The underlying goal both global corporations and startups share is the creation of value for their company, their end consumers, and their specific industry as a whole. However the gap between the two groups of innovators has yet to be closed. Global corporations and startups have the potential to bring each other game changing opportunities through collaboration and partnership but first they must recognise what they can offer each other and thus, break the mentality of “us vs them.”
The reason for the gap between global corporations and startups can be narrowed down to the structural difference between the running of a global corporation and the running of a startup, with both global corporations and startups being novices in imitating what the other does.
Understandably startups require a different set of needs than those of global corporations. Startups create one-page business plans. They move with agility, developing simple prototypes quickly and cost effectively over and over again. Unlike established global corporations, their main focus, that is, until they need to scale up, is not efficiency. Instead, a startup’s ultimate focus is innovation.
“[Global Corporations] tend to hire managers, not explorers,” says Coca Cola’s VP of Innovation, David Butler. “You tell them to do this and keep doing it, not explore new ways to do it. Early-stage companies employ nothing but explorers.”
To fix this gap between global corporations and startup companies two things need to happen. Global Corporations must move towards open innovation and startups need to realise the benefits that global corporations can offer in the scaling up of their venture.
Global Corporations will benefit from absorbing the changes necessary to tap into the 45 billion dollar startup ecosystem to gain early insights and discover further competitive advantage in new markets. Furthermore, the importance of startup culture and agile innovation practices to global corporations who want to continue to grow and expand 10-20 years down the line.
Perfect examples of large companies who exercise this initiative are Coca Cola and General Electric. Two multinational companies who understand the potential dangers of disruptive technologies today’s startups are notorious for creating. By embracing the concept of open innovation, global corporations are building new strengths and thus developing more ways to improve collaboration and partnership with startup firms.
Open innovation is increasingly practiced through formalised engagement with startups through corporate accelerators, corporate venture capital and acquisitions of startups as Intel have recently done with Movidus – a software based company that specialises in low power processor chips for computer vision and deep learning.
Coca Cola is teaming up with outside entrepreneurs to develop ideas that can solve problems at the company. General Electric has enlisted 500 coaches to train executives to embrace concepts like risk taking and learning from failure.
On the other hand, it is imperative that startups realise the potential benefits of aligning their company with global corporations who have the resources and expertise to scale up their businesses.
Remi El – Ouazzane, the current CEO of Movidius made it his mission to reposition the company, which led to the licensing of the company’s technology to global corporations like Google and Lenovo.
Working with larger corporations can create an opportunity for startups to test their products for market fit, provide them with the financial resources to scale – the last thing a startup wants is to run out of money – and assist them with content marketing, one of the most scalable growth methods.
However as global corporations consider the needs of innovative startups, startups must also understand that global corporations are looking to help innovation that scales. Therefore startups who are interested in partnering with global corporations must ensure that they are creating technology that is valuable, a company that has the initial potential to scale, a proven business model and some attraction from their targeted market.
Overall, the stronger collaboration of startups with global corporations will encourage the growth of a stronger European tech ecosystem where startups have access to the market knowledge and experience, economies of scale, established networks and brand power of global corporations to transform into sustainable corporations.
Startups can also be an important channel to expand for further expansion into new markets for global corporations as young companies tend to have the required agility to compete in emerging sectors. A win-win situation for both global corporations and startups.
Remi El-Ouazzane will be speaking at DTS on February 16th.