As corporations continue to prioritize innovation, many have thrown their hats into the startup ecosystem. Whether it’s through an internal incubator, an innovation lab, or an event sponsorship, it’s clear that companies don’t want to be caught flat-footed when the next wave of innovation arrives. And some savvy startups have a lot to gain from partnering with well-resourced corporations.
I recently met the innovation chief at Schneider Electric, an electric company that has been around for more than a century but is still looking for ways to fill gaps that competitors have ignored.
A company like Schneider — one with a dedicated customer base and entrenched business practices — shows that organizations can recognize a paradigm shift when they see one. Still, the problem many run into is articulating the why and how behind these initiatives.
Most corporations quantify a successful startup partnership based on fuzzy metrics such as the amount of product that’s developed or the number of small companies acquired. Others look at how much talent, expertise, or intellectual property is gained. No matter the standards, both corporate and startup leaders must articulate their reasoning and benchmarks for cultivating a strong partnership if they want to see that union realize its true potential.
Get to the Heart of Your Partnership
Here’s one factor motivating corporations to join forces with startups: fear. Leaders at many large corporations feel startups move faster than they do. They want a front-row seat to observe and learn how startups manage to innovate so quickly.
There is also the potential for strategic acquisitions or simpler customer relationships. Corporations may find inroads to new marketplaces through opportunities to buy from or sell to startups — particularly if there’s a cutting-edge piece of technology involved.
Then there’s the opportunity for corporations to boost the local economy and promote the kind of innovation that startups bring to cities. For example, Miami’s Knight Foundation works hard to nurture its local entrepreneurial ecosystem. The foundation has invested more than $30 million in support groups like Endeavor and 500 Startups, sparking an exciting wave of innovation in South Florida.
Despite those factors, many corporations still struggle to verbalize why they want to partner with startups. That may be because they’re just responding to the fear of being displaced by hungrier businesses, having their industry disrupted, or getting beat out for talent by startups that appeal more to younger workers.
The end result of this failure to articulate specific goals is that some corporations invest millions of dollars into innovation without any clue as to how to apply it, and startup founders can find their business unexpectedly sidelined. Corporations can enjoy a bevy of benefits by getting involved with specific startups or a local startup ecosystem. But above all else, being able to articulate your objectives properly is the key to a fruitful partnership.
Build a Better Bond Between Startup and Corporation
Startup-corporation partnerships can be mutually beneficial, but it is often challenging to know where to begin. Here are a few ideas to help you begin the process on the right foot:
1. Mind the gap
Mind the gap. It’s important for all parties to enter these partnerships fully aware of the asymmetry between a corporation and a scrappy startup. Corporations should take a long look at what they hope to gain from the partnership, acknowledge any barriers that exist, and work to break them down. Startups should be mindful of their assets, every step of the way, making sure the fine print has been well-examined so there aren’t any unhappy surprises.
I worked at a company called Sermo that Bloomberg approached with a partnership opportunity. The doctors we had on staff took a number of surveys and served as respondents for any breaking medical news that Bloomberg’s journalists needed comment on.
We had yet to launch when this opportunity emerged, but we’d put a lot of faith in the idea that the Bloomberg partnership would yield good buzz. The union was incredibly important to us, but it was barely a drop in the bucket for a large conglomerate like Bloomberg. That sort of expectation gap needs to be addressed sooner rather than later.
For example, the additional layers that corporations may require of startup processes can overwhelm a young company. Corporate leaders should keep those issues at the forefront and make solving them crucial to success. Realizing that a gap exists and attaching it to an objective can help leaders gain a clearer picture of the mission and put it into words.
2. Champion both sides
To make collaboration work, there needs to be a champion inside each organization. These people need to be ready to protect the relationship while serving as internal public relations agents. Without such champions, partnerships can get lost in the chaos and shifting priorities on both sides.
A startup I formerly worked at was transitioning from MySQL to MongoBase to handle all of our data, but the shift caused our app to slow down substantially. When the CEO asked me what the problem was, I gave him a frantic and technical breakdown.
After I finished my initial explanation, the executive again asked me what the issue was. Once I got out of my defensive mindset, I was able to articulate the issue — and the executive was a helpful resource for solving the issue. Having a CEO who was patient enough to hear me out and be an asset gave me the confidence to see the problem through to the end.
By that same token, select advocates for your cause based on their expertise and suitability for the role. If there are difficult legal issues involved, select someone who has a legal background. If it’s more of a technical collaboration, look to your IT groups. In all cases, find someone who is likely to have the tenacity and social influence necessary to see things through any rough patches.
3. Be clear about goals
Be transparent about goals, expectations, and milestones. Everyone needs to begin this partnership with eyes wide open. Startups must be clear about what they want (and what they don’t) because corporations can eat up a lot of their bandwidth.
Clearly outline the objective of this collaboration with your startup partners. Get leadership from both sides together to reach a consensus, figuring out where your goals align and how you can better help one another.
Partnerships between corporations and startups can be incredibly fruitful, but only if both sides are savvy about them. The overall point is to stay cognizant of the big picture and figure out how you’ll measure success — or decide to cut your losses.
Corporate brands’ presence in the startup ecosystem will only become more pronounced as time goes on. Leaders interested in partnering with startups should determine what they want from these collaborations and articulate those goals properly. Doing so brings those goals into focus and makes realizing them a stronger possibility.