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  • Corporates & Startups: How To Collaborate in an Open Ecosystem

    9 min read

    Innovation

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    Corporate and startup collaborations, like any other collaboration, require learning from both sides. In this post, we will dive deep into this topic: Corporates & Startups: how to collaborate in an open ecosystem. We will help you understand how to take advantage of business opportunities and build long-lasting partnerships and collaborations. In addition, we will give you a glimpse into the future of corporate-startup collaboration.

    Collaboration of any kind requires capabilities. You need key partners as well as key resources to sustain a competitive or ‘unfair’ advantage. The UNITE Business Capability Map summarizes the capabilities of your firm visually to leverage your strengths and assets for both innovation initiatives and digital transformations. These capabilities will enable you to execute your strategy.

    What is Corporate-Startup Collaboration?

    Open innovation aims to leverage both internal and external resources to come up with new business opportunities and solutions. In other words, this innovation strategy wants to go beyond a company’s internal boundaries to explore new ventures, mostly originating from the synergies between internal and external participants in the innovation process.

    While corporates and large companies often lack the speed in identifying and grasping business opportunities, startups are the exact opposite. Innovation and disruption are at the core of these companies, so they thrive at reimagining the norm and developing new technologies. Amid this landscape, collaboration has proven to be the best way for both sides.

    Defining the Scope of Corporates & Startup Collaboration in an Open Ecosystem

    The extent to which both companies collaborate is unique to each collaboration. An indispensable factor of a corporate-startup collaboration is the definition of the scope of the partnership and collaboration. It should be mutually defined to manage expectations, work with a clear mission, vision, and objectives, and define metrics to measure success.

    The Benefits of Corporate-Startup Collaboration

    Corporate-startup collaboration in an open ecosystem brings many benefits to those involved. This starts from specific business units to C-level executives, investors, and of course, the lean startup.

    Let’s analyze some of these benefits.

    Accessing knowledge and more resources

    Engaging in collaborations immediately increases a company’s access to external knowledge, experience, technologies, and tools. This propels an organization to new fields of research and development.

    Gaining and retaining Talent

    Whether in startups or individual advisors, gaining access to diverse and skillful talent is key to digital innovation. Companies should find new talents and work to retain the employees they already have.

    Corporate-startup collaboration provides employees with an opportunity to engage in the innovation process fully. Thus, they can participate in and work towards emerging new business models, products, and solutions within the organization.

    Creating new products and revenue streams

    This is often one of the key results of corporate-startup collaborations. Whether in the form of a pilot project or a fully implemented product/service, corporations and startups share burdens. Therefore, both sides reduce costs, risks, and project timelines, fast-tracking the development of disruptive solutions.

    Related: Revenue Streams in Business Model Canvas

    Increasing business opportunities

    Open innovation contributes to an abundance of new business opportunities for the corporate, startup, and everyone involved in the collaboration process. The business opportunities arising from the corporate-startup collaboration are many. They’re also not necessarily constrained by geographical borders. Moreover,  companies should leverage them to build lasting relationships to provoke innovation and progress. Collaborations are more beneficial to startups because they supercharge a startup’s marketing strategy.

    The Challenges of Corporate-Startup Collaboration

    No innovative effort is free from all risks. As with every collaboration, these partnerships have some risks that are important to keep in mind.

    Where there is continuous risk in charge of the norm, there is the risk of revealing private information or intellectual property and financial, collaborative, and market risks.

    Beyond these, there is also the challenge of integrating external innovation into internal development, which comes with its own project and implementation costs.

    In collaborating with external parties, corporations also risk becoming dependent on external knowledge, which can cause a loss of flexibility, creativity, and strategic power.

    Facing Collaboration Challenges from Both Sides

    It is important to note that the definition of risks will be different for each stakeholder. In fact, we understand that large corporations do not speak the same language as emerging startups.

    To overcome such challenges, companies need a strong collaborative process from the beginning to the end.

    Often, corporations have challenges deciding the changes to make to introduce innovative solutions. That is why there are many open innovation models to accommodate each individual situation. A corporate-startup collaboration will always be a custom fit. Depending on who is in the room and who they decide to work with, each partnership will be different.

    Now that both the challenges and benefits of a corporate-startup collaboration have been outlined, we can move on to the question of how to evaluate whether the collaboration is working or if it can be successful in the long run.

    How to Measure if a Collaboration is Working

    A successful corporate-startup collaboration is one that provides positive impact or mutual benefits to all parties involved. It is quite difficult to provide a single indicator to measure success, considering how unique each situation is.

    There are, of course, financial indicators that determine the success of an innovative product and marketing strategy for a startup. However, it’s also important to measure how successful the collaboration itself was, regardless of the financial results.

    Depending on the partnership or collaboration scope, the evaluation criteria will be different. Criteria should be defined early to ensure mutual understanding and manage expectations for all stakeholders.

    These milestones or expectations should be defined from the get-go to ensure a streamlined process for regular evaluation from both the startup and corporate sides.

    Evaluation Of Collaboration

    Evaluation of collaboration can be based on a multitude of factors, for example:

    • how technically feasible the technology/project is,
    • whether it creates a profitable business model,
    • and whether it creates a competitive advantage.

    Another important factor, which is harder to measure quantitatively, is that of the partnership potential. Is this a collaboration that can bring long-term gain? Many elements play a role in this, including trust and openness as well as mutual support and smooth communication.

    Apart from individual and interpersonal qualities that can contribute to successful collaborations, there is also the idea of collective understanding and acceptance. In this case, from large companies and their workforces towards the concepts of open innovation.

    To continuously leverage the available opportunities, companies should adopt strong corporate cultures that promote innovation and corporate-startup collaborations and are focused on networking, knowledge-sharing, and personal development.

    The Future of Corporate-Startup Collaboration

    We cannot predict the future, nor can we predict future innovations. However, one thing is certain, without collaboration, we will not solve the challenges of the present or the future.

    We’ve mentioned in this post that innovation is specific to each company and innovator. As such, the future will look different to everyone. While some companies will fully digitize and move towards new, modern ways of business, others must modernize current practices and adapt what currently exists to more efficient, effective, and sustainable processes.

    Due to external pressures like COVID 19 pandemic and climate change, companies have been re-evaluating their long- and short-term goals to remain competitive and be ahead of the game. This alone shows how companies have the power and resources to change, especially when unexpected risks come up. However, the issue is really figuring out how to change, evolve and remain relevant in the market.

    3 Best Practices for Collaborating with Startups and Corporates

    How can startups and large companies collaborate more productively? The following tips will guide you on how to collaborate better with startups:

    Have a clear vision for engagement

    Big players need a clear innovation strategy that helps them set their venturing approach, the type of mechanism, and when to begin. Successful venturing activities clearly state why they are searching for external collaborations, the search fields they are considering, and how they intend to create value.

    Startups need to develop strategies to accelerate corporate objectives beyond the immediate product and service they provide. A focus on leveraging their know-how (whether through industry knowledge, rapid product development, or using insights) is a good place to start.

    Understudy your collaborator

    Recent studies show that big players’ venturing efforts differ according to their stage of maturity. In the first years, most venturing units struggle with organizational buy-in and lack a tangible value proposition to offer partners. These units often fail to fulfill company expectations (expected ROI) and partner expectations (benefits) during the mid-years. Finally, experienced teams struggle with consolidating and integrating external innovations in their business lines. Both parties should understand the maturity level of their collaborator and help them overcome their specific challenges.

    Focus on learning capacity

    Research shows that it takes most companies years of learning before they can effectively take on new ideas from external partners. However, most initial collaborations between startups and big companies are developed in hackathons, accelerators, challenge prices, and incubators that usually last only three to twelve months. Building learning capacity between startups and corporations is an achievable outcome that can be derived from such collaborations.

    Startups are often focused on landing a deal to ensure their short-term survival, while big players are focused on building their future roadmap. While these differences can’t be immediately resolved, a focus on collaborative learning and know-how to build new skills, identify new trends, and discern useful ideas can help increase the opportunities for continuous collaboration. Think beyond the immediate business deal.

    Conclusion

    Misconceptions abound about what corporations and startups should expect from their collaboration on innovation projects. Yet, these collaborations are growing in importance as companies of all sizes try to respond to shifts in the marketplace rapidly.

    We’ve seen great benefits from corporate-startup collaborations, and the results can be extremely satisfying and successful in both the long and short term.


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