by Atit Danak, Engagement Lead, Zinnov; Chaitra Ramalingegowda, Marketing, Zinnov
There is no doubt that corporates need to collaborate with start-ups. In fact, there has been a significant jump in the number of active corporate – start-up collaboration programs in the recent past. More importantly, both corporates and start-ups appreciate the significance of collaborations. These numbers speak for themselves –
- 80% of corporates believe that start-ups have the potential to positively impact an organization’s innovation engine
- 89% of start-ups believe that they can deliver scalable business solutions
- 46% of start-ups who haven’t worked with corporates are likely to do so in the future
However, very few corporate – start-up engagements succeed. But what is success and failure in this context? For starters, a contextual organizational lens is crucial to defining success/failure of a corporate – start-up collaboration. To put it simply, failure is the absence of a sustenance model, or the inability to meet the defined goals. While not all programs are designed for similar outcomes, neither are all programs designed for the real intended outcomes, in context to organizational goals and readiness. This, therefore, sets up the program for failure.
A customized engagement, for instance, ensures that different aspects such as business vision, growth strategy, future roadmap, etc., of both the corporate and the start-up are catered to, to drive meaningful business outcomes, thereby improving the odds of success for both corporate and start-ups – and hence, for the program.
Key Factors for Improving the Odds of Success for a Corporate – Start-up Engagement
But, how can organizations gauge if a collaboration program is set up for success?
The success of corporate – start-up collaboration programs hinges on the mutual value created, with tangible business outcomes to quantify it. An engagement that does not have the buy-in of the relevant internal and external stakeholders is bound to fail.
Beyond stakeholder buy-ins, the odds of success hinges on 11 key success factors, or levers, that corporates must tune to perfection (and a start-up must measure a program on):
1. Program Charter and Objectives with clear KPIs (key performance indicators): The first step for any collaboration program is to define the program charter and the intended objectives, with clear KPIs to quantify its progress. This well-articulated outline needs to align with the corporate’s future roadmap and vision. It should ultimately drive the mandate that is core to the corporate’s business strategy and long-term vision.
2. Sustenance Model: A robust and detailed financial sustainability model needs to be outlined, with budgets allotted, key champions allocated, funding streams identified, and incentive strategies agreed upon. Broadly, there are two types of sustenance models for collaboration programs:
- Return via equity investment in start-ups
- Return via business impact (revenue and/or profitability impact; direct or indirect)
Every program is an investment from the corporate balance sheet, and for it to grow, the innovation team must be able to clearly articulate and show results that ensure ongoing (and increasing) resource allocation.
3. Program Governance Structure: Every collaboration program should ensure that there is a clearly outlined governance and organization structure, with standard operating procedures in place. Further, clearly defined KRAs (key responsibility areas) of the key people involved, help set the course for a corporate – start-up engagement that has the potential to deliver tangible and impactful business outcomes. Process is not antithetical to innovation, when applied appropriately.
4. Collaboration Thesis: A collaboration thesis provides a holistic view of the build/buy/partner landscape for a corporate looking to collaborate with a start-up. It is a combination of multiple viewpoints and ever-evolving document. For example,
- Where in the customer journey, value chain, and technology stack does clear value lie? Answering this question helps build a unique perspective that throws light on where the world is headed and what sort of businesses will succeed.
- Given a corporate’s organizational capabilities, infrastructure, and resources/assets, where is it best suited to play? Clear articulation of the types of ideas the corporate feels best suited to invest in is crucial.
- What is misaligned with group strategy? What is out of scope for each P&L or BU? It is critical to articulate what to ‘abandon’ in the engagement, so there is clarity on all fronts.
- Does the corporate want to partner with the start-up deeply? What does interim success look like? Clear setting of expectations of what engagement model the corporate is comfortable with is important. Some examples of collaboration approaches are platform evangelization, joint go-to-market, co-innovation, etc.
5. Compete Strategy: Much like any academic or university program, input quality heavily influences output. And over time, builds a self-fulfilling prophecy. Hence, a robust and competitive program should have the potential to attract relevant and high-quality start-ups. Additionally, defining the outcomes for both parties involved will help in setting the right expectations on both sides. A structured curriculum, right financial (grants or equity) and non-financial (e.g. technical know-how, tools, data, access, etc.) resources, relevant and proactive mentor pool make for a compelling value proposition. Thereby becoming more competitive in terms of attracting high potential start-ups and partners. Other elements of compete strategy would be: (a) the ability to create opportunities; and (b) an experienced program management team, with the right internal and external balance.
6. Ecosystem Collaboration: The technology ecosystem consists of various key players such as academicians, university labs, independent researchers, relevant customers, etc. The collaboration program needs to outline the external players with whom meaningful collaboration is feasible. This typically helps a corporate program in (a) building stronger value proposition; and (b) optimizing the resources invested.
7. Clear Stage-gates and Evaluation Criteria: The staged evaluation process, criteria, and framework for each stage of the corporate – start-up engagement need to be outlined, based on the outcomes intended. From selection to final decision-making – each stage needs to be mapped and communicated to relevant parties. These are leading indicators of a tangible outcome. It not only allows for easy decision-making but also helps optimize resources and the program itself.
8. On-boarding Process: A clear on-boarding process that communicates the above-mentioned goals, proposed outcomes, introduces key stakeholders to each other, and also clarifies concerns is the most optimal starting point for formal engagement. This enables a positive program culture that will assist in mutual development and growth. It also helps reduce operational overload, especially with support functions such as legal, compliance, IT, facility, etc.
9. Mentorship Map: How big is the mentor pool offered by the program? Who are the mentors? How relevant and diverse is their expertise so the start-ups are offered a comprehensive mentoring program? How often and in what format will they be available for actual hands-on mentorship sessions? A thorough mentoring process must include diverse expertise from a pool of mentors who are engaged investors, industry leaders, subject matter experts (internal and external), and former successful entrepreneurs. This process needs to have in place measurable metrics and right incentives that help in engaging with and retaining the best mentors. It is important to note that every subject matter expert is not a good mentor. Mentorship requires a certain persona and approach which is equal parts knowledge and a coaching mindset. This applies to both internal and external mentors.
10. Post-program Support: The corporate usually decides how to engage further with the selected cohort of start-ups, after the program formally concludes.
- Further collaboration with start-ups: Corporates collaborate further with the start-ups to bring the product/solution to market. This is a straightforward course, when expectations are well-aligned early on. It is simpler when the outcome is defined as investment or acquisition or vendor/license agreement. For joint go-to-market and co-innovation, it invariably becomes critical for the program team to provide ongoing support to start-ups to ensure expected results are realized.
- No further collaboration; only alumni support: The corporates conclude the engagement and choose only to engage further with the start-ups as alumni of the program. In this model, it is advisable to maintain relationships with start-ups, track their progress post program, and foster a strong sense of community outside the organization through regular meets and digital collaboration tools. The corporates may also provide support to the start-ups through connects in the ecosystem and perhaps even inviting them as mentors for the subsequent cohorts of start-ups.
- Provide additional support for extended (short) period: Typically an outlier, this scenario emerges when a start-up is close to delivering a tangible outcome (e.g., a demo) but is unable to meet the 3/6 engagement period deadline that is usually followed. It is advisable to provide support for an additional period of 1-3 months in select cases.
11. Growth Strategy: A future roadmap for repeated corporate – start-up collaboration needs to be outlined by corporates. An engagement that can be replicated across BUs, geographies, and horizontals will gel seamlessly into the organizational vision and mission. Thereby, it can help build a robust talent strategy, growth plan, and investment directives for the future. The true North of every collaboration program is to solve any use case quickly and efficiently in the shortest possible time by working with the most relevant high-potential start-up in the world.
The above-mentioned components are critical for the success of a corporate – start-up collaboration program. However, the convergence of the above-mentioned factors will drive a successful corporate – start-up engagement, that can drive meaningful and impactful business outcomes.
There isn’t a doubt that corporates need to engage with start-ups. The mode in which this engagement manifests and how aligned it is with the overall business strategy and vision, are what make a corporate – start-up engagement a success.
 Unilever Foundry global study, ‘The State of Innovation.’
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