Have you ever failed to launch a new innovation project because of the lack of alignment with a startup partner? Or maybe, you didn’t hit your business objectives and saw less-than desirable results.
Let’s talk about why this happens and how you could put an end to it.
One of many paradoxes in the business world is the desire of corporations to work with startups and incorporate their culture, meanwhile encouraging (or even unconsciously pressuring) startups to assimilate with the corporation mindset.
For corporations, collaborating with startups is worth the investment as these partnerships bring a range of opportunities. They can gain insights into emerging trends and quickly respond to changes in the market while gaining a competitive edge. Cost savings, risk mitigation, and brand enhancement among other factors is what makes this type of partnership so attractive.
Startups are agile making them a natural partner in innovation for corporations on a mission. However, there are two inherent differences that can potentially pose a set of challenges - culture and organizational structure.
They also often bring a fresh perspective that can shake up corporate tried-and-trusted processes. When corporations push their structures onto the smaller teams at startups - the paradox occurs.
So what can you do to avoid this?
Open innovation is when organizations collaborate and seek ideas from outside sources instead of relying solely on their own knowledge and resources.
And with digitalization only accelerating, it makes sense why more and more corporations are looking outward to help them keep up.
While Bloomflow fosters corporation-startup partnerships, we are also a startup ourselves and have the pleasure to work with large enterprises. We know the startup world.
And in our experience we’ve identified five key aspects of the corporate-startup partnership that both parties should pay close attention to.
1. Effective and Frequent Communication
In this type of partnership, there is often no defined process or governance, which leads to ineffective communication as well as security risks.
Startups are small and flexible giving them the benefit of agility but the downfall of resource management. They do not have the same resources, time, or team to match the corporation's structure and expectations. So as the bigger player in the game, it is important for corporations to stay involved in the project, specifically, in the organizational aspect.
Both sides should take the time to establish clear communication channels and specific procedures. As a corporation representative, do not be afraid to take the lead and send those calendar invites, follow ups, or appoint team members responsible for overseeing the processes.
There will come a time when challenges must be faced, and having effective communication will ensure partners will be able to work through them efficiently.
It's complex to keep track of what everyone is doing, but when engaging with externals, we need to ensure best practices
João Stakonski / Technology Innovation Analyst at Unilever
In a survey conducted by Economist Impact, 5 main open innovation adoption practices were observed in advanced and emerging organizations:
- Centralized team dedicated to open innovation
- Team dedicated to open innovation software/platforms
- Standard procedures for innovation activities
- Adoption of open source softwares to support open innovation projects
- Established licensing or intellectual property management systems to support open innovation projects
When establishing communication, selecting and adopting practices that work well for both partners is the backbone of your collaboration.
2. Build Trust Between Partners With Transparency
A sure way to dissolve a partnership is by losing trust and as with any other partner, the startup needs to get the full picture.
As mentioned previously, their main characteristic is their agility to adapt and sharpen their solution if the organization's expectations are clear.
Aim to instill trust in your partnerships and establish a full transparency policy that covers all elements of the collaboration - goals, timelines, intentions, contracts, procedures, etc.
Do this at the start of collaboration so your outcome visions are aligned and success at scale is not jeopardized by lack of transparency.
3. Share Information, Carefully
You need to understand that startups do not have the same guidelines and security measurements as a big corporation. Not all will have information security and privacy protection.
So it is up to you to create an ongoing stream of information exchange and ensure security policies are set in place. Share more than the minimum information required so you can discover insights or find innovation gaps.
Innovation gaps are cases in which a business has a need to evolve but lacks the resources to do so. Discovering these gaps with your startup partners represents a great opportunity to close them through meaningful innovation.
Keep in mind the "paradox of openness" described by Laursen and Salter as it poses a challenge in collaborations with startups. The difficulty lies in creating an environment that fosters innovation without giving away too much to competitors. Firms that don't embrace external knowledge could miss innovation opportunities while those that share too much may lose their edge to competitors.
It's about finding the right balance between seeking external knowledge to fuel innovation, while also safeguarding your own expertise.
4. Understand Their Methods and Processes
Frustration and complications arise when there’s not a clear understanding of your partner’s differences from your own organization.
Remember, your organization or the startup is not trying to adopt each other’s mindset. That will not happen and that is also not the goal of this collaboration. It is a partnership that is mutually beneficial because of those inherent disparities.
Tobias Henz, an expert in bringing corporations and startups together mentions that “Just openly acknowledging that there may be problems in working together due to different cultures, methodologies, and philosophies and committing to working them out can drive partner satisfaction up by 30 percent.”
Both parties need to take the time to familiarize themselves with their partners’ procedures. Establish a common approach to ensure both are working in the most effective and efficient way possible.
Be careful to not impose too many of your own methods and processes. Don’t forget, the key advantage of working with startups is their agility and learning how and why they do things differently.
5. Set Clear and Achievable Goals
In a McKinsey interview, discussing main obstacles faced in corporate-startup partnerships, Miao Wang, leader of McKinsey’s innovation practice, states that one pitfall “...is lack of strategic clarity about what you are trying to accomplish. Many corporations know they need to innovate, and know the technology trends, but have not translated that into what they practically need to do and therefore how they can leverage the external ecosystem to help them accomplish their objectives.”
A strong foundation needs to be set for the partnership to create impact. This should be done by setting clear goals and achievable key performance metrics to get the most value out of the collaboration.
For us at EIT Food, the most important step is clearly understanding the corporate’s strategic objectives, and then working backwards from there to identify the right innovations/startups and increase the chances of a successful outcome.
Samantha Gadenne / Corporate Venture Manager at EIT Food
Again, many startups don’t have the capabilities to mount large and expensive projects. Therefore, both partners will need to be frank about what is possible and what is not. Keep this in mind while discussing future projects that way the desired outcome is realistic and aligned with business objectives
The goals set should be mutually beneficial. Yes, the corporation will have needs, but the startup should also be benefiting from this partnership (in more ways than just monetary).
As The Partnership Progresses
Remember to find a balance between learning from the innovative startup and leveraging corporate strengths. With effective communication, information sharing, and understanding you embrace the best of both worlds, and pave the way to success and sustainable growth.