Companies increasingly find themselves threatened by shifting customer demand and new technologies (such as AI) that are completely changing the way things are made, used, and valued. Existing organizational competencies simply aren’t enough to meet to meet these challenges.
So, do you try to staff up with new skills and hope you can catch the competition in time, or do you partner with startups that are already blazing new trails and can help you solve your business problems better/faster/cheaper than doing it all on your own?
In a session I hosted at the Impact conference last month, we looked at some of the reasons why it might make sense to partner with a startup rather doing everything in-house; how to go about building a corporate function that facilitates innovation or R&D teams working with promising startups; different ways of finding and engaging with startups; and a few metrics and indicators that let you know whether or not your approach is working. (We excluded corporate venture capital investing from our discussion, since making investments is a very different way to engage, and worth its own separate discussion.)
Making the Case for Why You Should Engage with Startups
- Learning about new technologies/markets
- Exploring new markets
- Finding new technologies to acquire or license
- Expanding existing R&D capacity
- Responding to disruptive market changes
- Solving a difficult business problem
How Do You Engage?
- Start with the business problem to be solved
- Identify major pain points
- Be internal advocates/”ambassadors” for the new idea
- Enlist key sponsors from senior leadership
- Act like the “service provider” to the function or business unit; don’t try to replace what they do (and when possible, use their budget to ensure skin-in-the-game and commitment)
- Develop proof-of-concept opportunities
- Create clear metrics for success (such as bilateral key performance indicators; crisp delineation of the requirements for each stage/phase in order to proceed; articulation of what the desired outcome for each party is, and how you will know if it has been met; and what happens if you fail…or succeed?)
Top Challenges of Startup Engagement
- Misaligned goals
- Budget cycles
- Managing expectations
- The different sense of time and pace between corporates and startups
- “What happens next?” Once a proof-of-concept or a pilot is executed, is there a plan for scale-up?
How Can You Tell Your Startup Engagement Strategy is Working?
- Budget and resource allocation for a proof-of-concept (skin in the game)
- Contracts initiated post-POC
- Identified contribution to company R&D or business targets
- NetPromoter scores (two-way: both within the company, and from the startup and corporate on each other)
- Does the business unit or function move forward with the project? (Additional funding, adoption of the tech, licensing or commercial agreements.)
- Are you getting inbound requests for help from other teams in the organization?
Ways to Engage
- Proof-of-concepts
- R&D contracts
- Partnerships with accelerators and incubators
- Relationships with venture capital firms
- Commercial agreements post-POC
- Acquisitions
One major theme from the session: start with the business problem or opportunity you are focused on, which you think a startup may be able to help you address. And don’t lose sight of that throughout the journey.
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