While corporate R&D is said to be on the rise, one of the other ways in which large firms look to innovate is through working with startups. As we said in an article published a couple of years ago, we were seeing a rise in the corporate accelerator, in a trend for large companies and organizations to engage with startups that might help fuel relevant innovation.
With this necessary symbiotic relationship between corporate and startups, it’s important to set the right framework for engagement between the two.
Prajakt Raut, founding partner at The Growth Labs in India, offered some valuable guidelines in a recent blog, which we publish an extract from here:
More corporates are launching innovation programs and engaging with the startup ecosystem than ever before. One big reason is that companies are realizing that just doing product innovation is not going to be sufficient to grow business, or in fact, to even survive in the market. They recognize that they need to innovate and adopt new-age solutions across all aspects of business – be it HR, marketing, sales, distribution, warehousing, etc., etc.
Companies are therefore reaching out to the startup ecosystem to seek innovation. Especially frugal innovation that may cost them 100x more to design and develop in-house. But large companies and startups live in two different worlds, with totally different cultures. How then should corporates and startups engage meaningfully?
Here are some key points to consider:
- Companies that identify problem statements from business units, and then seek solutions for those problem statements are more likely to succeed in their innovation hunt than companies that ‘hunt’ innovation and then try to find an internal customer for it.
- Startups need to identify the ‘problem statement’ that they are addressing well, so that corporates are able to understand how that solution fits into their business. For example, if you pitch an employee on-boarding app as “We help you engage with employees from the time you issue an offer letter, so that you can identify potential no-shows much earlier”, you are more likely to get a customer buy in than pitching it as ‘Smoothest employee on-boarding experience for new joinees’.
- Companies will rarely find your solution as a ‘perfect fit’. Instead, they will identify it as “This looks interesting, and can be potentially useful”. Once there is interest, the company and start need to find a way to engage to develop that into a meaningful solution.
- Startups should be careful on how much customization they can/should do for each corporate. It is a fine balance between ‘co-creating a product with inputs from a customer’ and building bespoke solutions for each company’.
- Startup should make efforts to understand the company’s culture, and make efforts to get all internal stakeholders on-board. However, they need to retain their individuality and not get ‘immersed’ in the company’s culture.
- When doing a pilot, the startup and company should agree on the performance metrics and success criteria, and the post-pilot model of engagement BEFORE getting into the pilot.
Raut concludes, “At The Growth Labs we are encouraged to see the increase in the number of companies planning innovation and startup engagement programs. While many will be exploratory expeditions to understand what is happening in the ‘startup world’, it is these expeditions that will pave the way for meaningful engagements between startups and corporates that will help startups find easier access to market, and help companies find innovations to drive growth and leadership.”
The original article can be found here.