Over the last few years, companies have put innovating with early and later-stage start-ups higher on their priority list, besides investing (CVC) and buying (procurement).
Two core organizational models have emerged:
- Start-up projects compete with internal projects for the same resources. So, start-up collaboration is kept separate from the core business.
- Start-ups are brought inside and close to the business. Resources are allocated across internal and start-up projects without trading off one for the other.
Here's a more granular picture:
1. Many large companies + Many start-ups (Outsource)
Companies take part in theme-based or industry-specific and cohort-based programs. Organized by government-sponsored incubators and commercial service providers. Examples are: Plug and Play and Agro Food Park.
2. Many large companies + Many start-ups (Do it yourself)
Companies team up with other large companies (non-competitive). And work with selected start-ups to explore new routes through multi-stakeholder programs and projects, separate from the daily business. Examples are: Mista and AION Labs.
3. One large company + Many start-ups (Do it yourself)
4. One large company + One start-up (Do it yourself or Managed Services)
A company commits resources up front. Streamlines the process to repeatedly discover and assess start-ups. And runs challenge-based, targeted start-up projects (E.g., venture clienting, joint NPD) with VC-style portfolio governance mechanisms. Examples: Many.
Is there a single best approach?
But based on our research, more and more companies consider tapping into start-ups as an innovation subsystem. And build up capability in-house.
There is anecdotal evidence that the impact of outsourced start-up collaboration (especially in approach 1) seldom delivers outcomes large enough to progress.
- You constantly need to decide what you can share with the start-up (and others) and what you probably can’t share. It hinders the collaboration process.
- The physical and mental disconnect with the core business often means that no one sponsors the collaboration results.
- Even though outsourced collaboration may produce interesting outcomes, teams have to tap into functions like procurement, manufacturing, packaging, IT, and logistics to integrate the start-up outcomes into the business. Without clear evidence that the outsourced start-up project warrants priority, safer and predictable internal projects will always prevail. And the interest in the start-up will be fading out.
We’ve met many great open innovators who struggle with determining the right approach. And then miss out on opportunities.
Care for a second opinion about how to manage start-up collaboration and get the organization behind you? Let’s find a time to talk. No strings attached.