To answer this reader question on colocation and working with startups, we turned to Michele McConomy, the Vice President and General Manager of Corporate Innovation Services at our partner RocketSpace. A veteran of the innovation practices of PricewaterhouseCoopers and Mindjet / Spigit, Michele recently hosted an InnoLead Field Study at the RocketSpace technology campus in San Francisco, where large companies like British Airways and ABInBev mix with startups and entrepreneurs.
I have attended two of the InnoLead Field Studies and greatly appreciated the opportunity to talk with the large corporations that are spending time with startups and the “entrepreneurial ecosystem” via community accelerators and shared office spaces. Do you have any “best practices” or guidance on how to make those relationships successful? I’m less interested in your thoughts on where to co-locate, and more interested in — once we get there — how to find and build successful partnerships with entrepreneurs, startups, founders, etc.
It sounds like you’ve taken an important step, acknowledging that the future of corporate innovation will require a direct connection to the global startup community. As you’ve found, corporations need to be connected to the startup world directly, so they can anticipate trends, drive innovation, embrace new models, and avoid disruption in their respective sectors.
In order to do this effectively, we recommend that corporations create physical spaces in which they can interact with the entrepreneurial ecosystem. Some companies are doing this internally, while others are using external spaces like ours. Obviously these interactions can utilize different structures — from hosting startups in an internal incubator, to placing your executives in external shared office spaces — but “form follows function”; in other words, the structure should be driven by your corporate strategy.
Whichever route you choose, you need to create a fluid and seamless process for bi-directional sharing and relationship building, and for quickly capitalizing on the insights gained. Startups will always outpace corporations when it comes to speed-to-market, so corporations must be able to work effectively with startups to keep up.
The Five Step Process
Here are five practical steps you can take to ensure you’re prepared to initiate a corporate-startup partnership, and benefit from the relationships once established:
1. Set Clear Goals
This seems obvious, but don’t take this step for granted. Codify your objectives. What are you trying to accomplish by engaging with the startup community?
Companies typically have very different objectives here, so be specific. For example, some are simply seeking to understand new approaches to technology and business models. Others are approaching the interaction from a recruitment angle, looking for individuals and teams they can “acqui-hire.” Still others are looking for investment and M&A opportunities, or opportunities for collaboration that can accelerate their product development cycle. We’ve even seen companies pursue cultural objectives, looking to infuse their staid corporate culture with entrepreneurial passion, energy, and a sense of urgency.
These goals are very important to articulate and codify, as they will drive participation (see No. 2, below) and other factors. It will also help you avoid time-wasting activities and will help prevent internal frustration. More importantly, it will help you avoid damaging your potential relationships — and hence reputation — with the startup community.
2. Build Your Dream Team
Once you know what you want to achieve, you need to identify the internal champions who will participate in the program, and the potential bottlenecks and obstacles to success.
Map this out if you can. Who do you need on board to ensure the program will work? Are there internal processes that could create obstacles along the way?
Understanding your internal culture is critical here. Most companies have something (or someone) internally that slows down the approval process, and it’s important to know what (or who) yours is. Use this knowledge to get champions on board early, and proactively address potential bottlenecks.
More importantly, as outlined in No. 1, above, make sure that you involve the individuals who can facilitate your goals. If your objective is recruitment, then obviously your strategy needs to be driven by HR and the business units impacted. If your objective is related to accelerating or enhancing the product development cycle, then the appropriate product groups and executives need to be driving the train.
Make sure you have the right individuals bought into the strategy, aligned on the strategy, and tactically on board to pursue that strategy with decisiveness and speed.
3. Define Your Value Proposition
What do you bring to the table? Why would any startup or entrepreneur be interested in interacting with you?
Answering those questions is critical, because large corporations can’t simply rely on their brand name to attract startups or entrepreneurs.
In fact, great startups and their teams are often inundated with requests for meetings, and have to sift the valuable opportunities from meetings that will lead nowhere.
In addition, from a startup’s perspective, a relationship with a corporation carries inherent risks; not only can it slow them down, but it could expose their technology or approach to a potential competitor with vastly deeper resources.
Startups have no time for distractions, and if you want to work with them, it’s imperative that you articulate what you bring to the table.
Some companies, for example, are offering access to a segment of their customer base for conducting research or testing ideas. Others are offering access to their marketing or promotional departments to assist with launches. Still others have provided mentorship and strategic guidance from seasoned and experienced executives.
Perhaps the most valuable resource that companies can provide is actually a pilot project. Most startups launch into the ether, hoping to catch fire with prospective customers through buzz and social media. Leveraging a corporate partner for a pilot can prove vastly helpful to the startup in terms of validation and market access. But, importantly, it can also provide incredible insight to you as you look to understand customer appetite, validate business concepts, and test the waters on new approaches you might not be able to build momentum around internally.
4. Be Honest and Transparent
Like any relationship, it is very important that you communicate what you can deliver, and by when. Openness, honesty, and transparency are not only hallmarks of the startup world, but they are critical when setting milestones and time frames; you don’t want to overpromise and under-deliver.
This is vital to ensure — for example, in the event of a pilot as in No. 3, above — that both parties are clear on key steps and milestones so any project can move forward.
You will want to be crystal clear about what your startup partner can expect to accomplish as part of a pilot and how long it will take. An unclear timeline, a meandering roadmap, or a missed milestone can be an absolute killer for a startup. When you’re an entrepreneur, every day matters, and every minute counts. This can be somewhat antithetical to the large-company experience, where meetings and multiple levels of sign-off are de rigueur.
So be completely upfront with a potential partner about how long you expect each step of the process to take. If it takes longer, keep them informed of what’s going on.
5. Follow Up, but Don’t Smother
This may seem obvious, but it’s important to follow up with any startup you approach. That includes closing the loop after meetings. Again, this seems obvious, but one of the biggest frustrations that startups experience is related to lack of follow-up from venture investors they pitch, or corporate partners they approach.
If the entrepreneur or startup has taken the time to discuss their strategy and hear about your corporate overlap with their approach, you need to give them the common courtesy of a quick follow-up. Be clear about your thoughts, whether that means articulating why a relationship will not work, or explaining next steps with deadlines. Too often, we see corporates eagerly seeking introductions to startups, followed by zero communication after the meeting.
Companies don’t appreciate how quickly lack of follow-up can negatively impact their brand, “street cred,” and growth strategy.
Of course, there has to be a balance. Setting up multiple follow-up meetings, which may be common in a corporate environment, can be a massive turn-off to a startup. Entrepreneurship is about speed; multiple meetings slow them down. Lots of meetings is also a red flag to an entrepreneur that the corporation lacks decisiveness, speed, internal buy-in, and vision.
Remember the reason why you are partnering with a startup in the first place: they are fast and focused. If you take away that focus or slow it down, you sacrifice the core value of the partnership.
Those are five quick steps that can help kickstart a corporate/startup innovation program. Just remember that at the foundation of any innovation program is the ability to work with speed — developing a plan for innovation has no value if you don’t execute fast enough to make an impact on your customer base, business and market.
For more information, RocketSpace has made available to subscribers of InnoLead a downloadable white paper on working with startups (registration required).