Innovation is the key to long-term business success. Innovative companies grow faster than the rest: the likes of Kodak and Blackberry have shown that even clear market leaders can quickly be overtaken by competitors if they don’t develop new products and solutions.
While many companies see innovation as an important part of their long-term strategies, often they still struggle to make their innovation goals a reality. They focus on optimizing existing processes and increasing sales of existing solutions rather than developing radically new products. Why? Because there’s often a huge psychological barrier when it comes to developing new solutions. And that in turn is because they threaten to make existing ones obsolete, and may require new strategies or organizational structures.
Startups, on the other hand – technological and growth-oriented organizations whose raison d’être is building innovative, scalable business models – focus all their resources on developing new products and solutions that address current customer problems or even open up completely new markets. They’re work fast, with short iterative feedback and product development cycles as well as agile structures that enable them to adapt rapidly and test various prototypes and solutions.
The startup world and the corporate world are very different, but each has clear strengths to offer the other. Here’s an overview of how they can do that.
Why Startups And Corporates Work Together
Benefits for corporates
Companies can leverage the power of innovation and the agility of startups to tap into new markets, develop new technologies and create an innovative brand presence.
Benefits for startups
Startups, for their part, need a strong partner who supports them in their growth with know-how, customer base, and financial and technological resources.
Choosing the right collaboration model
There are several ways for companies of all sizes to work with startups. These vary by resource and timeframe requirements, as well as by the participation of employees in startup activities. This graphic show the most common collaboration models and startup activities according to level of resource involvement and employee engagement.
Barriers and success factors
The closer the cooperation between the partners, the more important it is to watch out for the pitfalls described below and to foster certain essential success factors.
Conversely, companies can stay on top of their cooperation activities and ensure a successful long-term cooperation by keeping the following success factors in mind.
How it works
For a corporate to establish a successful cooperation with startups, here’s a step-by-step recipe:
1. Define the vision
Companies must have clear ideas as to where startup collaborations should lead. They should also define potential cooperative values. These can be determined by analyzing the status quo as well as developing a long-term vision (“Where do we want our business to be in 10 years?”). They also form the foundation and guidelines for future activities.
2. Define strategies and goals
The second step is to work out a clear strategy and set the scope of activities based on your vision. These include determining concrete objectives for possible collaborations (developing new products, understanding technological trends, etc.), determining the parameters by which collaborations are assessed, determining the budget and the criteria for the choice of partner. Responsibilities for all further processes should also be clarified at this stage.
3. Define Collaboration Incentives for Startups
Due to the ongoing race for the best startups and fierce competitors in the startup scene, it is important to make startups an attractive offer to enter into a collaboration. At this stage companies should therefore consider what kind of cooperation can lead them closer to their defined goals and what resources they can offer that can create added value for startups. Ideally, look at the deal from the perspective of startups with which companies want to enter into a partnership.
4. Scouting and selection
Scouting for the right startup partner can be done through various channels, such as the company’s own corporate website, social or other media. When searching for particularly hard-to-reach or even international startups, companies from the startup scene (such as Pioneers) can be hired to use their network to find suitable cooperation partners. The relevant startups are then selected from all submitted applications or inquiries on the basis of the previously defined criteria and invited into a partnership or a startup program.
5. Test startups and start the cooperation
First, startups go through a deeper compatibility test with the company. One practice is to invite startups to initial talks or events to better understand their work culture, goals and intentions with respect to the partnership. Having successfully passed the test, the future partners should define their long-term plans, milestones, framework conditions and responsibilities. This way they set a clear strategy path for the future partnership.
The process from the startup perspective
Since startups usually have no resources to run collaborations in a structured way and opportunities to work with companies naturally arise in their day-to-day operations, we won’t cover a structured process here. But we do have three pieces of general collaboration advice.
Startups should, like any company, have a clear vision and strategy when entering into partnerships. Ignore opportunistic collaborations that do not provide any long-term value.
Collaborations with startups are often not the highest priority for established companies, so it is important for startups to receive performance guarantees from the partner companies and, above all, to lay down a clear time horizon for the services.
- In order to protect their intellectual property rights, startups should be accompanied by their legal adviser when conducting cooperation negotiation
A glimpse into the future
Cooperation with startups is developing further and will play an increasingly central role in long-term corporate competitiveness. Here are three trends that are now emerging:
Cooperation with startups will be a strategic imperative
In the future, cooperation with startups will no longer be seen as optional, but as a necessary measure for each company to maintain their economic competitiveness and reputation as innovators. In Austria, where Pioneers is based, joint activities of companies and startups have been on the rise for years now. And the majority of active companies expect even closer cooperation in the future.
Structured programs will replace short-term activities
After an initial surge in “tech tourism”, i.e. short-term activities ranging from trips to startup offices and less formal partnerships, longer-term models of cooperation such as incubators, accelerators and co-innovation will assert themselves in the future. Companies are already recognizing that long-term cooperation with startups has greater impact on their reputation for innovation than public relations and branding activities.
Startups and companies will work side by side
Going hand-in-hand with the pace of change, the need for quick exchange and co-development with startups is increasing. It is expected that common “physical” work spaces will be commonplace by 2025, to facilitate growth and reduce barriers to collaboration.
You can download the extended version of this paper via the Pioneers Discover resources page, where you can also browse and download all our consultancy arm’s previous reports and guides.