Corporate Innovation Insights

Working with startups: Hardly any sustainable results, but there is usually a good reason for this!

By July 1, 2020June 3rd, 2024No Comments

Having worked on numerous startup-corporate collaboration projects, our innovation consultant Erik Muckenschnabel summarized his thoughts on why many startup collaboration activities do not deliver the expected results and shows how to design a useful and effective collaboration that accelerates both parties.

When the startup hype started ten to fifteen years ago, it didn’t take long for all kinds of forms of cooperation between startups and corporates to emerge.

Whether it was hackathons, scouting programs, pitching or innovation days, all these projects brought something new to companies around the globe. Since then, startups have been seen as saviors of failed innovation initiatives within companies and motivated them to work together in all the above formats and many more. Nevertheless, many of the collaborations didn’t seem to create long-term value for either party.

If I look back at some of the earlier projects I was involved in, we had many startups participating who were dissatisfied and we had corporate partners that didn’t receive tangible outcomes from the project. In the end, there was no lasting change, no benefit for the startups and no innovation growth. Why is that and what else must be done in order to be successful when innovating?

(1) It simply does not only help to get to know startups on the market

Cooperation between startups and companies takes place in different ways, usually with the same goal: to bring tomorrow’s innovations and ideas into companies. Although the question of whether start-ups are necessary to fulfill this self-imposed task is often not yet answered, first typical formats such as hackathons, scouting & dealflow management are being commissioned.

The above-mentioned projects regularly provide a cultural stimulus for participants and innovation managers, even if they neither satisfy the startups themselves nor serve the overall goal of a company. On the contrary, it often happens that their solutions serve as an impetus for ideas and new products for the companies, without the hard-working startups receiving a follow-up cooperation or a prize. To be honest, no really good startup participates just because of the opportunity to meet someone or to get a 5k cheque. Just put yourself in the shoes of a participating startup: would you spend valuable resources only to potentially get this benefit?

It is also needless to say that this is often due to the fact that through the formats mentioned, corporates get to know a large number of startups, at least on paper, and get a good overview of the market in terms of the use case they are looking for. This seems to be sufficient, but rarely leads to a sustainable innovation change within a department, let alone the company as a whole.

Solution: Hackathons, scouting & dealflow management have their justification, but they should only be used when they actually bring the desired added value to companies and startups alike – there is no point in simply scouting, approaching or inviting the most promising startups if follow-up measures are neither intended nor planned. Therefore, the following questions should always be asked internally in advance: What do I really want to achieve with my project? What kind of collaboration is the right one? Which startups do we need as partners? Do we even need startups to solve the defined problem? How could the entire process look?

(2) Don’t make startups feel that they are losing control

As a startup you are always dependent on financial or other support, which large companies can often provide. Therefore, an offer to work with a large company for a longer period of time or to develop a specific product in a particular industry can be very attractive. This is another form of collaboration between startups and companies that is designed to create a win-win situation for both sides. In reality, however, it is a dance on thin ice, as the company recognizes the opportunity to gain knowledge through the joint creation of a new product or service through the startup’s often existing innovative advantage, while the startup is looking for resources and partners to develop its product and add another well-known reference to its portfolio.

The problem? As a startup you want to keep as much control as possible, because you cannot know where the path will lead you and how successful the future might be. As a company, on the other hand, you probably belong to the market leaders and do not want a potential competitor to grow up next to you.

Solution: Startups want to be as independent as possible and yet are still looking for opportunities to work together with renowned partners. Therefore, as a company, try to provide the startup with the resources that make you a trustworthy partner. By helping them to grow and develop their solution or product, you gain knowledge, insights and, if desired, even a cultural change within your teams. Try to make the startups feel that they are on an equal footing as partners and not as applicants for a job. All in all, you shouldn’t try to get the upper hand from the very beginning, because this leads to startups being very restrictive in their approach to collaboration, as they feel they are too much out of control.

(3) Don’t start another innovation theatre

In innovation projects, there are many key factors on which success depends on. One of them is certainly a comprehensive problem discovery before the start of each project, which is often missing. Companies start innovation initiatives to present themselves as fast-moving players that either keep up with or even stay ahead of the times. In addition, they also try to become innovative and agile employers in order to be attractive for digital talents. What is often forgotten is that companies do not even know what exactly they should innovate. It almost seems as if the creation of real products and results is either not their primary goal, or the real problem is not even visible to them – and this is precisely why projects often end up as “innovation theatres”, which is of no benefit to either the companies or the startups involved.

It’s not just like waking up in the morning and deciding to drink tea instead of coffee this time. As much as it may sound that innovation is a complement to all other tasks, responsibilities and projects within the company, it must nevertheless be a well thought-through process that can only then lead to sustainable changes and results.

Solution:If you want to become more innovative, always remember that innovation should somehow solve critical problems. Innovation should not be an end in itself. It is essential to identify the problem or challenge first, and therefore a problem identification exercise involving key stakeholders, innovation departments and management should be planned and carried out first before launching any initiative. To this end, I recommend a series of workshops that focus on the composition of the company as such, current and past innovation initiatives and the lessons learned, and a clear definition of objectives and possible obstacles. Only when the problem is clear, the most appropriate approach can be chosen.

To sum up, startup-corporate collaboration can be a useful and effective way to accelerate both parties – but the above-mentioned essentials should always be borne in mind.

If you want to know more or discuss, just add him on LinkedIn and send him a message.

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