The word ‘corporate innovation’ is becoming an increasingly popular buzzword, but for the most forward-thinking companies, it represents the future of the business and a significant spend on research and development. There is a misconception that corporate innovation is simply innovation in a corporate environment when in truth it is a much more involved process.
Corporate innovation nurtures unique thinking within corporate settings. The corporate landscape is changing drastically, and for a corporate brand to stay relevant, they must innovate in order to change with the market.
Corporations have begun to appreciate the advantages of working with startups, with regards to inspiring innovation. Such innovations can come in the form of adopting new technologies, but also by adapting the business practices typically associated with startup culture.
There are examples of ways in which successful startups are providing unique ways for corporations to innovate within their own landscape, and the following is a brief discussion of just some of them.
How can corporations work with startups?
Corporations and startups operate differently by nature due to the differences in their culture and business environment. Increasingly however, startups are making efforts to connect with corporates, allowing them the funds to grow. For corporations looking to collaborate with startups, the following factors need to be considered:
- Corporations should be aware of their problems (both internal and external) and focus on optimizing for quality over quantity. By identifying issues facing the business, corporations are more accurately able to find those startups that can help solve the problem.
- Say no to those startups that don’t meet your requirements. Don’t waste time and money forming partnerships with entrepreneurs whose technology doesn’t fit your strategic goals.
- It is imperative to optimize internal processes in order to facilitate partnerships with startups. This will allow the corporate to more rapidly apply the benefits of the collaboration and develop the business.
Accelerator programs can bridge the gap between startups and corporations looking to work together. These programs assist startups by providing access to funding, guidance and mentorship, and office space that allows them to focus on products and business development. Accelerator programs benefit corporations by providing them access to innovative and disruptive startups. This allows corporates to manage these disruptive forces rather than compete directly with them.
Difference in approach to disruption
Corporations and startups have different approaches to disruption, due to the differences in their business models and the scale of the business. The large corporations require broad organizational innovation in order to bring about meaningful change, while startups can respond to market forces with individual or small scale innovation to achieve growth. Innovative entrepreneurship has taken organizational innovation to the doorstep of many corporates by facilitating the understanding of its benefits.
Rapid production and MVP
A Minimum Viable Product (MVP) is more than the product itself, it represents the beginning of a whole process. The concept is more broadly related to product development and UX design. The idea behind MVP is that a product is designed and presented to customers and their behavior is monitored. This product has the minimum number of features required to perform its basic function, thereby allowing the final product to be designed according to customer tastes. This is an alternative to questioning customers about a respective product.
Failure arises when the focus is not maintained on a core MVP product or there is a lack of dedication to planning product development. Though MVP is usually associated with startups, the concept can benefit large corporations as well. As such, MVP is a way startups are changing the corporate innovation landscape.
The biggest benefit of MVP is that it allows you to understand customer behavior when interacting with the product before the product has been fully developed. Knowing the customer’s interests allows you to manage product development accordingly, therefore reducing the time and money spent while increasing customer satisfaction.
However, the use of MVP is not without pitfalls. Teams eager to see a rapid production commonly focus on the ‘minimum’ part of the product, ignoring the ‘viable’ one. Thus, the results obtained cannot accurately predict the preferences of customers. Proper implementation of MVP can alter final product design drastically, potentially even leading to the abandonment of a project altogether, however these results take time to collect, and this is in contradiction to a rapid production method.
Why startups are coming forward
Partnerships with startups keep the corporate innovation landscape alive, by encouraging innovation within organizations typically rigid in nature. A startup-corporate partnership offers growth opportunities by providing competitive advantages to corporates.
Many corporations make the mistake of refusing to consider innovation during periods of success, instead of resting on a stable market share which leads to their eventual decline. The startup mindset of innovation is imperative in business at any level. Startups aren’t afraid of taking risks because the whole business is a risk. Their mindset of solving problems and trying new things contrasts directly with the structured mindset of a corporation. Startups display solution-oriented behavior, and this can help corporates move forward.
Ways in which startups can change corporate innovation
Startups and corporations engaging themselves in collaboration can derive a range of benefits for their businesses, depending on how they choose to interact. Here is a list of some of the most common:
Reverse pitching event
Usually, startups are the ones pitching their ideas. A reverse pitching event requires corporations to pitch the problems they are seeking a solution for in front of startups. This offers a funding opportunity for startups and builds relationships between the parties. It also presents a variety of potential solutions to the problem and allows the corporate to select the best candidate for partnership. Issues affecting a reverse pitch event include a poor problem definition, a limited pool of applicants, and limited diversity of entrant startups.
Corporate venture capital
Corporate Venture Capital (CVC) allows an organization to diversify their finances by investing in emerging talents. Corporations seek startups that are projected to have an upwards trajectory in terms of sales and profits and offer them funding in exchange for equity. This allows corporations to gain an understanding of emerging technology and market trends, whilst growing the startup into a branch of their own business. This process is risky however, as many as 90% of startups fail. It is also costly for corporates, as startups often require significant venture capital in order to grow.
Open innovation program
Open innovation programs are very effective is they are broad in scope and present opportunity for many startups to pitch. A simple request is put forward: startups must present their views and ideas on a particular topic. To reach the maximum number of entrants, the program can be run online, generating many ideas related to a particular product or service.
Hackathons engage startups and corporate teams in complex and out-of-the-box problem-solving. They typically take the form of bootcamps lasting 2-3 days in which product designers, startup strategists, marketers, and developers come together to create solutions to a problem and define the appropriate business models. Hackathons are relatively inexpensive and are an opportunity to develop corporate brand awareness, as well as building relationships with startups.
Corporate startup accelerator program
A corporate startup accelerator program facilitates the growth of startups by providing resources, expert guidance, funding, and corporation mentorship. These programs have a set schedule and encourage talent acquisition. Corporate startup accelerator programs require a substantial investment on the part of the corporation however, due to the time and money involved in setting them up.
Sponsorships can be beneficial if a corporation wants to engage in the startup ecosystem. A coworking space or an industry event can be sponsored by the corporation. The corporation gains access to startups via these sponsorships without having to directly invest in them. This form of sponsorship facilitates discovery of potential partners for the corporation.
Becoming a customer
One of the easiest ways of developing a startup-corporate relationship for a corporation is to simply become a customer of the startup. This allows the corporation to gain access to the startup’s technology and often leads to the mergers and acquisitions commonplace in the industry.
Corporates have traditionally been reluctant to innovate: being global companies with huge annual revenues, they often have the mentality of “if it ain’t broke, don’t fix it”. This mindset, however, can lead to their failure. Markets change as new technology alters consumer behavior and preferences, and to avoid acknowledging this has caused many corporations to fail.
Startups, known for their flexibility, quickly adapt to changes in the market. In a sense, this is because they have to: without substantial market share or brand awareness in the market, they are to carve a niche for themselves catering to consumer tastes. For a startup to grow, they must maintain a competitive edge to overcome their lack of funds.
Corporate-startup partnerships are becoming more frequent as both parties become aware of their value to the other. Both have what the other needs. Startups are therefore changing the corporate innovation landscape by encouraging innovation in general, and looking forward to this trend is expected to continue.