How to leverage start-up collaboration to deliver innovation
Across industry growth is dominated by small agile businesses delivering innovative often technology based new products and services. (figures indicate 2015 will overtake 2011 as the record year for start-ups at over 110,000 in the UK alone!) London dominates the Fintech start up scene as the banking world struggles to evolve. Healthcare companies globally are increasingly focussed on the opportunities and challenges eHealth presents, the most break through innovations reaching market through previously unknown start-ups. (from the exotic, such as BioBots – the future of regenerative medicine, to age old problems of embarrassing conditions, such as the Dr Thom website). As the Internet of Things expands dramatically so all industries will need to understand data and drive relevant customer interaction in real time.
Start-ups have the benefit of being able to fail and do so quickly, learning adjusting and adapting to gain the right formula. They’ve no quarterly shareholders to satisfy or a huge body of people not to mention revenue that is used to doing things in a certain way. There’s no legacy technology or working practises to consider, connect to or replace. There’s more money to invest in early stage ventures than ever before and the accerlator / incubator scene is burgeoning across the globe. (See start up infographic for 2014).
So how can big business possibly compete? A recent article in Huffington Post interviewed three companies in the US – McKinsey, Trident Capital and Standard Chartered to explore this challenge.
The 6 steps for how to leverage start-up collaboration to deliver innovation are listed below:
Proactively engage with start-ups
In the last two or three years corporations are actively coming to Silicon Valley and asking for introductions to portfolio companies around specific areas of interest, particularly big data and analytics, cloud computing and mobility.
Strike a balance between agility and quality
There are different ways for an organization to provide value to a startup and it’s not always around them shipping a perfect product that would be perfect for your organization. If they are just starting out, they may want a relationship because they want an investment or to test an idea. Sometimes they simply want your organization as a customer and other times they simply want the input and feedback of your organization. As a corporation, you have different options, so it’s important to find that startup that is the right fit for you, who can really end up helping your business and at the same time you’re helping their business so it really works both ways.
Align incremental innovation with the corporate agenda
Are the start-ups are aligned with the corporate agenda, make sure that there is an alignment through due diligence, where corporate experts talk to them and see if what they have makes sense and can fit the business use cases. Run a pilot, where the corporate find one of their clients, where the solution can be tested in the field. If it works out to be something really interesting, then go into something more formal which can range from a commercial agreement, to an acquisition, to a joint venture.
Involve technology and the business
This approach is more efficient by saving everyone’s time and reducing the number of meetings required. Being exposed to the all the different startups, also gives both the technology leader and the business head a much better idea of the kind of calibre of companies that they are dealing with.
Build an innovative corporate culture
When corporations take observations and inspirations from startups and try to reduce them to practice, most are lacking the innovative culture internally to make the necessary. For that change in culture to occur, it all starts at the very top. Decisions have to be made at the top of the corporation so certain norms get established very promptly.
Corporations are starting to create whole new units where they can build the culture from scratch, i.e. BMW is doing this with i brand, where they have created a competing division with a completely new set of driving principles in order to foster and expand innovation. The same is true for Daimler.
Culture is fundamental to not only create ideas, but especially to make them stick and make the organization transform itself as a result of the good ideas that come from the innovation process. While large corporations can learn and gain inspiration from the agile way that startups work, the fundamental and first most important condition for success is organizing the corporation for the collaboration with the startup to be a successful one.
Where we do find things align is when the attitudes tend to be right. We really want startups to align on the traditional things that we think of with regards to our brand culture which is, how is failure viewed, how are mistakes viewed — are mistakes punished or are mistakes celebrated because of the learning opportunity as opposed to just being something that went bad.
Measure innovation KPIs
Corporates often confuse their operational KPI — how they measure their day-to-day performance — with their innovation KPIs. And it is important for corporations to be establishing two different sets of KPIs in order to measure performance.
Organizations should continue with the operational KPIs, but they really need to define a new set of KPIs to measure innovation. I also think that as part of innovation KPIs, many times corporations use the number of patent applications they compile as a measure of how well they are doing in regards to innovation, and I have found this to be a misleading metric. They really need to work at establishing a new set of metrics for innovation.
What is clear is one size can’t fit all and the real challenges is people not money or ideas, as the ideas fail without the talent to spot, develop, adjust and launch them.