Working with startups has become key to successful open innovation for big corporate companies. We've identified 10 key lessons that each corporate startup programme needs to implement to set the pathway for mutual success.
Working with startups has become key to successful open innovation for big corporate companies.
Our guide ‘Winning Together’ sets out how different types of startup programmes can help corporates achieve significant benefits to their business processes. These can range from sparking new relationships to rejuvenating corporate culture, brand perceptions or programmes, or by making savings to corporates' bottom line. Simply put, startups can help corporates solve core business problems more effectively and enter new markets at lower risk and higher speed.
However, currently the sad fact is that many attempts to collaborate do not live up to this potential, due to a lack of strategic alignment of programmes, internal opposition or mismanaged expectations on the side of the corporate and startup.
Therefore, we identified 10 key lessons that each corporate startup programme needs to implement to set the pathway for mutual success. Here they are:
1. Carefully consider your objectives to engage with startups.
It is shocking how many corporate managers want to start programmes because ‘our competitor is doing it’. FOMO (fear of missing out) is a strong change driver but each programme must be selected after careful consideration of your motivations. Our guide identified the four key objectives to engage with startups, which are:
2. Select the programmes that best deliver on these objectives
The range of programme options has exploded over recent years. But, do not despair. Some programme types tend to be more appropriate (given resource requirements, timescales etc.) in reaching your objectives, as you can see from the following table:
3. Secure board-level sponsorship
One of the biggest barriers for setting up effective startup programmes is: internal opposition. Other business units that need to collaborate - from legal to procurement or vertical units - may not see the value of working with startups (that many imagine to be a bunch of hipsters in a garage) or feel threatened when new ideas are supposed to be brought in by an external team, a phenomenon know as ‘not invented here’ opposition. This makes board-level sponsorship even more important because it gives programmes the necessary validation and provide employees with the confidence to take risks when trying out new collaborations with startups.
4. Develop key performance indicators
To measure the progress of your programme, it is important to include success metrics, not just short-term pay-offs but importantly also long–term metrics. Examples include number of entrepreneurs, startups and countries reached, as well as number of jobs created and funds raised by the startups. These are some of the 'data driven' metrics used by Google to measure reach and impact of their programmes. Telefonica measures the number of trials, of contracts and revenue generated by the startups. Accelerators such as Wayra and Microsoft Ventures count the number of successful startups in three years' time, in terms of capital raised and exits.
Another interesting metric is programme–related KPIs for employees. Dell for example started a new KPI for its employees, whose bonus now depends partly on demonstrating ‘entrepreneurial spirit’ i.e. working with startups and new ideas. Similarly, Glh Hotels set up incentive structures for the management team. All the CEOs at the glh chain work on a three-year plan with deliverable and key performance indicators that measure their engagement with startups that can improve glh’s customers' experience.
5. Capture data and feedback continuously to iterate the model
Starting with a pilot, testing its success and fit with your objectives and scaling later will be more successful than launching a big flagship programmes that fails to deliver value. ‘Iterate endlessly’ is a very useful approach to improve the quality of corporates' startup programmes and consequently the value of the potential collaborations with startups. Google and Microsoft Ventures adjust their programmes continuously: they survey startups regularly and learn from their feedback.
6. Hand startup programmes to people with an entrepreneurial mindset
Startups and corporates often struggle because they speak, dress and work differently. This makes it even more pivotal that managers of startup programmes understand the world of startups and treat them as partners, not agencies or employees. Microsoft decided to only employ entrepreneurs to build up its seven Microsoft Ventures accelerators. Wayra, Telefonica’s accelerator, also employs people with previous startup experience who can also use their own networks to engage mentors and investors for their startups and this delivers additional value to them.
7. Allocate an internal champion with decision and budget power
Programmes that run on the side fail to deliver value for both corporates and startups. When programmes work closely with a senior figure who has decision and budget power, collaborations like co-development of products and procurement can start without wasting everyone’s time. A quick ‘no’ is better than a protracted ‘maybe’. Diageo for example runs pilot programmes with an allocated budget of $100,000 and a set timeline, after which senior management makes a decision on whether to renew or end the product partnership.
8. Create a publicly visible, single access point for startups
Many startups struggle to find the relevant people and programmes in corporates. Likewise, the lack of a single access point makes it hard for colleagues and other units inside corporates to engage with them. A visible ‘gatekeeper’ who unites different startup functions and can direct enquiries accordingly can help. Google started Google for Entrepreneurs, a team of 15 fully dedicated to running the company’s startup engagement. Unilever has started the Foundry, a platform that facilitated 60 pilots in the past year with its brands and Telefonica rearranged its various programmes last year under Open future, a new subsidiary that reports to Telefonica’s strategy unit.
9. Scout internationally to attract the best talent
Startups might not be located in the same city or country as your headquarter offices. Consider partnerships with organisations that can scout on your behalf, or a network of local partners.
10. Make it easier for startups to work with you
Payment terms of 180 days, complicated IP terms and cumbersome legal processes that require the support of a legal department might seem normal to corporates, but they are a big obstacle for young, small businesses and can kill startups. Corporates should try to simplify these processes where possible. For example, Unilever has cut its payment terms for 90 to 45 days, Wayra offers a 48 hour fast-track programme for selected startups to register as a qualified supplier and BMWi Ventures has eased its reporting requirements.