part of the corporate as the top challenge that start ups report in a collaboration.
The only way to overcome this inertia is to be prepared before you begin the collaboration. It’s difficult to anticipate all the choke points before hand but it’s important you make the effort. It’s also critical to have a plan to deal with problems as they arise. And they will arise. In my experience, if you’ve done the hard yards in developing a collective objective with the key stakeholders within your organization, it often makes it easier to deal with process related problems quicker.
Complex processes such as 20 page agreements full of legalese, might need to be pruned down to a couple of pages. This may not always be easy or possible in a well established company which often err on the side of caution. But it’s critical to develop the flexibility within your processes.
As with all things, the more you work at this, the better you and your organization will get at start up collaboration. Corporate — Start Up collaboration is a skill and in today’s world, it’s a skill you and your organization need to develop quickly.
Start ups know how to start, but most struggle with scale. Big companies know how to scale, but don’t know how to start — David Butler, VP of Innovation and Entrepreneurship at Coca-Cola