Last week, I talked about the four key benefits of working with startups to drive innovation projects forward. While you may be convinced that it makes sense to work with a startup, the question may be how to do it. Enterprises commonly deploy dedicated teams or strategy groups to work alongside startups. Others have incubation centers or commit capital investments in startups.
Begin any startup relationship with mutual respect. Like with any innovation venture, executives must have a deliberate strategy for working with startups. On the corporate side, this helps with resource management and plays to an enterprise’s obligations when engaging with startups. While innovation may be a side project in the enterprise, new ventures can be an “all hands on deck” priority for a startup (and devastating if they divert resources in anticipation of a deal that does not come to fruition). Be deliberate in your approach to startups, even if it just exploratory, and be transparent with those you are working within the ecosystem.
Here are some ways you might engage with startups:
You could have the startup be a supplier or vendor to you if they provide some needed services that are of value. This is a great way to work with a startup while they may provide a new and nimble approach to fundamental functions within your company. This could also be a great source of “internal” innovation where you find ways to work more effectively by leveraging new technology or approaches for some of your fundamental corporate processes.
A more strategic approach to drive growth and market disruption is to partner and co-develop with the startup to provide new innovative solutions for your clients or to enter a new market. There are many ways to approach this, ranging from distributing the product or service the startup provides through enterprise channels to creating a joint venture around the creation and launch of a new product. How to structure such a partnership is the most difficult part of this approach. Success would leverage, and not stifle, the new thinking from the startup while leveraging your corporate scale and resources.
A major step in engaging with startups is through making an investment or outright acquisition. Making a corporate investment could yield tremendous benefits, ranging from simply staying close to emerging technology or reaping financial value from an evolving market. Strategically done, it could result in many options across evolving markets and technologies that help accelerate your corporate vision. Of course, it could make sense for some companies to acquire a startup as a way to accelerate innovation within the company (or to curb potential disruption from a more nimble competitor). This might be a faster way to enter an evolving market or a way to fully integrate new innovative technology that could be scaled.
Any acquisition can introduce risk to a corporation, and a startup could be riskier than most particularly when integrating cultures. That said, properly managed acquisitions may increase the pace of innovation while positively impacting the broader corporate culture.
These methods bring similar risk and resource commitment inherent to all forms of innovation. You need to understand and shape the ways your company may engage with startups before you do begin any partnership. Even if you are comfortable working with a startup you need to make sure that your counterparts in your company understand what might be different to help enable a winning joint solution. Your company could expend resources unnecessarily, and your credibility impacted if you push a startup through your system without preparing your company accordingly. Even worse, you could end up having the startup over-commit resources for something that never had a chance to begin with.
It is also important to make sure the startup is ready to work with a large company as well. Desire and readiness by both parties are critical for success. Take the time to make sure your stakeholders understand the vision and strategy of how startup partners can impact the bottom line. If you are a startup leader reading this article, you need to have a deliberate approach to working with large companies to have success but that is a topic for a different day.
Even if your company is not ready to formally work with startups you, as an innovation leader, need to stay engaged in the startup ecosystem. By staying close to startups, venture capital and other influencers in this space you are able to get a view of what is happening in the market, it will help you discover new technologies and also let you connect with entrepreneurial talent. Most important, engaging with startups will give you another input to shape and influence the creative innovation thought process within your company.