The Corporate-Startup Relationship: Why It’s So Hard To Crack

The Corporate-Startup Relationship: Why It Is So Hard To Crack?

It is undisputed that corporate-startup relationships are nowadays inevitable, if not a match made in “business heaven”.

It is undisputed that corporate-startup relationships are nowadays inevitable, if not a match made in “business heaven”. With success stories such as Diageo and Thinfilm, Coca-Cola and Wonolo, as well as Dell and DocuSign, it is hard to ignore that the corporate-startup relationship is the key to fostering innovation and ensuring mutual success. 

However, regardless of their inevitably, there is a relatively low success rate for partnerships between large companies and startups. In fact, 45% of large companies and 55% of startups in Europe are “very dissatisfied” or “somewhat dissatisfied” with their partnerships according to BCG. This begs the question, if they are so unavoidable, why is the corporate-startup relationship so hard to crack? 

Before jumping into why they fail, let’s take a minute to remind ourselves why they exist in the first place. 

Why Startups Work With Large Corporations: Money, Reputation, and Growth 

  • Aligning themselves with a large corporation allows them to secure the necessary revenue needed to survive and achieve sustainable growth. 
  • It grants them independence from external capital sources, buying them time to build a reputation while collecting success stories for future sales. 
  • Accessing proprietary assets (data) and mentoring from large corporations allows startups to further develop their product while understanding the complexities of the market. 
  • Tapping into existing internal infrastructure and partnering with a large company’s subsidiaries allows a startup to scale faster and internationally.

Why Corporations Work With Startups: If You Can’t Beat Them, Join Them

  • It allows them to innovate externally while protecting their strategic positions. They are able to secure a competitive advantage within their industry and increase revenue without having to completely uproot their own internal structure or business model.
  • Given a startup’s agile working methods, large companies are often provided with a product that is easily adapted and customised to their needs and market trends. 
  • It is a smart investment. As David Fowler from Microsoft puts it, “In the same way that startups are the developers of tomorrow, so startups are the large-scale enterprises of tomorrow.” What may start out as an investment, if successful, may become that corporations next flagship client or customer.
  • Because at the end of the day, a corporation’s only option is to disrupt or be disrupted. In other words, if you can’t beat them, join them.

Why the Startup-Corporate Relationship Stumbles

Unfortunately, regardless of the benefits outlined above, about half of these collaborations are unsuccessful. In fact, there is a laundry list of possible risks for failure, but the key recurring themes are as follows:

  • Startups have a very limited window to find revenue in order to fund their operations and ensure the survival of their company. This can be problematic as a corporation’s rigid internal processes can lead to long sales cycles that jeopardize a startup’s financial success. 
  • What guarantees the long term success of collaboration between a startup and a corporation is senior management support from the corporation. However, for a startup, navigating the maze of internal corporate structures and their siloed organisations to secure senior management support can prove difficult. In addition, differing expectations from key decision-makers within the large company can cause delays when attempting to launch a partnership or project. 
  • Although startups are known for their agile working methods, some large companies view this as an opportunity to dictate the future product roadmap. As such, a startup may find its product development being dictated by the client who makes the biggest fuss, rather than intentional UX research. A startup may become too influenced by an individual customers needs, limiting their ability to create a scalable product that responds to the global market.
  • Lastly, a clash of cultures surrounding the following: agile vs. static work processes, conflicting work ethics, and varying appetites for risk. These all add complexities for a successful relationship. 

How to Avoid The Stumbling Blocks

Fortunately, recent research has revealed that there is a possible solution to circumvent these stumbling blocks. Overall, the goal should be to simplify the collaboration process, while ensuring a win-win scenario for both parties. Therefore the process is two-fold: 

  1. Large companies should adapt internal processes to shorten sales cycles and simplify rigid decision-making processes. The easiest way of implementing this is for corporations to initially move away from long-term contracts and opt for experiments and pilot projects (POCs). This means putting in place a short term project that allows immediate cash flow for the startup while providing sufficient time for the large corporation to evaluate the potential solution prior to industrialisation.
  2. Although possibly evident, the second part of the process is to prioritise a robust flow of communication between the startup and corporation. Both parties need to have a mutual understanding of each other’s culture, incentives, risks, and differences. Large corporations need defined innovation goals in order to best choose a cooperation/partnership model that reflects their innovation strategy. They need to identify which departments and key decision-makers will be involved in piloting projects with startups and equip them with the necessary resources to make those initiatives successful. Expectations and limitations between the startup and the large corporation need to be transparent and fully aligned to ensure overall success.


Why Different Types of People Should Work on Innovation in Ambidextrous Organizations

Why Different Types of People Should Work on Innovation in Ambidextrous Organizations

As the founder of Procter & Gamble, William Cooper Procter said in 1930 “this may ruin the soap business. But, if anybody is going to ruin the soap business it had better be Procter & Gamble”.

In the past years, every C-level executive has had to deal with disruption and change in their business environment: new technologies arriving in their market, disruptive innovations rising to maturity, shifts in their industry structure, and many new dynamics.

The level of business uncertainty and volatility has increased greatly over the years and finding answers has never been so hard. In fact, corporations had to simultaneously take action on two very distinct fronts: existing business activities (time horizon: the now and the near future) and future business (time horizon: the long-term future).

The necessity to make your organization ambidextrous to build a competitive advantage

Improving existing business: the now and the near future

Large corporations mostly operate in mature markets, where competition always takes new forms, fueled by new technologies and innovative newcomers.

Here, the corporation’s mission is to make continuous improvements and upgrades to the current core business. To accomplish its goal, companies should unlock traditional tools (such as increasing operational efficiency or implementing cost-cutting strategies) and can also embark on core-exploration, looking to deploy incremental innovation.

Incremental innovation can be defined as a series of small improvements or upgrades made to a company’s existing products, services, processes or methods to maintain or improve its competitive position over time. 

Therefore, the work revolves around continuous cycles of adjusting, reconfiguring and redefining products, services or processes.

Inventing the future business: the long-term future

Large corporations are aware that disruptive waves can come their way and turn their quiet sea into choppy waters. Here the company’s mission is to create the future by identifying new business opportunities and discovering sustainable blue-oceans. 

To do that companies can embark on radical exploration and unlock various tools such as Corporate Venture, new business partnerships with startups, etc.

The idea is really to expand the business ecosystem, to get access to new assets, new capabilities and new talent. It requires breaking internal silos by adding more autonomy and external exposure. 

Therefore, the job revolves around exploring new territories, not always intuitionally linked to the core business. And even more: new solutions can happen to be potentially threatening to the company’s core business. 

Today, all scholars agree that high levels of exploratory and incremental innovation performed simultaneously within the same organization are leading to competitive advantages. 

But can it be performed by the same (type of) people?

Improving current business and inventing the future requires different (types of) people

If we frame the two sides of the business coin, we can see that:

Business organisation for innovation

To improve existing business, you need to have people who have a deep knowledge of the company’s legacy, current dynamics, and internal politics. Combining this understanding of the current business with great analytical and planning skills will allow the company to find the right adjustments and incremental changes required to stay competitive. 

On the other hand, for inventing the future business, you need people able to think without having in mind the constraints of the current business. Protecting them from the actual state of the business is necessary to set them free, allowing them to evolve in a very high level of uncertainty where analysis and rules of the current business can fall flat (1 + 1 = X, does not equal 2). 

Moreover, it cannot be the same people working on both missions, as they can conflict with one another: radical innovation can cannibalize existing business shares and ruin the effort of the people working on improving current business.

Don’t ask the same person

So please, don’t ask the same person to look both for solutions to improve printing machines and for other solutions to replace printing machines. 

But still, please do ask people within your organization to look for these potentially threatening solutions. As the founder of Procter & Gamble, William Cooper Procter said in 1930 “this may ruin the soap business. But, if anybody is going to ruin the soap business it had better be Procter & Gamble”.


Your Inner Fields Are a Resource Playground. Internal resources.

Your Inner Fields Are a Resource Playground

Is there a limit to open innovation when it comes to maintaining confidentiality, managing R&D or protecting intellectual property?

In 2003, Professor Henry Chesbrough first introduced the concept of open innovation as: 

“a paradigm that assumes that firms should use external ideas as well as internal ideas and paths to market, as the firms look to advance their technology”. 

In 2019, companies embraced this vision of innovation, one that doesn’t only rely on a company’s own R&D, but also includes “external ideas”. All kinds of innovation initiatives and successful collaborations have been launched between corporations and partners in their ecosystems (startups, Venture Capital, incubators, labs, other large companies, etc.). 

However, there is still value to unlock, especially in what Chesbrough described as “internal ideas and paths”. Global collaboration seems to be the goal to strive for, but many companies still struggle in defining the right degree of internal openness to adopt. 

Is there a limit to open innovation when it comes to maintaining confidentiality, managing R&D or protecting intellectual property?

Open Internally: An Untapped Goldmine for Corporations

There are some common barriers to opening up innovation, even within your own company. Some are cultural barriers and others are organizational. Here’s a sample of some of the most common ones: 

  • Innovation projects are confidential and should not be disclosed to all colleagues.
  • Opening innovation increases the complexity of managing innovation.
  • Some colleagues are not expected to be innovators in the company.

And yet, there is so much value in the exchange of information. When a corporation fosters a culture of collaboration, the return on investment is phenomenal. Here’s a sample of the most common benefits:

  • Sharing knowledge saves both time and money for all your teams.
  • Colleagues discover each other’s areas of expertise and benefit from them.
  • Decisions are made faster, with more accurate information.
  • Synergies are created between different departments of the corporation.
  • Colleagues have the feeling of contributing to the future of their companies: they are empowered and engaged.

The key to achieving a high level of collaboration is to let innovation flow across the organizational structure of your company. Fostering such a dynamic will result in the emergence of cross-functional teams with dedicated knowledge on specific innovation topics. 

Entering an open innovation era is simply about multiplying internal exchanges within your group.

Method vs. Control: Management of Knowledge is Key

As Chesbrough explained, open innovation “is based on purposefully managed knowledge flows across enterprise boundaries”. In other words, it is crucial to foster the exchange of data, but in an organized and structured way that allows stakeholders to make the most of it.

While closed innovation implied control, open innovation requires a method.

The Golden Rule: Innovation Can Come From Anywhere

In a world of widely distributed information, innovation can come from anywhere. Following this golden rule, corporations successfully included external knowledge to launch innovative initiatives. Today, we encourage you to go one step further and bring your internal resources into play. 

Great opportunities lie in the development of internal connexions. If you let it happen, your company has everything to gain from allowing collaborators to access and share information.

Openness can be a great challenge for companies, but it’s above all a key-value creator. 

Knowing this, you should enter an era of OPEN internal innovation.


What is an Innovation Ecosystem?

What is an Innovation Ecosystem?

This article dives into innovation ecosystems, exploring the different players, why they are crucial for innovation, and why it’s important to build and efficiently manage your innovation ecosystem.

The term “ecosystem” was originally coined by British ecologist Arthur Tansley in 1935 to describe the transfer of materials between organisms and their environment. Ecosystem has since been refined to “a community of living organisms and nonliving components interacting together as a system”. The different organisms in the ecosystem are linked together and rely on each other for survival. 

Just as we find ecosystems in the natural world, we also find them in the business world. These two ecosystems interact in similar ways, relying on its members for survival. This article dives into innovation ecosystems, exploring the different players, why they are crucial for innovation, and why it’s important to build and efficiently manage your innovation ecosystem.

Innovation Ecosystem: A Complex Web of Players, Stakeholders, and Community Members

To better illustrate innovation ecosystems, we’ll use the practical example of the hotel industry. Who would be part of a hotel’s innovation ecosystem? The complex web of players can include: corporations, startups, suppliers, VCs, entrepreneurs, universities, governments, etc. A member can be any entity that you interact with, especially regarding innovation.

Each partner adds valuable information, technology, and expertise to the hotel’s ecosystem. The diverse background of each member is fundamental to the ecosystem.

For instance, a university partner could provide hotel companies with important information on customer expectations and insights. The academic approach universities employ can uncover new business opportunities for the hotel industry.

Innovation vs Product-Centric: Searching for Opportunities

An innovation ecosystem is member-centric, relying on members to create value. These types of ecosystems ask themselves: What can the ecosystem accomplish? What can this group bring to the hotel industry that other groups can’t? This is where the innovation ecosystem finds new business opportunities. 

Innovation ecosystems are opportunistic, always looking for the next big thing.

On the flip side, there are product-centric ecosystems. These ecosystems are concerned with the product they sell. Where does the raw material for the product come from? Where does the product get assembled?

The Weary Tale of the Hotel Giants: When You Don’t Engage With Your Innovation Ecosystem

The hotel industry has been hit by disruptive innovators over the past two decades. First, by the introduction of online booking, and then by menacing substitutes like Airbnb. To fend off ever-growing competition, hotel giants (Hilton Hotels, Accor Hotels, Marriott International, etc.) needed to continuously innovate their offering. However, most lagged far behind. 

The industry saw little change before the dot.com boom, becoming complacent. In this context, the booking.coms of the internet era capitalized on the opportunity. On one side, by lowering hotel room prices (thanks to democratizing reservation prices) and on the other, by cutting into a hotel’s profits by charging a commission fee for each booking. 

Instead of opening up their innovation process, and asking its members what could be done, the hotel giants did little and brushed off the tech startups as insignificant competitors. Today, Airbnb has more rooms listed on its website than the top 5 hotel companies combined, along with an estimated value of $31 billion.

How Could This Have Been Avoided? 

By simply engaging with their innovation ecosystem the hotel companies would have uncovered the shift in the market – one now centered around ease of booking and use of virtual travel agents. While engaging with their ecosystem, hotels would have been introduced to members with new technologies. An opportunity for collaboration would have unfolded allowing the ecosystem to develop new innovations to meet the ever-higher demands of hotel guests.  

Another missed business opportunity was the chance to invest in the booking.coms and Airbnbs early on.

If You Can’t Beat Them Join Them: Collaboration is Essential in Today’s World

This narrative of missed business opportunities is not isolated to the hotel industry. Unfortunately, due to exponential change in technology, it’s more prominent than ever. 

Companies of all sizes must engage with their innovation ecosystems to avoid the same end. The first step for companies is to establish an internal process for their innovation ecosystem. Followed by a strategy to tap into the potential these ecosystems create. 

This strategy should include a structure to build its innovation ecosystem, and a systematic and repeatable process for tapping into the ecosystems potential.


Understanding A Startup’s Journey In Your Organization corporate-startup journey

Understanding a Startup’s Journey in our Organization

In this article, we’ll cover the most important stages in the corporate-startup journey from the viewpoint of a large corporation.

Down to their DNA, corporations and startups are very different. Corporations handle many moving parts, requiring rigid processes, and a meticulous and organized environment. Startups are small, agile, and are less interested in perfection, and more in getting products to market.

The million-dollar question in corporate-startup relationships is how to make them successful. 

In this article, we’ll cover the most important stages in the corporate-startup journey from the viewpoint of a large corporation. By understanding the journey and its stages, you’ll be better equipped to accompany a startup through a rich and fruitful partnership within your organization.

Identifying a Need

The journey starts with the corporation identifying a need and releasing a call for solutions.

Let’s take a look at an example. A multinational bank is looking to digitize its operations. As this is not the company’s core business, they don’t have the know-how or expertise to accomplish this goal. Thus, the bank will need an outside partner who can provide a viable solution.

First Contact

A motivated startup will find the bank’s brief on digitalization and establish contact. After introducing itself and its solution, the startup must convince decision-makers.

The only way to convince decision-makers is by fully understanding the needs of the corporation – in our example, the bank’s digitalization and banking security needs. This requires ample communication between both parties.

Showcasing the Solution

Startups will want to show their solution to decision-makers as soon as possible. When they do, the startup persuades the corporation by demoing the solution to the company and demonstrating their understanding of the corporation’s needs.

Assuming the solution meets the company’s requirements, they will move onto the next stage of the journey. Depending on the complexity of the collaboration, the solution might go through a proof of concept phase before moving forward.

Proof of Concept

At this stage of the journey, many customizations and tests take place to ensure seamless integration. The corporation should clearly explain what is guiding its process and decision-making. Not only to the startup but also to internal collaborators.

For instance, if the bank needs six months to prepare for a pilot test, the bank should explain why. For instance, it could be for IT or security reasons, both of which should be communicated to the startup.

Six months for a startup is a lifetime. As most young companies are, the startup is cash-strapped. Thus, they might feel frustrated with the delay. To avoid this, the bank needs to clearly explain the reasons for the timeline. The exchange of clear information and expectations between both parties is imperative.

After completing a successful test run, the solution can move onto implementation, but first, a contract needs to be signed.

Sign on The Dotted Line 

No business journey is complete without a legally binding contract. In this stage of the journey, the bank and the startup agree on terms and conditions for the partnership, sign NDAs, and complete other administrative tasks.

Meanwhile, other departments in the corporation will be interacting with the startup. There are many moving parts and the startup could feel overwhelmed. By taking the time to fully explain the process and to accompany the startup, the bank assures a smooth progression.

Most startups are not experienced with juggling different departments and legal contracts. Ideally, corporations should provide a simplified contract and a straightforward procedure.

As soon as all administrative matters are ironed out and agreed upon, implementation can take place.

Sounds Easy Right? 

Well, it’s not. In each stage of the journey, the relationship can take a wrong turn or even hit a dead-end. The key person of contact within the corporation must understand the journey the startup will take to help it navigate successfully.

Our bank and startup example was a simplified version of reality. Reality is not as rosy, there will be many additional touch-points and steps depending on the context of the collaboration.

A best-practice is to identify all the touch-points a startup can have with your organization and establish a process that is clear and easy to follow. Keeping in mind the differences in culture, priority, and speed.

It’s Worth The Trouble

A corporation could be thinking that working with a startup is more trouble than it’s worth. This can’t be further from the truth. Startups are an essential component in today’s innovation process, bringing speed, new methods and processes, and practices to all industries.

Don’t let your differences in organization and culture keep you from working together. You should aim to build long-lasting and successful collaborations with startups.