The Success Equation – Why Corporate & Start-Up Collaborations Help Leapfrog Growth

Prof. Shameen Prashantham

Professor of International Business & Strategy,

China Europe International Business School (CEIBS)

The Success Equation – Why Corporate & Start-Up Collaborations Help Leapfrog Growth

Prof. Shameen Prashantham

Professor of International Business & Strategy,

China Europe International Business School (CEIBS)


Corporates and start-ups both have benefits to offer to each other, which would be all lost out without the right partnerships. Innovation is one of the most important outcomes of this arrangement.

In this episode, Prof. Shameen, the author of Gorillas Can Dance, a book that dwells into start-up partnerships talks to Atit Danak, Partner, Zinnov about the finer details of these partnerships, and how they facilitate innovation.



Transcript

Atit Danak: Corporates and startups both have benefits to offer to each other, which would be all lost out without the right partnerships. Innovation is one of the most important outcomes of this arrangement. Hello, I'm at the Atit Danak, partner at Zinnov and I'll be your host for today. Having worked with multiple startup programs, facilitating the innovation journeys of companies, my team and I have watched partnerships succeed while saome fade and who better to talk to us about this than professor Shameen, the author of Gorillas Can Dance, a book that dwells into startup partnerships. Welcome professor Shameen, it's a pleasure to have you here with us today.

Shameen Prashantham: Likewise, I'm delighted to be on this podcast.

Atit Danak: Dr. Shameen is a professor of International Business and Strategy and Associate Dean at CEIBS, Shanghai. Prior to joining CEIBS, he taught at Nottingham University Business School in China and University of Glasgow. His latest book ‘Gorillas Can Dance - Lessons from Microsoft and other corporations on partnering with startups’ offers managers in large corporations a proven guide to partnering and collaborating with startups to improve the odds of success in their innovation journeys.

The book dwells into the where, why, and how of corporate-startup partnerships. His academic research has also been published in journals, such as Entrepreneurship Theory and Practice, Journal of Business Venturing, Journal of International Business Studies, Journal of Management Studies and Organization studies. Professor Shameen, we'll jump right into the questions to make the most of the time that we have right now.

Once again, thank you so much for joining us. When we talk about the role of corporate and startup alliances in innovation, these instances are increasing day by day, but the key question, you know, or the first one I would pose for you is how do these mandates form on the corporate side? Are these top-down very specific teams which are given charter to work with startups, or is it more often than not a bottom-up approach where somebody in the organization is looking to sort of kick off these partnerships and build the capability for the organization?

Shameen Prashantham: I think the answer is both and a lot depends on where the activity is taking place relative to where headquarters is. So in fact that the start of my research and you pointed out that I've been at this for about 15 years. I was studying companies in Scotland which were subsidiaries of US companies, like IBM and Sun Microsystems, and a lot of their startup partnering activity was bottom-up.

In fact, it was because the subsidiaries were trying to show headquarters back in the US that they could do more, that they were capable of getting a bigger mandate to do more innovation activity, but they were facing this chicken and egg problem, which was, they could not do more without a mandate from headquarters, but headquarters would not give them the mandate unless they could show that they were capable of more.

And so one way to deal with this was to do a little bit of under the radar partnering with local Scottish startups in a way that was mutually beneficial, but they could do some pilot projects, you know, without incurring huge expenses and then that was a way to showcase to headquarters what they were capable of.

But Bangalore is the other place that was doing research from the early days. And I know Zinnov has been very actively involved in the ecosystem. And again, some of the initial partnerships, for example, there was a startup back in 2006 that was working with Microsoft in India. And back then, in fact, they just had the template of the independent software vendor, ISV programs. But rather entrepreneurially a young manager called Rajeev Sodhi sort of reached out to them and helped them to gain access to resources that they needed. And the atrt-up went on to have a very productive partnership with Microsoft. Rajeev, till recently was COO of Microsoft, India incidentally. And, you saw examples of this bottom-up approach, but of course, since then the phenomenon has matured and so now there are a lot of headquarters driven organizations, but at this early stage in our conversation, I do want to emphasize that entrepreneurial managers and subsidiary organizations have shown that it's possible to get startup bartering going from the bottom-up.

Atit Danak: Got it. And, you know, like always, I'm really curious in terms of how your early experience in Scotland while you were studying is still so much relevant. I think it's only becoming more and more relevant as we look at globalization, as we look at decentralized structures across the world and more and more so in terms of organizations both on the hardware and software side. You touched upon a very important aspect. You used the word Entrepreneurial Managers and this is where my next question is. I'm sure and then we have seen this in terms of the success rate of innovation programs, how it depends a lot in terms of the people driving it. And from a corporate startup perspective, there's a fair bit of effort involved in terms of being successful. If we talk about the leaders of this program or the teams that are running this program, how would you describe them in terms of success scenarios? What do they look like? What kind of experience do they have? You touched upon mindset, but if one had to go out and look for these managers to run a successful corporate startup program, what would you look for?

Shameen Prashantham: You know, I think you're absolutely spot on about the importance of people. So from the corporate side, I've often seen that the people who are able to build bridges with the startups are very entrepreneurial themselves. And this sort of takes two forms broadly. One is they have been entrepreneurs in a previous life and now they're working for the corporation. So somebody like Zack Weisfel comes to mind. Zack was with Microsoft in Israel when they set up their first corporate accelerator in Tel Aviv in 2012. And on the heels of that, accelerators were set up in Beijing and Bangalore. And I know that Zinnov was working closely with Microsoft in Bangalore. Now Zack has been an entrepreneur in the past and found ways in which to add value within a big corporation. Someone else that comes to mind is called Gregor Gimmy, he's a former IDEO, a manager and an entrepreneur who spent time in Silicon Valley before returning to his native Germany and was part of the BMW startup garage co-founding team.

And you know, these guys very easily built empathy with the entrepreneurs on the outside, but not everybody in this position is a former entrepreneur. So I thinking of someone like Jeremy Basset at Unilever who helps set up Unilever Foundry. I mean, his background was in finance and then he moved into the marketing function at Unilever and eventually got interested in first an intrepreneurship program which didn't take off and then helped to create Unilever Foundry. Shilpa Patel at Nissan's luxury car brand Infiniti. Again, she was a brand manager by training, but I think what's common to Jeremy and Shilpa was sort of this orientation towards ‘Hey, let's challenge the status quo. Let's try and do something that may not work out.’

So that willingness to go outside of your comfort zone and be willing to operate with a bit of ambiguity, I think is important. But let me just say a couple of other things. One these managers and the corporates who are engaging with startups must realize that that's only one half of their challenge, the other half and maybe the bigger challenge is actually engaging with people within the company.

So they have to actually be very good at spanning boundaries not only externally into the startup ecosystem, but also internally into the corporate because they have to talk to business unit managers, get buy in from other people who will eventually do the actual collaboration with a startup on, say a pilot project.

The other thing to say is that it takes two to tango. So the people side of the equation from the startup is also important. And what I have seen that some entrepreneurs are better than others in terms of getting it, in terms of engaging with corporates. And again, when there is some experience in the top management team in the startup where they have seen what corporates look like on the inside, I find that that also helps in making the communication go more smoothly.

For example, then the emphasis is much more on solutions rather than ‘Here's my cool technology’, you know and they much better able to press the right button when interacting with the large corporates.

Atit Danak: Absolutely a lot of critical points there. And I love Zack's work. I think, his team at his current program at Intel, Intel Ignite was just recently recognized by the CEO as one of the best initiators in the company. And lot of strong names that you gave reference to. The point I would maybe really, really strongly anchor on is the word ‘buy-in’. Whether you're an entrepreneur or you are innovation consultant, or you're an innovation manager in organization if you're trying to strike partnerships, there a lot of variables and to your point, a lot of ambiguous situations you are dealing with, and you're trying to constantly sort of remind people in terms of the upside and to keep an eye on that to solve problems. And that requires a fair bit of selling and convincing because you want to transact value in terms of not necessarily money, but also time.

And that's one thing which I think is one of becoming more and more difficult to get from people and getting that kind of buy in requires to be able to convince or showcase value of that time being delivered by people. I wanted to touch on one more thing professor Shameen, and you give a good example in the conversation of how some of the teams that you have seen, for example, in Scotland where or otherwise also they work under the radar, in terms of getting some evidence built in before they go in for a larger buy-in from the corporate in terms of running an innovation program or corporate startup collaboration program.

I've also seen this to be a big dichotomy within the corporates. The whole show and tell versus tell and show, one common mistake which we have seen with with corporates is or professionals in corporates is that there's a lot of emphasis on show and tell, in terms of building the evidence, but many a times, you know, there are these trade offs that you have to make and there are definite scenarios where this sort of shortchange themselves in terms of not getting the right backing or not investing the right resources in that initial experiment to build evidence and sort of not really set up themselves for success. So, if somebody is doing this for the first time in terms of collaborating with startups has this vision to make this a capability within the organization they understand the importance of starting small, but how do you execute it? How do you decide what is the minimum of what is must-have versus good-to-have when you're starting small? Anything that you have seen in terms of between the successful managers and not so successful scenarios?

Shameen Prashantham: You know, I think you're saying it's important to think small, particularly early on, because eventually then it's important if you want to make this... If startup partnering is seen as being strategically important, then eventually it has to be scaled up. And in some cases, managers are just lucky that you know, there's somebody at the very top who thinks it's a good idea to do this and there is a mandate to go forward.

So, you know, there's an interesting contrast between Zach's experience when he was with Microsoft 10 years ago where it was much more bottom-up and he was doing this very entrepreneurial as a sort of middle manager, that was the Microsoft accelerator that he got going in Tel Aviv, but then later he left Microsoft in 2018 became a Consultant for some time and then a year or two later ended up joining Intel.

In fact, I think that in the following year and ran this Ignite startup program that support right from the top. I think in fact it was the CEO previously and now the CTO is the main sponsor. And in such a case, it's quite a different story, but if it's more like Zack 10 years ago, you're operating a subsidiary unit, you want to do something relatively. I mean you are the one trying to do something as a bottom-up initiative then. Yeah starting small, the idea is really, you got to pilot it itself. You know, usually these startup programs as an output have pilots that these startups do, but the startup partner program itself often needs to be piloted.

And here, I would say a few things, the people who have done this well, first of all, I think recognize that there's a risk. It may not work out. People may not get it and I think they recognize the importance of speaking in two directions. One is externally to the startups and internally within the company as we've talked about and here, interestingly, you know, and sometimes it's taken me a while to pick this up.

It's not actually a one person show, but a two person, two people show. So I mentioned Gregor Gimmy, a BMW startup garage. He is German, but he worked in Silicon Valley and came back and was sort of an atypical kind of BMW employee. And he sort of played to his strengths as that and tried to create some very out of the box thinking.

And his mantra was ‘Seek forgiveness, not permission’. So he was telling me when I met him in Munich, he said, can you see the decor of this room? It's nothing like the BMW corporate identity. I just went ahead and did this because I wanted startups to feel comfortable. And then the next day I got a phone call from corporate at Identity, and I thought I was in trouble, but they said, ‘Well done your room looks great. Can we use this occasionally for some corporate events?’. So he said, ‘Well, you'd be surprised. Sometimes we get away with not asking for forgiveness.’. That's what we always say in Silicon valley. But then as I kept digging a bit further, I realized Gregor wasn't operating alone. There was another guy, Matthias who was his co-founder and Matthias was a BMW lifer, a much more buttoned down traditional BMW guy who knew the intricacies of how to handle the inside.

So I think that's very important, even when you're starting small, to have a good perception of what's needed from the startup's point of view, but also how to manage the idiosyncratic realities of your organization. And each organization is different. The other thing I would say, people who have done a good job starting small and getting started is to go with a problem-led approach rather than finding solutions from startups and then match it, trying to match it to a problem within the company. And often people go to two individuals within the company, say a brand manager or a business unit leader who is very clear about problems they're trying to solve and be willing to take a chance with a startup.

And this may not be the norm. But you just need one or two like that. And I think being savvy in that way is key. And the final piece is, I think, what these people are good at is, driving towards success in the sense that you engage with say, half a dozen startups on a small scale initially or like Walmart in China, they did something with three startups, and said, work with us on pilot projects and they should not take more than 60 days, which in fact, it was very reassuring to the startup because they were very scared, the big company would be very slow.

And just having that kind of an approach it was useful to get started, but also the managers involved from the Walmart China side was very savvy to try and increase the odds as much as possible to have some success among these three, both in terms of addressing problems within the company as we've said, but also identifying startups that were likely to deliver.

And they even when, you know, their global CEO visited China, they were able to put forward these three startups and have a demo. Now you don't always have that level of spectacular success, but even having the subsidiary leader take a look and pay attention, I think is important.

Atit Danak: Very fair points, professor Shameen. I want to sort of touch on one more thing where you ended in terms of global leaders coming in and showcases, right. This example that you gave was a very interesting example where a subsidiary or a team has put in the effort to identify companies, they have also put in the effort to orchestrate these proof of concepts and essentially what they're showcasing is the learnings or the success from these POC versus what we have commonly seen with a lot of corporate teams as to, you know, talk about a global leader coming in and insisting on having a startup showcase, and having these showcases in kind of an open search, the idea is that we will show what, you know, particular location country or ecosystem can do and leverage that to get a buy in to then actually figuring out who to work with and how to do, you know, from what to do with different POC perspective, something you and I would call us innovation theta.

My question there would be is, you know, if one of these common traps that teams fall into when they're trying to start small, is there anything from your research which you would want to vociferously put out there that corporates should not do when they're starting on this journey in terms of getting the buy ins or working with startups? You've already touched on a few points, but I'm more than happy for you to reiterate some of those.

Shameen Prashantham: No, it's a very, very good point about the danger of innovation theater, meaning that people do things with startups because it's somehow appears to be glamorous. And then there are, maybe one or two high profile events, but then nothing comes off of it. There's no sustained focus and so on.

And, and that's really problematic because then there's a massive loss of credibility on both sides, both with internal audiences and with the startup community and, it's really quite a waste. So, you know, I think if you just take a step back when you're thinking about engaging with startups, I think it's useful to think about the why, the how, and the where and in fact that's how I've organized the book.

And so I think that first piece around ‘the why’ is extremely important to recognize that there are some strategic imperatives that have to be addressed and engaging with startups is but one way in which to address this. So having that North Star very clear.. for many companies it’s been digital transformation.

I think that's why BMW began talking to startups. Going forward I think sustainability concerns are going to also mean that... Budweiser, for example, in China is talking to a local startup that can help transform their beer waste into recyclable plastic. But then there's ‘the how’. And I think with ‘the how’, I think it's important to realize that there's this tricky situation and this is where companies get into trouble with innovation theater. On the one hand, big companies and startups have very complementary capabilities.

One has scale, the other has agility. So bring them together. Boom. You should have magic. But in fact, very often then both parties realize that the very differences that make it attractive to work together also makes it challenging. I call this the paradox of asymmetry. So you have to think about this and address it thoughtfully.

Atit Danak: I can personally relate to a lot of those pieces. People do see the launch pad deliveries at Cisco, you know, once in a year or twice in a year, but then we have seen the program evolve over the last five-year period.

What has mattered a lot is the aspect of resilience, the persistence, the creativity in terms of getting the resources, getting the buy ins and most critically recognizing that even building these partnerships or these capabilities, this evolutionary process, nobody's going to get it right the first time, but it's important to go in with a certain perspective so that if something doesn't work out, you will know the reason why it didn't work out here, you will be able to iterate from that, and that continuous evolution, sort of, happens with the program. It's able to deliver a lot more results and possibly a different scale of results as time goes by.

Thank you so much, professor Shameen, for answering these questions and thank you so much for helping us with these answers and giving a perspective on the corporate side of partnership.

Shameen Prashantham: Thank you, Atit. I thoroughly enjoyed the conversation.


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