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Sander van der Blonk (Netherlands)
Client Relations
July 15, 2021
4
minutes

We regularly meet with large and mid-sized companies in FMCG, energy, manufacturing, finance, insurance, and health.

In a nutshell, we are seeing a new generation of business and innovation leaders who treat startups as sources of ideas, talent, and technology. And who want their companies to open up and collaborate with them as suppliers, commercial partners, or co-innovators.

What are the frequently asked questions and topics of discussion? Below is a sample of them, plus a transcript of our responses.

Question: What strikes you most about the state of startup collaboration?

"For established companies, there are plenty possibilities to accelerate digital transformation and business model innovation by collaborating with early and later-stage startups.

In this context, I find two aspects noteworthy.

First, companies wanting to involve startups often run into questions like where to begin? How to find fitting startups? How to overcome organizational barriers?

Second, companies and large organizations that have been working with startups are struggling to get it right.

Let me elaborate on it.

We just completed quantitative research on collaboration success factors together with the Rotterdam School of Management, Erasmus University (RSM).

About one-third of the startups in our sample were not satisfied with the performance of the collaboration at hand, while almost 50% of them indicated that they failed to realize the goals they set out to achieve.

Remarkably, the responses from the corporates paint a different picture: Almost all corporates were satisfied, even when some did not achieve their goals.

So, what does it tell us?

For a startup, collaborating with a large company can be a big thing in terms of opportunity, time, and resource allocation. For a corporate, though, collaborating with startups is one of the many transformation and innovation activities they will engage in. And this can fuel the typical complaint that companies are only concerned with innovation theater and showrooming.

The only way to harmonize this asymmetry is to make the intent and expectations of the collaboration crystal clear upfront, at the risk of failure, bruised reputations, and wasted cost and time.

At Scoutely, we call it the fuzzy front-end of collaboration. We believe that companies who do this the right way not only reap the benefits from working together; Startups will also seek them out as they become seen startup-friendly and, literally, cooperative."

Question: How do you see working with startups evolving?

"I might be biased, but I'm pretty bullish about the outlook because, in the end, the pros far outweigh the cons.

As indicated, we're still in the early days. A growing number of corporates and large companies have embraced startups to some level.

Mid-sized companies may just haven't had the resources for it. They run into conflicting priorities and might thus be missing opportunities that they don't have the capacity for.

In the coming years, I expect that startup collaboration will professionalize and spill over to mid-sized businesses.

What's more, I foresee mounting pressure on companies' competencies due to platform competition and sustainability demands. It's a huge transformation!

Startups help rebalance companies' skills portfolios. I think they will increasingly be seen as an innovation subsystem that companies need to build and maintain, similar to a supplier network.

For example, in the Automotive, Insurance, and Agri-food sectors, I see a lot of companies now making great strides in organizing for startup collaboration because it pays off for them".  

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Question: What's your take on startup disruption?

"Ah, I was one of those who believed that disruption is all around us. And that established companies would die rapidly due to startups' tech, but I erred.

There are examples of companies who have not adapted and ignored the business impact of emerging tech. But according to recent research done at London Business School (LBS), it seems this number is smaller than previously thought.

Interestingly, so LBS concluded, established companies are becoming more adept at deciphering the impact of fast-changing technologies. And they have a whole range of responses -from cost-cutting and consolidating to taking pro-active steps like working with startups through all kinds of partnership models."

Question: What are the best mechanisms for engaging startups?

"In short, there is no best.

For example, corporate accelerators and labs have started falling out of favor. Only a handful produce noteworthy returns for either the corporate or the startups involved. And so, isolating startups from the core business seems not advisable.

Also, some companies report that financial and strategic investments in startups have not yet radically changed the companies' core business.

By contrast, others state that collaborating with startups one-on-one through challenges or a commercial sell-through scheme has helped them improve their offering and reduce operating costs. Also McKinsey concluded that targeted projects with startups produce greater outcomes than broad, exploratory programs.

Whatever the choice of engagement mechanism, I believe that success depends on long-term purpose and organizing for it as one startup project does not move the needle.

Question: To increase the chances of success, where to begin?

The urgency to move forwards with startups is evident, but most organizations we see aren't entirely sure of the strategic direction they need to go.

I believe that strategies will emerge over time and that much depends on how the company leadership team deals with the organizational pushback when bringing in startups.

The whole idea of Open Innovation and especially working with startups, is that you appreciate what startups are able to produce and that you want to learn from them.

However, what goes wrong with startups is primarily human and irrespective of the chosen engagement mechanism. Think power dynamics, uncertainty, jealously, bonus considerations.

My advice is that if you're going to get in the startup collaboration game, you'd better come prepared. Educate yourself and your organization on the reasons why and the practicalities.

Also, state that people get credited financially or non-financially irrespective of where the innovation originates. It will remove much of the resistance, and people feel energized by it. That's an important factor in pulling it off the ground."

Do you also have questions about collaborating with startups? We'd love to hear them.

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