Experience Matters

With a wealth of disruptive ideas emerging from the startup community and the subsequent rise of entirely new markets, organisations have their work cut out to remain relevant. Innovation is seen as an answer for driving top line growth and market share, so it is understandable that corporates are paying ever more attention to the entrepreneurial ecosystem.

A study by Mass Challenge on Startup/Corporate collaboration found 82% of corporations now view interactions with startups as ‘very important ’. This surge in interest from corporates has led to new means of connecting startups with counterparts opening up.

For example, global Tech Startup conferences have become ‘must attend’ occasions for Investors, Entrepreneurs and Corporate Innovation leads. From California to China, event companies are bringing together innovation players from across the globe to collaborate, build relationships and launch new businesses.

SLUSH is a prime example. We were hosted at the last SLUSH in Helsinki, and were impressed to learn that since 2008 SLUSH has grown from a 300 person student event into one with 20,000 Entrepreneurs, Investors and innovators. It is so popular that direct flights from San Francisco are organised especially for the week in the snow.

The landscape has changed, innovation is hot, and the entrepreneurs pioneering it are very much in fashion.

Collaboration is trendy, but why?

For corporates, there is the increasingly crucial opportunity to learn from and partner with innovative thinkers and technologies external to their own organisation. The startup ecosystem can encourage a lean startup mind-set that drives disruptive thinking from within.

For startups, there is an opportunity to leverage the scale, brand, customer base and industry knowledge of large corporates to drive user traction and growth. The possibility of finding future investment or suitors for an acquisition is also pretty attractive.

Effective collaboration can be mutually beneficial then, but not without its challenges. Having access to the right partners and knowing how to work with them productively are complex tests to overcome. 

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What are the key challenges for corporates?

Deciding on which innovation approach to take

Different thinking exists on how larger organisations should innovate. Opinions range from establishing a Corporate Venture fund, setting up a corporate accelerator programme or launching a ‘sandbox’ to incubate new concepts internally.

Deciding who to partner with

Over 650,000 startups were launched in the UK last year. Deciding who to work with can be a mammoth task. On top of suitability, any decision to partner with a startup must be caveated with the risks involved in working with an early stage company. The general level of maturity of the startups tends to play a significant part in their eligibility.

Shifting the culture of the organisation

Working collaboratively with startups often goes against the longstanding cultural principles of many large organisations. A level of mindset adjustment needs to be made across the organisation in order for innovation to receive buy in from employees working outside of innovation teams.

Overcoming internal/political challenges

Clear direction and a well-articulated innovation strategy should be developed to ensure there is comfort and a clear understanding from employees of the open innovation approach being used.

And for startups?

Protecting TIME (the only non-renewable resource)

Startups cannot afford to be messed around and made to wait for simple requests or responses. There needs to be a designated point of contact within the corporate organisation, or a third party brokering the relationship to ensure issues are dealt with quickly.

Protecting IP

Agreements on IP need to be carried out on a case by case basis. It is not possible for the Corporate to always own all of the IP for new ventures, nor should it be the case.

Lengthy corporate payment terms and slow processes

Startups depend upon being paid promptly. Most corporate payment terms are 120 days, and for many startups this poses a serious cash flow risk.

Ok, we’re collaborating. Highway to success, right?

For both sides, innovation needs to demonstrate ROI. In order to do this we need to be developing solutions that create value for customers. Ultimately, innovation is only the answer to driving top line growth and retaining market share if the solution is one people use and desire.

Combining this co-operative ecosystem with a human centred approach maximises the chances of success. Incorporating human insights and testing throughout the innovation process keeps new innovations on the right path towards desirability and commercial success.

For example, when a global payments business asked for our help to reshape their innovation process, we began by putting in place a structure that enabled them to clearly define and prioritise their innovation pipeline. We curated a global Partner Network of accelerators and academic institutions to bring together a diverse blend of stakeholders to fuel innovation activity. The end result was the launch of 3 new innovation hubs globally (London, Tel Aviv and Berlin) and a reduced innovation timeline from 18 months to 100 days.

This success was predicated on a carefully considered ecosystem of startups, academics, investors and makers- not just one individual partnership. Gaining access to such a network is as challenging as finding a suitable corporate-startup relationship.

Bringing together the best of the startup and corporate world to design innovations that have a positive impact on the lives of customers might begin at meeting-grounds like SLUSH. However, building productive relationships between startups and corporates, and ecosystems is a challenging task. Inevitably, the collaborative journey comes with compromises on both sides of the fence. Whether setting up and running a lab, defining an innovation framework, helping clients take new products to market, or ensuring the innovation process remains fundamentally customer-centric, it is an exciting time to be part of the shifting landscape of collaboration.

Matt Milligan
Senior Consultant

Matt principally works across UK & Irish markets on innovation projects. He leads the EY Startup Network which connects startups with EY Stakeholders across the globe.

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