Research shows corporations create coherent partnering and investing strategies with startups
BOSTON & BOULDER, CO – Innovation Leader today released a new survey sponsored by Techstars, the worldwide network that helps entrepreneurs succeed, which shares how executives at large corporations are approaching engagements with startups and other disruptors to fuel corporate growth.
The survey, Startup Engagement: Best Practices for Large Organizations combined quantitative data from 115 large organizations with 15 qualitative interviews to reveal ways that corporations currently engage with startups, and sheds light on best practices for companies looking to leverage startups to drive internal innovation.
While some startups are determined to go it alone, motivated by the disruption of established industries, others are eager to partner with large organizations for mentorship and advice, joint product development, access to markets, funding, and the potential of a large equity event in the form of an acquisition.
Survey research found that large corporations range in their experience and willingness to work with startup entities. Of the five percent of corporations with the highest level of experience with startup engagement, research found that providing mentorship, sponsorship and participation was at a much higher rate (88 percent) than corporations with less experience (57 percent). More experienced corporations are also more likely to partner with startups to co-develop new products (79 percent) than corporations with fewer startup touch-points (51 percent). More experienced companies are also more likely to participate in university startup programs (85 percent) when compared to less experienced corporations (45 percent).
But many companies have not put a game plan in place to connect to their startup ecosystems. In fact, the survey found that 19 percent of corporates said they haven’t yet established goals for startup engagement; 47 percent haven’t defined a clear “point of contact” internally who will be responsible for startup interactions; and 38 percent of corporates don’t yet have metrics in place to track the impact of their startup engagement activities.
“Our experience tells us that it’s not a question of if this disruption will occur, but when,” says David Brown, founder and co-CEO of Techstars. “We saw a way to turn this situation into a win-win. For a large corporation, the best path to true innovation—cultural change as well as problem-solving and avoiding disruption—is to partner with startups. We realized that if we could bring together the corporations that were the most willing to innovate with the top technology startups that have the deepest domain expertise, both would benefit.”
The research suggests that large corporations with the most startup interaction are more willing to work with startups across every category of engagement, including corporate VC investment, running a startup-focused technology accelerator, acquiring startup technology, becoming an early customer of startup products and services or reselling their technology to their customers. Willingness to work alongside startups creates mutually beneficial circumstances for both the startup and the corporation.
The research also shows that more experienced companies were similar in their approach to their goals for working alongside startups. All companies said the top goal was running pilot tests or proof-of-concept tests for new ideas, followed by “driving internal transformation” by using startup tools and methodologies, and to better understanding customer or tech trends. Just 29 percent said they were hunting for potential acquisitions.
“We met over the last four years with 1,500-plus startup founders around the world and asked them what would make a great corporate startup partnership. Everything we designed kept their input in mind,” says Danielle Cohn, Executive Director for Entrepreneurial Engagement, Comcast NBCUniversal and one of the interviewees featured in the Innovation Leader report. “At the conclusion of our first accelerator class, seven of the 10 companies were doing some form of a partnership with Comcast NBCUniversal businesses, including two that have entered into master services agreements with our company.”
In addition to the research results and interviews with corporate leaders, the Innovation Leader report includes a roadmap for corporations looking to work with startups — from establishing a strategy to identifying the people who will be involved to assessing progress. For more information, download the full report.
Techstars is the worldwide network that helps entrepreneurs succeed. Techstars founders connect with other entrepreneurs, experts, mentors, alumni, investors, community leaders, and corporations to grow their companies. Techstars operates three divisions: Techstars Startup Programs, Techstars Mentorship-Driven Accelerator Programs, and Techstars Corporate Innovation Partnerships. Techstars accelerator portfolio includes more than 1,700 companies with a market cap of $18 Billion. www.techstars.com
About Innovation Leader
Innovation Leader is a fast-growing media and events company with a laser focus on helping the world’s largest companies build their competitive advantage. Since 2013, Innovation Leader has built the largest network of corporate innovation, strategy, and R&D executives in both public and private companies, helping these executives to strengthen their innovation programs; connect with useful resources, solutions, and vendors; and engage with peers inside innovative labs and workplaces around the globe. For more information about Innovation Leader membership and events, visit www.innovationleader.com or follow us on Twitter, LinkedIn and Facebook.
Today, global energy corporation Equinor and startup Crux OCM are working together to test Crux OCM’s software, which functions as an “autopilot” for oil and gas control room operators. It’s early days yet, but if the Crux OCM solution works and scales, it will lead to efficiencies, cost savings, and new revenue opportunities for Equinor.
This sounds like a pipe dream: a startup and a large corporation partnering to give the startup a first user to test their idea and the corporation the kind of solution that would have taken years to develop internally.
In reality, this kind of partnership can be a rapid win-win, but only if approached the right way. Startups and large corporations think and work incredibly differently—and too often, great ideas get lost in translation. The first hurdle is identifying startup founders with deep domain knowledge who are at the top of their game.
Identifying the Stellar Startups
“We did not really know what we were getting into,” said Jens Festervoll, corporate liaison for the Techstars Energy Accelerator in Partnership with Equinor. “Equinor is a global energy company and wanted to partner with an accelerator company that had a reach into global startup ecosystems and a reputation for attracting top talent.” They were hoping to identify and work with truly stellar startups with products or solutions that could make a real difference to Equinor, and to inject a dose of startup culture into the company—but they also knew that working with startups would bring special challenges for a large corporation like Equinor. And so an accelerator was born.
From the moment she heard about the Techstars Energy Accelerator in Partnership with Equinor, Crux OCM founder Vicki Knott knew she wanted in. “The same day applications opened, the founder of Crux OCM hunted me down,” said Audun Abelsnes, managing director of the program. “Vicki’s real obsession for a niche problem like increasing the volumetric throughput of pipelines appealed to me. Techstars backs exceptional founders, and I immediately felt there was something special about Vicki.” Crux OCM indeed proved to be an exceptional startup, with a great team that was ready to #domorefaster.
The Startup Culture Injection
But Vicki did have some hesitations: “We were worried that the experience would be the same as all of our interactions with large corporations up to that point—that progress would be so slow we would not be able to determine and secure a trial opportunity within the three months of the accelerator.”
It’s true that corporations and startups work at different speeds, and this can cause friction. “The speed and sense of urgency is just totally different between a energy major like Equinor and any startup,” said Audun. Fortunately, Audun is also positioned to help ease this tension. “I have unique access to senior management in Equinor that can help and push the needle forward if necessary.” He gave Equinor the tools and methodologies to build trust with the startups in the program, creating strong channels of communication and overcoming cultural barriers.
For Equinor’s part, Jens reflected that he and his colleagues “appreciated the speed at which these startups expect things to happen, and the fact that we do not work that quickly.” But the Equinor people who mentored the startups in this program—giving their time and attention on a regular basis, week after week—found that they were changed by the experience. Nearly 80% of these mentors said that they would work differently in the future, with more agility. That taste of startup culture let them see ways to bring elements of it into their working lives, making them both more efficient and more engaged.
“We need this cultural change,” said Jens.
The Measurable Power of Mentorship
Techstars not only brought startup speed to Equinor—mentors also got first hand experience with the Techstars value Give First. This means helping others whenever possible, without expectation of a transactional return. It is the essence of mentoring. “The Equinor staff was so welcoming and open to the Techstars companies,” Vicki said. “All individuals in the organization did their very best to help us and fully embraced the Techstars #GiveFirst mantra.”
Going into the program, Crux OCM saw their technology as a solution for oil pipelines. Equinor mentors like Jofrid Klokkehaug, VP of operations and maintenance, and Ulrik Olbjørn, the digital lead for Equinor onshore, helped Vicki realize that she could expand this vision. The software was just as applicable to the 5000 miles (8000 km) of integrated gas pipelines and facilities on the Norwegian continental shelf. Thanks to this insight, Crux OCM had a great new market to attack—and Equnior had a potential solution to a problem.
That’s the beauty of Give First—you always do get something back. You just don’t know what or when it will be. In this case, the benefits for Equnior came quickly: “Crux OCM will test their solution on a small Unit at our Snøhvit LNG facility as a first user,” said Jens. “If the tech works, then there is an opportunity to scale to more complex systems, adding more value.”
A Win-Win Times Six
With this accelerator, the company was looking to “improve Equinor’s ability to innovate and drive change,” said Jens. Less than a year after the first class of the program, Equinor is seeing gratifying results.
They’ve experienced the high quality of Techstars startups, overcome cultural barriers that made trust and communication difficult, and infused some of that energizing startup culture into their corporate culture—and these are just the intangible successes. Crux OCM is one of six startups from the program that are exploring potential solutions with Equinor. That’s a win-win times six—and a very measurable, and speedy, path to creating value.
By Chris Pearson, Manager, Partnerships | IBM Digital Business Group
I’ve spent my fair share of time mentoring startups, and when we meet for the first time, I always begin by asking the founders a seemingly simple question: “Why are you doing this?” Answers to this question come in different forms, typically to the tune of “We’ve noticed a gap in ‘x’ market that we can expose,” or “We have an innovative product that can revolutionize the way ‘y’ business is done,” and of course the ever so original “We’re the Uber for ‘z.’” It’s always great to get a picture of the product these founders are developing and to witness their excitement about the potential impact it can make, but none of those really answer the question I’ve asked. They’re all telling me the what and how but not necessarily the why. The reason I specifically ask “Why?” is that this question requires the founders to defines their purpose—and I believe that understanding your purpose is the foundation on which companies can truly thrive.
“He who has a why to live can bear almost any how.” These wise words, written over a century ago by Friedrich Nietzsche, are just as true today as they were then. Circumstances change, markets shift, new innovations arise, all of which are uncontrollable factors that can impact what and how, but if you have firmly established your why, there will be very little you cannot overcome.
Determine Your “Why”
Simple questions don’t always yield simple answers. The purpose behind our actions, let alone our business, isn’t necessarily easy to define and oftentimes takes a bit of digging, but once you have it, the decision making process becomes significantly easier across the board. As a founder, you have to account for hundreds of decisions on a daily basis, each of which can potentially take you any one of a hundred directions. The benefit to understanding your purpose is that it acts as a compass in your decision making. Whatever answer or course of action aligns most closely with the central purpose you’ve identified is the decision you make, period.
For me personally, I decided years ago that my purpose was to help foster growth across the startup ecosystem. I’m not a founder myself, but I have recognized a pattern across history: civilizations tend to thrive—and reach their pinnacle—when they are focused on innovation. Creating solutions that make life and business more efficient and effective is a central theme in growing societies, and I believe that is just as true today as it’s ever been.
I developed this mission shortly after joining 500 Startups in a business development role after many years in corporate finance, and it was this idea that opened my eyes to a missing component in the startup ecosystem. I realized that enterprise companies play a critical role in the development and growth of startups and that the development of startups plays into the long-term success of enterprise companies. For the sake of time, I won’t dive deeply into the subject. Here is a reason so few large corporate entities survive, or at least maintain, a high level of success beyond three generations—and it revolves around their inability to accept and buy-in to innovation.
Partners for Innovation
It was this revelation that led me to take a role at SoftLayer, which ultimately fully migrated into IBM, where I’ve worked to become a key figure in the development and execution of our startup program Startup With IBM. Our objective is to manage a program that not only provides startups access to our technology through credits and more importantly positions those companies that work with us to reach our global network of clients and partners in order to help them find customers and generate revenue. We want to leverage the strength of what IBM is today to create meaningful value for the growth and development of these startups who will ultimately determine what IBM becomes in the future. If we can serve these startups well, helping them grow and scale on our cloud, as more than just as technology providers but also as a business partner, then we have the opportunity to become a core piece in the success of the next generation of these companies. By design, our program is only successful when startups are successful first. The goal is to create a structure that serves and supports founders by leveraging IBM’s core competencies to give them the tools and resources they need to do what they do best: innovate.
It’s yet to be seen whether or not our complete vision will come to fruition in the end. What we do know is the why behind what we’re doing, and every decision we make for this program will be to serve that ultimate purpose as we go forward.
Learn more about how Techstars partners with corporations to promote innovation—within corporations and for startups.
Techstars, the worldwide network that helps entrepreneurs succeed, announced today two new ways that will help Fortune 500 companies engage faster with the Techstars Network to drive innovation and disruption in their industries: Techstars Network Engagement Program and Techstars Innovation Bootcamp.
Long known for its worldwide mentorship-driven accelerator programs, Techstars created the new programs to help large corporations confront the threat of disruption to their businesses faster. Techstars has more than 1,600 startups in its accelerator portfolio with a market cap of more than $16 billion. By connecting early-stage companies with larger corporations looking for innovative solutions, Techstars is helping startups in our network succeed, while also helping large corporations stay closer and engage earlier and more effectively with disruptive innovations.
How? Through two way mentorship. Startup founders provide insights and technology solutions that represent the disruption that large corporations are seeking. Corporations are able to offer startups business development opportunities, market insights, proof of concepts and potentially investments. It’s a win-win partnership.
Take Amazon’s acquisition of PillPack (a Techstars company). PillPack, a tiny start up, moved the entire global pharmaceutical market, putting companies like Walgreens and CVS in danger of losing enormous portions of their core business because they weren’t thinking ahead or outside of the box. Techstars’ new programs puts disruptors in direct contact with large corporates so that they can work together to solve business challenges before they’re in competition with each other.
About Techstars Network Engagement Program
Techstars Network Engagement Program provides corporate partners with unparalleled access to the Techstars worldwide network of entrepreneurs. Techstars Network Engagement Program helps partners identify internal challenges, implement proof-of-concept solutions, scale new technologies and expand their portfolios.
“By partnering with Techstars, we’re able to take advantage of their proven ability to source and support the world’s most promising startup founders and help them achieve lift-off through initial investment, business development and mentoring. Through local engagement with QBE subject-matter expertise and leaders, we hope to provide a strong network of mentors and supporters to help Techstars entrepreneurs succeed – at every stage of their journey,” Ted Stuckey, Managing Director of QBE Ventures.
About Techstars Innovation Bootcamp
Techstars Innovation Bootcamp is a 54-hour internal innovation event that empowers employees at large corporations with an intense, yet fun, process to help identify and rapidly advance new business concepts. Cross-functional teams pitch business innovations to a panel of judges at the end of the 3-days with a goal of further advancing their ideas. Techstars Innovation Bootcamp creates a culture for advancing entrepreneurial ideas, learning startup methodologies, and rapidly advancing new business concepts.
“Equinor piloted our first Techstars Innovation Bootcamp in London earlier this year and, after a successful program, we rolled out additional programs in Stavanger, Oslo, and Houston.
The Techstars Innovation Bootcamps have had three benefits: (1) Exposing Equinor employees to the startup business culture (i.e. toolkit, mentors, pace of delivery), (2) Rapidly assembling a meaningful portfolio of investible innovations and (3) Strengthening the engagement between the Corporate Innovation Function and the Business Lines.
The co-ownership with Techstars on bootcamp outcomes and the ability to create a healthy tension between startup business practices and corporate expectations have been keys to our success.” Laurent Poncet, Head of Business Model Innovation at Equinor.
A quick New Year’s shoutout to everyone with love and care for early-stage acceleration. 2018 marks year four of our METRO Accelerator powered by Techstars. Since the 2015 launch of our first Techstars program, we are (proudly) looking back across three years of building and running a bona-fide startup development system – a first for METRO, a first for our customers, and a first for the hospitality industry. Not bad!
Since program inception, our joint METRO Techstars team has attracted 40 formidable founders to trust us with their business building. On the way, METRO learned to become a dedicated early-stage investor, a passionate corporate mentor, and a powerful source for commercialization opportunity helping our startups grow.
For the 50+ year old multinational corporation that METRO is, three years of successful early-stage startup development support has been a rather transformative experience. With that – lessons learned, lessons shared – here’s what I believe is key to look out for if you are a founder looking to apply for our (or another) corporate program:
Build Relationships That are More than Transactional
Most corporate mentors you encounter during the program are likely individuals tied to a myriad of internal realities, complexities, and constant change. Tempting as it may be to assume s/he possesses a magic wand, at times it’s not as easy as it seems to unlock the large(r) organization. During the program, better you connect with your corporate mentors beyond your most ad-hoc request (say, to proof-of-concept your solution ‘today’), to create relationships made to get your emails answered, even months post Demo Day.
Learning Goes Both Ways
You may want us to – but no, we don’t always know the answer to all your questions. To best deal with that, what good corporate programs (should) do is to help create a ‘safe space’ for mutual learning. As we work jointly through your company’s opportunities and complexities one issue at the time, we found outcomes prove best if everyone comes out smarter than going in. So, do keep challenging us as we will do the same. Let’s be honest. Often, both sides are in uncharted territory. So, let’s get jiggy with it, creating spaces for plenty a-ha and eureka moments enabled equally on both sides.
Ask, Does the Corporate Provide Robust Post-Demo Day Commercialization?
I firmly believe the difference between a good program and a great program is the corporation’s ability to provide commercialization opportunities beyond core 12-week acceleration. Think program-as-a-service versus program-as-a-lab. The former seeks to afford you a more permanent path to new customer acquisitions, following to the biz dev support during the actual program. To be sure – ‘free market’ forces in full swing – no corporate program will actually guarantee you new customer opportunities all the time. Hence, back to my point above, this is why establishing long-term corporate–mentor relationships is such an important thing.
Be Sure You’re Ready to Run with It
How much ‘homework’ is enough before approaching a corporate about piloting your product or service? Hard to say or measure, but we tend to know it when we see it. Above all, be comfortable asking uncomfortable questions in sometimes tricky corporate meetings. Having sat in many pitch sessions, don’t short-sell yet don’t over-hype. No matter what you are building, it’ll likely always be added to or otherwise be ‘under construction’. That is perfectly fine as long as you are honest about your offering’s strengths and weaknesses (to the degree you know of them). In other words, corporates or otherwise, it’s your audience’s trust in your judgement that is equally as important as promoting your product’s intrinsic genius.
We just completed the second Demo Day for the Techstars IoT Program in New York. One of the corporate partners of this program was the global professional services firm, PwC. In this post, Dave Drach, VP Corporate Strategy at Techstars and Niko Pipaloff, Emerging Tech and Startup Engagement at PwC, share their experiences on the most effective ways to approach startup/corporate engagement.
How can corporations and startups best collaborate to prepare for the digital age?
Startups must be very tactical when engaging with a corporation and be willing to be open during mentor interaction, but then specific in what goals they would like to achieve. Corporations have deep domain experience from years in a particular industry, as well as an extensive network of connections. Both can help founders understand business markets and how ecosystems currently work.
Through partnerships, startups can leverage PR and marketing, as well as channel and distribution access, especially in heavily regulated industries. For example, DoPay, who completed the Barclays Accelerator, Powered by Techstars, was able to leverage a Barclays bank in Egypt to create merchant accounts for their easy payroll platform. These kind of partnerships and strategic relationships are the result of open and collaborative communications that are fostered through the mentoring process.
Corporations should consider the startup ecosystem as a critical component of their innovation/R&D function. Surprisingly, we found that just 7% of companies rank “working with the startup ecosystem” as one of their top sources for innovation in PwC’s Global Digital IQ Survey. In order to get the most from their investments, corporations should look to engage across the startup lifecycle, tailoring their strategy for each stage.
Early stage engagement (pre-revenue) can focus on establishing broad relationships and awareness building. Sponsorship of co-working spaces or incubators are a great way to get a pulse into the ecosystem. Corporations can also offer pro bono services to build a positive reputation in the community. For example, PwC has offered workshops in data analytics, corporate structuring, tax law, and sales tactics.
As startups mature and grow, more direct business relationships become more likely. Focus on providing funding, domain expertise and relationships but be careful not to overwhelm the startup with your demands. Realize that the startup will need to serve a market beyond the single corporate partner and give it the space to make the best product and market decisions.
What are the most productive outcomes of a collaboration between a corporation and startup founders?
The most productive for founders, and I would say the corporations as well, are some form of cross licensing and promotion. When both parties stand to benefit from the deal, then both parties will invest in making it successful. The collaboration usually focused on a new, innovative technology, perhaps a technology that the corporation has not been successful with or has been challenged in engaging.
A great example is the collaboration between Disney and Sphero where the two companies were deeply engaged in the Disney Accelerator, powered by Techstars and then the two partnered to create the BB-8 connected toy. The collaboration included content and media promotion, content licensing and even investment from the corporation in the startup. The results were outstanding and the two entities have since collaborated on many additional connected toys.
The most productive collaborations allow each party to focus on their strengths. For startups, I think that strength is effective “exploration”. That means testing new ideas and markets, customer discovery, finding product/market fit and setting the direction. For corporates, their strength is in effective “exploitation”. That means bringing massive resources to bear and scaling an idea through funding, domain expertise and relationships. It means taking a model that was proven out in small scale and putting behind it the power of global salesforce, manufacturing or distribution capabilities.
As one of the largest professional services firms, PwC has the capacity to provide a startup unprecedented access to customers and partners. The real challenge is to identify complimentary go to market strategies and identify startups that are at the right stage of maturity.
What are the differences in how a corporation handles disruption and how a startup handles disruption?
For a startup, there really is no such thing as disruption. A founder sees a problem, harnesses the resources to solve the problem and delivers a monetizable solution. The focus of the founder is solving the customer’s problem and likely ignoring the existing business ecosystem in the process. That is what the Techstars company Everledger has done with diamonds and blockchain.
Everledger records the provenance of diamonds from mine to ring leveraging a digital registry built on blockchain. It completely changes how you insure a diamond. And obsoletes most of the legacy criminal behavior around stealing and fencing diamonds.
Founders just do their thing and if it makes the existing infrastructure obsolete, the disruption, that is a side effect of their solution and their effective execution.
For a startup disruption in the market is almost always an opportunity. A changing landscape makes established players more vulnerable and gives nimble new entrants a fighting chance to provide something better fit to the new paradigm. An established corporation could also view disruption as an opportunity but it’s often saddled with the “Innovator’s Dilemma”…change often threatens established corporate functions who resist the loss of their eroding position. This is why large corporations are rarely the instigators of disruption but so often the victims of it.
To counter this, corporations need to develop a mindset of constant change where it is normal and expected to reinvent oneself every few years. Part of that is cultural (changing the norms and expectations so that employees feel safe and encouraged to try new things) and part of it is operational (providing the tools to facilitate a free flow of ideas and the environments to effectively prototype them). In my experience, neither of these is possible without a visionary leader in the c-suite willing to champion the cause.
What are some of the technologies that are emerging from the startup ecosystem that are having an impact on large corporations?
I work every day in helping connect our portfolio of early stage companies with corporations to help both parties. I pay attention to deals that close fast between corporations and startups because it demonstrates technology areas that are being adopted rapidly.
First would be drones and drone deployments. Skyward, a Techstars investment which was acquired by Verizon, was the right solution at the right time. Skyward focuses on systems that simplify drone operations into task oriented solutions. Hensel Phelps, a 3,000 employee construction firm, moved from experimentation with drones to offering an operating infrastructure for drones by becoming a Skyward customer.
AI is being embedded into task specific solutions, mostly with improved development platforms that are emerging, like Seldon. Adoption is not moving as fast in the area of blockchain, but the demonstrated solutions are truly breakthrough.
One example is the blockchain startup Wave, who completed the first global trade transaction leveraging blockchain between Ornua (the Irish Dairy Board) and Seychelles Trading Company. This was a global trade transaction for butter and cheese between Ireland and the East African Country of Seychelles, completed digitally, in blockchain.
Based on our research, PwC has identified 8 essential technologies that are having the greatest impact on our clients, and all of them are heavily driven by innovations coming out of the startup ecosystem.
For example, in the IoT domain, we are partnering with Sigfox to bring low cost, high bandwidth sensor solutions to many of our industrial and utilities clients. In the drone domain, we are partnering with Hangar to support hardware and flight planning for our mining and infrastructure clients. And in the Machine Learning domain we are experimenting with platforms such as Datarobot to bring advanced machine learning capabilities to the masses. PwC works with these and many other startups to provide deep technical expertise and push the limit of what is possible. Ultimately, we are stronger together.
How does the incentive structure for innovation differ between corporations and startups?
The primary incentive structure for a startup is survival. If you do not find product-market fit, then you die. If you do not find a scalable monetization model, then you die. Time is your enemy. Innovation is your friend. You have no infrastructure, few to no customers, and no legacy, so you can focus purely on the potential of the future. And if you survive, the payoff can be significant. You are able to control your own destiny within the opportunity which you are pursuing.
Every conversation, every meeting, every transaction has tremendous urgency. You must #domorefaster, to use one of the key training points we leverage here at Techstars.
A startup is a high risk, high reward venture where the incentives for the founders are directly mapped to the market success of the company. It’s a “succeed or die” environment which forces a clarity of purpose and an efficiency of action. Startup founders are constantly pushed to work on the most important aspects of the business and their decisions are pressure tested at each step.
Traditionally, corporations have been less effective in innovation because their internal structures rarely allow for such single minded clarity of purpose. Employees are ultimately incentivized with bonuses and titles, but because of the diffusion of responsibilities it can sometimes be easier to obtain these rewards by effectively managing perceptions rather than solving hard problems.
Ultimately, corporations should look to map internal incentives more directly to innovations and their success in the market. That means giving intrepreneurs the time and space for dedicated work and a bigger piece of the upside when innovation efforts are successful.
Are there structures that help corporations and startups innovate together?
The collaboration between startups and corporations has grown significantly over the last 10 years and is replacing elements of the R&D infrastructure of many corporations. The original approach was primarily focused around acquisitions. One of the most effective approaches I have seen recently is support for startup partnership integration, either through a third party, or an internal “black ops” team that is given executive support to quickly drive through integrations and partnerships.
Both the startup and the corporation benefit from rapid deployment and integration. We call this “Startup Speed” and it’s a game changer for our partners who get there.
In many ways, corporations and startups inhabit two different worlds and speak two different languages. Incubators like Techstars are vital in bringing the two parties together, but it can still be hard to bridge the gap and work together effectively. Ultimately, a corporation needs an integration point with the startup ecosystem, teams within the company that speak the same language and work in similar ways. PwC has several.
Our Emerging Tech and Analytics Labs provides a sandboxed environment for the testing and prototyping of new technologies and tools. Our New Ventures group, provides the financial backing for the development of new products and businesses. And our Digital Services team provide expertise in human centered design and customer engagement. These teams are familiar with PwC’s core businesses and operations but also bring a wealth of experience from tech, startups, venture capital and digital agencies.
Ultimately, it is through these functions, that PwC is able to effectively collaborate with the startup ecosystem.
We’d love to hear from you. As a startup, what have you found to be the keys to successful collaboration with corporate partners? As a corporate executive, how have you bridged the gap to effectively engage with the startup community?
We recently held an AMA on corporate innovation with Cory Hooyman, lead innovation manager at Target.
We talked about corporate innovation and how to bring new practices and methods into your team and company.
Is there one thing that startup founders need to know to best interact with large corporations?
Ryan: The nice thing about our program in particular – especially when we’re working with a large corporation or retailer – is that there’s a massive gap between the corporations and the startups. It’s on both sides of it.
The startups, in a lot of cases, do not interact with an enterprise level corporation because they don’t speak the language. The timelines are off. A lot of the time, the professionalism of the startup needs to improve in order for them to interact with these very large organizations.
On the flip side, the corporations – and Target has done an amazing job of this – admit where they need to improve in order to interact with the startups. Not everything is going to be at the level of a huge consulting firm or a massive software company when it’s just three or four people who are iterating an idea.
When we look through the companies during the application process, we always try to project the potential of that team in their ability to work with the enterprise level companies. Just because they don’t know how to speak that language right now doesn’t mean we can’t work with that and hopefully get them to a level where they’d be able to actually interact with a 10,000 person company or 300,000 person company. That’s a big thing for us.
When we talk about team, team, team for the participants in the program, clearly, it’s about the entrepreneurial skillsets and the stuff that we identify as Techstars as an organization. But for companies that are trying to work with massive corporations, we also have to think about the potential of that team, their ability to interact with those large corporations.
Techstars sits right in the middle, between the startups on the one side of it and the corporations on the other. We plant ourselves right down the middle and try to be the middle ground between the two of them so they can hopefully speak the same language.
Cory: There are certain things that founders should watch out for. If the time is not right, the corporate yuckery can take place. They can in some way, shape, or form drown your company by not being aware of some of the things that Ryan mentioned, like the gaps.
I’ve talked to people who have, not through this program, but I’ve talked to companies locally who are on their (and I am not exaggerating this number) 28th, 29th or 30th meeting with Target. They’re still hoping for a pilot. People get passed around to various people in the organization with the intent of maybe this person might be somebody good to talk to.
Really, the only reason they keep getting passed around is because nobody has any money to do what these people are trying to accomplish. If you knew that up front, you might be like, “I’ve had my fifth meeting. I get it. I’m out. I’m going to go focus on something else.”
But because people don’t want to tell you they don’t have access to these resources, they just pass you along with the hopes that somebody else can deal with it.
Do you have a question about interacting and working with large corporations? Let us know in the comments!
Working with a corporation can offer all kinds of opportunities to a startup. It lets you test new functions of your app, figure out implementation techniques and, most importantly, learn from and build a lasting relationship with a potential partner.
I’ve watched this process first-hand at the Techstars Retail Accelerator, in Partnership with Target, where many of our startups have run successful pilots with major retailers. We kicked off our second class on July 17, and I’m watching our latest class set themselves up for potential pilot opportunities in the near future.
Sadly, many pilots end up failing, and I think one of the main reasons is startups do not clearly understand the motivations of their pilot partners.
So, why would a corporation run a pilot with a startup?
None of us knows everything, even in our own field of expertise. Pilots let corporations explore areas of strategic interest without betting the whole house on something new or unfamiliar.
A pilot lets a corporation test your startup’s idea, and whether a potential partnership is actually feasible and worthwhile for it.
Few things derail a partnership faster than two systems that just don’t work well together. You want to be peanut butter and jelly, not peanut butter and…sushi.
A pilot gives you a way to better understand the contours of a potential relationship without risking too much.
While the corporation’s strategic motivations get you in the door, the motivations of the employees you’ll be working with are what ultimately get you the deal. Always ask yourself, “Does the success of this pilot somehow influence your internal champions’ bonus?”
If the answer is “yes,” you will have much higher engagement. If the answer is “no,” you may not ultimately have a path forward with this company.
Running a free or discounted pilot allows the testing to move forward while a corporation actually finds budget for a larger roll out. Sometimes this is just a matter of budget cycles, but it could also be budget reprioritization, which takes longer.
In a B2B pilot, it’s ultimately your customer’s customers who will vicariously sustain your business—i.e., if your customers die, you die. A good pilot can teach corporations more about their customers, and whether your product helps serve them better. That’s the ultimate return on their investment in you.
In addition to thinking big picture, pilots also teach you what granular tweaks separate good ideas from great ones. In a pilot, you can experiment with what changes to a product bring the best results, and what trainings for employees supercharge adoption and boost impact.
Now that you (hopefully) understand the motivations behind piloting, how do you actually pull off a successful pilot? Check back soon as we lay out the key steps to actually implementing a successful pilot.
This was originally published here.
Techstars Mobility Accelerator mentor Zaki Fasihuddin recently joined Volvo Cars as VP of Digital. Zaki has been an active corporate mentor in the 2015, 2016 and 2017 Techstars Mobility Accelerator programs. In this post, I interview Zaki who shares some tips for ways corporations and startups can work together.
The entire transportation industry is going through a historic change. Automotive companies are shifting from bending metal to bending bits. Soon they will be offering software and services to complement manufactured metal.
Driving this massive transformation is the need for the large corporations to become more innovative and nimble like startups. These companies are looking to partner and work with emerging technology startups instead of being merely disrupted by them. Innovation teams are being formed at large corporations to build processes around structured engagement with innovative startups.
At the Techstars Mobility Accelerator program, we have 10 corporate innovation partners for 2017. You can read more about these new corporate partners in this post. These include Ford, Verizon, Honda, next47 (the independent investment arm of Siemens), Bosch, InMotion (powered by Jaguar Land Rover), AAA, Dana, Munich Re, and Michelin.
These corporations are not only learning from startups but are offering mentorship and support to help these startups thrive in the changing transportation industry.
As we kick off the third Techstars Mobility Accelerator program (and 109th class to go through Techstars, wow!), I’m excited to interview one of our mentors, Zaki Fasihuddin who has worked at innovation teams at both McDonald’s (a 2015 and 2016 Techstars Mobility corporate partner) and now Volvo.
Mentors are where the magic happens at Techstars, and we have an all star list of Mobility mentors. It’s even more amazing when mentors come back year after year to support the program. It’s equally impressive when those mentors change roles at large corporations but still find ways to be engaged and to get their company involved. At Techstars we have a saying “#Techstars4Life” and it’s powerful to see this in action.
Zaki first started as a Techstars Mobility mentor when he was running the McDonald’s Digital Hub in Silicon Valley. He mentored many mobility startups, helping to support internal connections, paid pilots, and relationships throughout the industry. He offered unique corporate insight because of his previous startup experience being a co-founder, early team member, and investor in several software companies
In June of 2017, Zaki gave me a call after transitioning to his new role at Volvo’s Mountain View office. “How can I #GiveFirst and support the 2017 class?” I smiled knowing that two of our incoming companies (SEEVA and EcoG part of our 2017 Techstars Mobility class) were already asking if we had any mentors from Volvo. That’s the power of the Techstars network!
Here are some tips from Zaki for both corporations and startups on ways to work together.
Why is it important for corporations to work with early stage startups?
Zaki: There are several reasons why corporations should consider working with early-stage startups that include:
- Range of experimentation of new ideas: For startups, there is no such thing as “we don’t do that here…,” or, “…that conflicts with our current business model…” Startups tend to be trailblazers into new unproven market spaces and have the ability to experiment, fail fast and try again, often in rapid iterative cycles.
- Speed: Startups can change direction on a dime. By partnering with startups, corporations can see signals or proof points faster on testing of hypotheses. Startups don’t need permission to act and are less constrained when they do by building scrappy solutions that are fit for purpose. At Techstars they call this #DoMoreFaster and two Techstars founders wrote a whole book on it.
- Cost effective learning: Taking on additional internal overhead cost to research technology and new business models in-house is not always feasible. That’s why programs like Techstars—that offer a turnkey accelerator program with a methodology of proven success—are so attractive. They can be run with minimal cost that can show a huge boost in experimentation, research, and overall accelerated learning in co-creation partnerships.
- Outside perspective: Fresh lenses can offer different approaches to problem-solving or frame opportunities differently. For example, a startup may “mash-up” technologies in a new way or apply a new business model that hasn’t been tried before. By their nature, startups are empowered to challenge industry norms by thinking differently.
- Talent: Being involved in the building of a startup was one of the most challenging experiences of my career. Entrepreneurship is sometimes thought to be glamorous, but it is actually the opposite. It’s more like the movie Groundhog Day where every day is a grind for survival mixed in with some healthy paranoia while the main thing that powers you is an illogical belief. It is the ultimate trial by fire that tests your fortitude on so many levels. Now if one can learn how to properly apply those skills and passion inside a corporation, they can make a sizable impact. Startups can not only serve as a talent pipeline but can also help inculcate a culture of healthy paranoia so corporations don’t rest on their laurels
You’ve now seen many corporations engage with startups. What do you think is the single biggest lesson corporations can implement to work with startups successfully?
Zaki: Be consistent, dedicate resources and follow through. You need to have a dedicated team that is truly engaged and committed, who understands startups and has a path to go from idea to proof of concept to pilot and potentially even production.
This means investing the right amount of time with a startup and the founders and jointly sharpening the problem statement, the scope of engagement and the outcomes that you will be trying to solve for in the collaboration. Companies that have invested the time to do this come out with far better results. It all comes down to engagement and commitment.
What would be your top 1 or 2 tips for a startup to work with a corporation?
Zaki: Be focused and specific for what you are trying to achieve. Don’t view the project as a one and done. Agree on a project that is feasible to achieve and doesn’t have a lot of dependencies to deploy. Don’t be smitten by working with a name brand, instead have a clear understanding of why you are seeking a particular partner and what tangible value it will create for your company.
For startups, time is not on your side. It is easy to go off on a tangent by making some bad choices which can cost your company more in the long run. We all need to learn to do more faster together.
What excites you about the Mobility space and in particular the opportunity for Detroit?
Zaki: Coming from a different industry, the exponential pace of change and innovation in the Mobility space is mind boggling. Places like Dubai, Singapore, and China are creating favorable conditions by fast tracking new regulations and offering seed investment to attract global mobility startups.
Detroit has more to offer entrepreneurs when it comes to world class research-based educational institutions, a massive transportation-focused private sector with knowledge workers, an affordable cost of living and a public sector intent on re-inventing the city. Detroit has an opportunity to become the global destination of choice for mobility entrepreneurs.
The Techstars Mobility Accelerator program has 10 corporate innovation partners including Ford, Verizon, Honda, next47 (the independent investment arm of Siemens), Bosch, InMotion (powered by Jaguar Land Rover), AAA, Dana, Munich Re, and Michelin.
We have over 200 mentors from another 100+ different corporations from around the globe. If you’d like to learn more about becoming involved in Techstars Mobility, please contact me.
This was originally published on TedSerbinski.com
I was on a panel recently sponsored by the NACD, the National Association of Corporate Directors. I was joined by Diego Rodriquez, Global Managing Director of IDEO, Barbara Mowry, board member of the NACD and curated by Catharine Merigold, independent board member and board member of NACD.
It forced me to reflect on the Techstars corporate programs we have run and how our programs, and more specifically our founders, have influenced the corporations they work with and how the board was involved.
The primary impact of our programs on our corporate partners is a disruptive transformation of those entities, usually in ways they did not imagine. I like to think of it as entrepreneur driven pragmatic disruption.
We see the greatest impact when our programs are led by the CEO and direct report CXO staff and even more so by the chairman of the board and board members. This has been the case in our programs with Barclays, Nike, Microsoft, Ford, Target, METRO, COX and Disney.
So, how can a board member influence innovation? Here are a few suggestions:
- Build specific objectives, such as implementing and running innovation programs, into the objectives of the CEO and executive staff members. Make sure these objectives have measurable outcomes.
- Do not base these engagements on venture investments, but on new products or offerings either through partnerships or trials.
- Make the CEO’s pay tied to progress against these objectives.
- Innovation cannot come from within your existing management and operating infrastructure (the innovator’s dilemma clearly defines these challenges).
- To support business sustainability, you must encourage testing of products and services that are disruptive and potentially cannibalistic to your existing offerings.
Build opportunities for partnerships with entrepreneurs. You can do this effectively without disrupting your current operations and then deepen your partnership with those startups that prove effective.
Encourage Transactions with Startups
- The most effective ways you can transform your company is to hand over some of your company operations to a startup operator. For example, digital account planning, AI analysis of logistics, drone inspections, robotic audits, or improved employee health.
- Work through your procurement process to ensure effective vetting of startup services, but simplify the procurement and contracting process for them. You want to encourage procurement for innovative services.
- Define a target volume of business that the executive team must transition to an external startup entity.
- #givefirst is the Techstars mantra. It seems very egalitarian at first, but in today’s world it is essential.
Some of the most disruptive ideas and subsequent solutions have come from serendipitous conversations with complete strangers. Open your door to those who really want to engage.
- Encourage your executives to allocate time to mentor, to discuss concepts on panels, to judge presentations and to contribute their domain knowledge to those building the new companies of the future. Encourage, but do not require mentorship. Not everybody is cut out to be a mentor.
- Define targets for each senior executive around engagement. It might include mentorship, blogging, developing a new initiative, or a board seat on an entrepreneur focused non-profit. The personal learning as well as the open reputation you develop will result in the kind of engagement that can lead to success for all parties.
Lastly, demand agility. When I hear the corporations I work with say we just need to be more agile, my response is, you can’t, because it’s hopeless. There is simply no way that a large organization can move like a small, nimble startup. It is cognitive dissonance.
I have been on both sides of this innovation transformation for 10 years, let the startups be agile. Build in agile processes in procurement, product evaluation, implementation and legal to support engagement at a startup pace. Leave your existing, price, efficiency, and risk mitigation procurement processes in place for your standing vendors.
Managing externally driven innovation and disruption is a discipline that must be developed. The primary fiduciary responsibility of a corporate board is the sustainability of that corporation as a going concern. Maximizing rents is a noble goal but certainly not achievable when it’s not feasible even to survive.
Today’s corporate board must hold the executive team accountable to the pragmatic disruption of their business. Disrupt or be disrupted.