Over the past year, we have seen a significant growth in how enterprises and startups collaborate to solve business challenges. We know from experience that these partnerships can be mutually transformative, when carried out right. What is this collaboration all about, and why does it exist?
As a mutually inclusive term, we talk about open innovation. Open innovation is not just about startup cooperation. For example, enterprises in research and technology-intensive fields have a long history of cooperating with universities. However, with the increasing speed that we see digitalisation breaking ground across various industries, meeting customer demands and staying on top of industry transformation has become increasingly challenging. This is where open innovation has proven to provide a lot of value.
Corporates have the ability to quickly scale their operations. However, due to their size, rapid innovation is challenging. For startups, this challenge provides a unique opportunity to gain validation and access to customers and access distribution networks faster than would otherwise be possible. For startups, acquiring early partnerships with enterprises can even be an opportunity to avoid an investment round and the dilution that comes with it. We know, from experience as business designers, that these partnerships can be mutually transformative when carried out right. Over the past few years, we have seen how the interest among enterprises for working with startups has grown from something explored by individual employees out of personal interest into being used as a strategic tool for development. At best, working with startup companies allows enterprises to bring new value-adding products and services to the market faster and with a lower cost than when using more traditional methods of building solutions from scratch.
Enterprises and startups can collaborate in many ways, ranging from simple delivery agreements to deeper co-creation. We have seen the best results in projects where the parties truly engage in co-creation on equal grounds, finding the best ways to serve end-users and bring the solution to the market. Often, this work starts with jointly assessing the end-user need and motivation, piloting the solution and validating the need, after which the commercial product is finalised and brought to the market.
Throughout the interaction, the customer and the market needs are kept in mind. Solutions under development are frequently tested with pilot users. While this might sound obvious, surprisingly we often see companies forgetting to talk to the people who will ultimately be using the product or service. While this is definitely the case in some startup companies, it is a problem we increasingly see among larger enterprises too. This is why the user is often an important stakeholder in the open innovation work we carry out with our enterprise and startup partners.
“So how do I get started?” you ask. There are a variety of services you can use to get going, ranging from “innovation challenges” to co-creation programs aimed at more strategic utilisation of collaboration for large and small companies to go to the market together. As an enterprise, if your experience with working with startups is limited, engaging them in an innovation challenge to suggest solutions to a set of particular challenges is a good way to get going. In our experience, the biggest hurdle for enterprises is often daring to make the decision to try. It’s easy – just take the jump. This is what the entrepreneurs you will be working with have already done.
Three things to keep in mind as an enterprise when engaging with startups:
1.Think about the big picture
As a decision maker, involve your human resource and business departments. Open innovation is going to be a core principle on which enterprises build their development in the future. It is not the sole responsibility of the CDO or a person who has been tasked with exploring the startup co-operation opportunity. It is the responsibility of leadership and HR to ensure that everyone in the organisation understands why open innovation matters. Keep the development close to the business to ensure a fluent transition when the product or service is commercialised.
2. Keep it simple and validate early
When you find a technology and market that you want to explore but part of it needs to be compliant with certain standards, don’t wait until the startup has passed through all of the required steps for certifications before you start testing it. Find ways to test the solution in a safe environment early on to validate the end-user value and business case at an early stage.
3. Dare to make mistakes
Setting expectations which allow you to make mistakes in your first attempts sets a realistic ground for working with entrepreneurs. Daring to make mistakes, learning from them and effectively pivoting your path based on the learning are the cornerstones of the startup mindset that leads to success. The faster you accept it, the easier it will be for you to work with open innovation. After all, no market changing innovations came without mistakes.
4. Don’t assume
The working methods of a big enterprise might be much smoother and more time-efficient than you think. Identify the key departments of the enterprise to direct your enquiries to the right people – communication may feel so slow because you are contacting the wrong department.
5. Realise that it might not be plug-and-play
It is a lot easier for a startup to change its product than it is for an enterprise to change its ways. Stick to your vision but be prepared to develop your solution further to match the needs of the enterprise partner. When you do, getting a partnership will become significantly easier.
6. Don’t be afraid
Don’t be intimidated by the size and influence of the enterprise. They often have a good understanding of the market landscape so be honest with them about your status and capabilities. If you don’t have a feature, say it; this might be your opportunity to get paid for implementing it. When you build trust and set realistic, yet high, ambitions, working with them can take you far.
The interview has been originally published on the special issue of CoFounder