We believe every corporate manager should have an interest in startups. Why? Because startups and large companies bring each other immense opportunities through collaborations that, if harnessed correctly, create win–win situations for both. It is telling that not only companies like Microsoft and Google, but also less technology–focused businesses such as Coca–Cola and have launched programmes to systematically scout, attract and collaborate with young tech companies.
Working with startups is not only reserved for the world’s biggest companies; medium–sized firms can also harness collaboration opportunities. Open innovation – ‘the paradigm that assumes that firms should use external ideas as well as internal ideas, and internal and external paths to market’ – has become important for many firms who recognise the limits of ‘closed’ internal R&D.
In fact, evidence shows that openness leads to faster project execution, better technical performance and higher financial revenues. Importantly, open innovation is increasingly practiced through formalised engagement with startups.
Stronger and more formalised interaction between forward–thinking corporates and startups has great potential to create substantial value for all parties involved. Whereas corporates and startups have collaborated in informal ways for many years, formalised programmes have distinct benefits.
Firstly, they make collaborations more efficient and cost–effective for corporates. Next, they are a public commitment to supporting new innovators and as a forward–looking company which sends strong signals to internal staff as well as external partners, customers and future employees. Equally important, formalised programmes are more visible to the startup community, and are therefore easier to engage with.
Stronger and more formalised interaction between forward–thinking corporates and startups has great potential to create substantial value for all parties involved.
Even though an increasing number of corporates want to start working with startups, many do not know where to start, given the mushrooming array of programmes. Our research suggests that many large firms also think too little about questions of strategic alignment, ultimate goals and success metrics. Lack of internal buy–in is another problem that managers of existing corporate startup programmes reported to us as their key barrier to work effectively with young businesses. A pivotal but often overlooked element is the need for mutual benefit and consideration of the startup perspective, without which a programme can be doomed from the outset.