Pioneers Insights: Six Steps To Open Innovation With Startups

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Michael Wlaschitz Writer at Pioneers.io

Incumbent companies are facing ultra-fast and unstoppable technological trends such as AI, big data and digitalization. These trends are transforming whole industries. At the same time, due to strong capital markets and globalization, competition from new entrants (especially fast-growing startups) is rapidly increasing.

To stay ahead of that competition and at the forefront of innovation, incumbent companies need to constantly rethink their business. Open innovation and co-creation with startups – if done right – can be critical in the development of new products and markets for any company.

So what is the right way to do it? For corporates wanting to set up successful startup collaboration programs, Pioneers Discover suggests the following six-step process of co-creation and innovation.

Step 1 – Define the WHY

At Pioneers we often meet companies expressing the wish to work together with startups. In many cases, however, they don’t really know why they want to do it. They might simply have heard it’s a good thing to do, or seen competitors doing it. But for co-innovation to provide strong value to the company’s business, developing a clear view on the long-term goals is vital and should always come before starting any projects. In the broadest terms, why and where to they want to achieve innovation?

Step 2 – Define clear problems and use cases

Having defined broad areas and topics for innovation, companies need to go deeper into each to define clear problems or use cases to tackle with startups. Problems should be topical and their solutions have a strong positive effect on the company’s productivity or efficiency, or provide strong financial returns. On the other hand, the definition of clear use cases (instead of problems) allows for more creativity in integrating new solutions that may not directly solve a clear problem. In both cases, high urgency and impact of the potential solutions and implemented technologies also guarantees employees’ long-term commitment to work with startups.

Step 3 – Scout for best-fit startups

Startups with potential solutions to the defined problem or use case need to be identified. Here the startup’s growth stage, prior funding (in the case of a potential investment) and the details of its technology play a major role in the selection process. These should be defined up-front to make sure the most fitting collaboration partners are identified.

Step 4 – Prepare for startup interaction

As many are aware, startups and incumbent companies (or well-established corporations) do business very differently. Their working style, speed, culture and business language often differ significantly and may result in regular misunderstandings and frustration from both sides. To avoid these, preparation for meeting with startups is key. Company employees need to understand that startups’ working styles, the business terms they use and their culture can be very different to their own. They can be trained to be open to new perspectives.

Step 5 - Piloting

Once internally prepared to work with startups, the next step is to actually meet with those identified as best-fit. Using different collaboration tools and frameworks, set the first goals for collaboration. Typically startups present their solutions and approaches, while corporates explain in detail the problems and use cases they want to work on. As soon as a mutual ground for collaboration is found, a first pilot test is key to building mutual trust and testing the long-term collaboration potential.

Step 6 - POC and Implementation

After a successful pilot that results in a first Proof of Concept (POC) – a match of the startup’s solution to the defined problem/use case – representatives of both sides need to work out a roadmap for a long-term collaboration that clearly states the timeline and responsibilities of both parties, as well as the legal and financial framework. As in every other step, we highly recommend bringing in a third party to help set up first successful long-term collaborations and provide know-how on structures, methods and tools that can facilitate all processes mentioned.

We’re looking forward to hearing about your collaboration experiences and stories! Or, if your company is looking for guidance on open innovation programs, email Pioneers Discover here.

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