Say you want to develop innovative financial solutions. Or make your food supply system more sustainable and resilient.
Do you do it yourself? Or would you consider partnering with startups?
The notion is that established enterprises can no longer afford to stick to innovating in-house or M&A; they have to hedge their bets.
So, across industries, enterprises look far and wide for partners, among which promising startups that align with their business and innovation thesis.
Whether or not startup collaboration is good, bad, or moderate is a relative question, not an absolute one. It's relative to alternatives and a matter of definition.
For example, Deloitte says that 96% of radical corporate innovation projects fail to make a return.
In pharma, cancer drugs have an awful 3,4% success rate.
McKinsey states that there is no definite correlation between the proportion of revenue spent on R&D and any measure of a company's success.
Also, Apple said innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D.
And according to Harvard Business Review, between 70 and 90 percent of mergers and acquisitions fail.
Contrary to many critics' views and based on our ongoing research, around 45% of collaborations succeed.
That’s not a bad number compared to alternatives.
What have we learned?
First, companies that report positive outcomes are proponents of open innovation.
Also, they go beyond a single hackathon or proof of concept; They use many engagement mechanisms in parallel - from procurement to co-innovation and equity stakes.
They formally define and measure success criteria focusing on performance improvement goals such as revenue increase, cost-cutting, new solution uptake, and faster development cycles.
Moreover, they do not just pay attention to the startup's assets but also the way the enterprise team and startup team connect - the soft factors.
Today, the art of new product development and business model innovation is no longer about who has the best idea and technology. Instead, it's about having the option to trade-off do-it-yourself versus buy or partner decisions continuously and quickly.
Therefore, companies that are serious about startup collaboration build and nurture a pipeline of startup opportunities that enables them to do just that.
What do you think?
What is a Scouting Stack and why is it important!
Startup search used to be a reactive game. Forward-looking transformation and innovation leaders take a more proactive approach.