Working with start-ups: Source it out or DIY?

Sander van der Blonk
Sander van der Blonk
May 10, 2022
2
minutes
Working with start-ups: Source it out or DIY?

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)

Companies set up labs and accelerators. And run one-off annual events (challenge prizes) or validation pilots. Examples are: Akzo Nobel, Unilever, and BSH.

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?

No.

But based on our research, more and more companies consider tapping into start-ups as an innovation subsystem. And build up capability in-house.

Why?

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.

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