Corporates and Start-ups Should Collaborate – But How Can It Succeed?
Many corporates see the major advantages of collaborating with start-ups to innovate with greater speed and agility. But whilst there are numerous quality studies on corporate inertia, I want to share with you the less documented view from the other side – the challenges of being a start-up collaborating in a corporate world. Here is a personal experience I had some years ago as a start-up co founder collaborating with two multinational giants. Let’s call them Big Company 1 and Big Company 2.
Starting with a Great Idea
We started out with a great Idea, as most start-ups do. We would provide visitors to high density venues like stadiums and arenas with the ability to order food, beverage and merchandise from their mobile phones and pair this with a variety of delivery and collection options.
My co-founder who had had over 15 years’ experience at a management level in hospitality dreamed up the idea in response to some of the real day to day pains he and his colleagues had to deal with. The equation was simple, there was a known problem which we knew how to fix, we knew people who could build the tool we needed so there was nothing to stop us; we figured let’s just go fix it.
The app was coded by our amazing lead developer who did the work of five. We did have technical teething pains but our developers were so good that even complex problems were fixed very quickly. So we had sound tech.
The Early Conundrum: didn’t they say they liked it?
Much to our delight, there was a firm consensus among front-line managers in some of the global catering groups we engaged that this would increase sales, reduce wastage and make for more efficient use of human resources. Additionally, the end users we surveyed loved the concept and said they’d use it for sure.
The front line managers (and many of their high-level superiors) were in favour of innovation and wanted to give it a go. We even had a highly committed internal champion in one of the managers; we were set!
Off we went grinning from ear to ear telling our friends and potential investors that we had landed the big one and it would all be smooth sailing from here. That was until we were confronted by protocol & procedure, risk management, legal, stakeholder interests and whatever else was in the waterfall that was about to hit us.
If they liked it so much why did it take a year before we even got our first test off the ground?
Burning the Cash – don’t they know we will be dead in 6 months?
As a start-up we had a set amount of cash and every day without revenue was a step closer to the grave.
First came the legal negotiations which our champion facilitated as best he could but it still had to go by in-house counsel. So back and forth we went week after week, bending farther backwards and making more concessions with each iteration. What started out as a service agreement ended up as a kind of MOU with a time-limited non-compete. Our CEO who was a lawyer was mortified but we were holding the blade and had little choice.
Then there was the Technical Scope. As the opinions of more and more big company people weighed in so did the varied opinions of how the app should work. Numerous additions and tweeks to the UI and back-end meant more time and money being burned; and we still hadn’t got our first beta test off the ground to determine if customers would even use the system!
But Wait! – don’t forget the corporate partners
Then there was the payment gateway. An external company (one of the big boys) that handled nationwide card payments for Big Co 1.
We had the blessing of the Big Co to integrate this gateway and they even introduced us to the relevant account managers and technical people. This should have been the easiest part of the project. But there were so many hurdles thrown up that it was actually easier to deal with the mammoth task of convincing the Big Co to allow us to handle their money through our pre-integrated gateway – which is what happened after several months of hoop jumping – and more cash out the door.
By this point our champion had stuck his neck out so far that the burden of performance basically rested on his shoulders internally. To reduce his stress of waiting for money to be processed by us then transferred to his bank account, we had to attend the first five of six tests with a stack of cash in hand so we could reconcile and pay up for all transactions immediately at closing.
Ahhh – but then there is the risk assessment
We eventually got the green light for our first gig with Big Co2 and we were jubilant.
A couple days before the test we get a request for a risk assessment which had us staring at each other with blank faces. So off to Google we went to find some examples. we copied and combined a few formats that looked like they were created by really smart people then basically guessed at the content. There were no precedents, this had never been done before. We did just what any good university student would have; filled the document with some great sounding fluff and then prayed for an ‘A’ grade, and it worked!
All in all we did very well to get in the door with two multinationals both of which had some great innovation-friendly people, but it still took us a year and a half and a lot of cash to learn that the entire platform had to be re-purposed and rebranded to be viable…which is what we did.
How much time, headache and money could have been saved for both sides if we’d adopted the much touted but seldom adhered to ‘fail fast and fail often’ philosophy? How many of Big Co’s competitors (big and small) could have gained a jump on them in a year and half of wasted time?
Here’s the Reality
The business development route into a big company can feel a bit like running the gauntlet for the small entrepreneur. It is by no means intentional but simply the result of necessary, tried and tested controls and procedures which have traditionally underpinned corporate success.
Nonetheless, most start-ups consider it illogical, they don’t get it and why should they?
- They just want to solve a problem as fast as possible and couldn’t care less about corporate protocol.
- The corporate concept of risk means nothing to them and If it did, they would be of no use to Big Co
- Most don’t have much cash
- They probably don’t have great legal and other professional resources which makes them vulnerable
- Most start-ups simply don’t have the experience, time and know how to cater to all the stakeholders.
- If they are forced to conform, this will likely destroy the true value in the relationship.
- When unrestricted, they will almost certainly spot additional solutions to challenges that have not even been contemplated as we did.
How Can Corporate Leaders Make Collaborations with Start-ups Work?
If you are a corporate leader who is genuinely interested in partnering with early-stage creators it will require a pretty radical shift in thinking.
So how do we make it work? This is a hot debate that will continue for some time. There are many strategies and I don’t claim to be the authority but in my opinion, one basic truth will apply to all.
You need to cater to start-ups and not the other way around. So many companies speak of assimilating the agile, creative DNA of the startup but fail to recognize that the DNA, like any living organism will only thrive in a hospitable environment. Applying conformity to a startup is like strapping steel-toed construction boots on a footballer.
You have to genuinely seek ways to clear the path for their creativity. If you do not then your incubators, excubators and other methods of assimilation will be mediocre at best. Ask the question, what can we do for startups? Rather than, what can they do for us? .
The price of not doing so is to risk being Ubered out of existence.
Cisco’s chairman John T Chambers predicts that 40% of companies in North America, Europe and Asia will be obsolete in ten years.
What are you doing to beat the odds?