Solving business problems with the help of startups - 3 steps to success
Many corporates misunderstand what startups are.
They imagine recent graduates, sitting in their hoodies over a laptop at their kitchen table. But many young companies today are ready to help corporate clients to tackle their business problems, cut costs and help them to digitise their business chains.
"Instead of thinking ‘some incumbents are gonna lose, some startups are gonna win’, startups should be seen as potential partners. Partners to create more value for your company, more value for the consumer, and for the whole industry." Giuseppe Zocco, co–founder of Index Ventures
In ‘Winning together: a guide to successful corporate-startup collaborations’, we show which programmes tend to be most useful to harness the power of collaborations to solve business problems. Strategic partnerships - co-development of new products or procurement from startups - is one such programme type that, if harnessed correctly - can create strong win-win collaborations.
If you are a corporate company that wants to set up a programme yourself, there are three important elements to consider.
1. Have a clear access point for your programme
Unilever started its internal programme ‘The Foundry’ about a year ago to create a central platform that connects startups with a working prototype to Unilever’s 400 brands. Managers like Alper Eroglu, Global Media Director for Deodorants and Oral Care Categories, have submitted business problem briefs for which the Foundry scouts suitable young companies over a ten-week period. Alper could then select the most suitable startups and run a pilot with them.
The benefits of choosing open innovation through collaboration over internal R&D is multifold. Pilots of three to 12 months are often quicker and reduce the risks of trialling new solutions when done in a test bed. With the help of the Foundry, Unilever has run over 60 pilots in the past 11 months.
However, visibility inside the corporate is pivotal. Many startup programmes struggle with a phenomenon known as ‘not invented here’, which refers to the opposition from internal R&D or business units who feel threatened by collaborations with new external businesses. Framing startup programmes as a way to help the business success helps tackle internal opposition. “It’s Magnum or Persil or Dove or any of our brands that come to The Foundry and say, ‘We’ve got this challenge, can you help us find a solution to it?’”, says Jeremy Basset, Marketing Strategy and New Ventures Director.
2. Get buy-in from the top
Richard Sofer, CEO of glh every Hotels, has a ‘mandate’ from his boss, the CEO for all glh chains, to “effectively discover new ways to innovate and improve his employees and guest service experience through innovative technologies”. Having the CEO and top level management committed and willing to explore possible collaborations with startups is very important to successfully lead strategic partnerships with them. (See more Why work with startups? How to rejuvenate corporate culture)
glh Hotel CEOs understand that in order to solve problems and offer a better customer experience to their clients they need to learn from ‘the brightest, most innovative individuals and teams in their small, smart startups’. To get exposure to new ideas, glh Hotels partnered with Wearable Technology Innovation Contest, a digital competition run together with government agency InnovateUK and UK universities, offering a prize for digital solution in the hospitality sector. Moreover, they offered a number of selected startups the possibility of trialling new solutions in glh Hotels as a ‘living laboratory’. To ensure all these activities are communicated internally, especially at the senior level management, Sofer appointed Caroline Cartellieri, Director of Online and International as an internal champion. She is in charge of scouting startups, designing startup programmes, and most importantly, she makes sure hotel managers are involved in the decision process and can decide whether to go forward with a pilot or not.
glh’s top tip for other corporates: Invest enough time, especially in terms of people power. If you do not invest upfront, it will never work.
3. Be clear on the rules of the game
"Corporates think in quarters, startups think in days." Piers Linney, Co-CEO Outsourcery
This often creates major difficulties for young companies, who require cash flows and planning security for their small teams. To tackle this challenge, it is useful to run pilots with clear timeframes and allocated budgets.
Diageo’s startup programme Diageo Technology Ventures scouts startups to test new digital solutions to modernise the production chain of its spirits and drinks. The most promising solutions are trialled according to a set process. A dedicated pilot team in the market where the technology will be trialled is formed, with close involvement of a senior stakeholder. Each pilot has a budget of $100,000 and a clear end point. “If we like a startup, we can quickly move to a pilot study, see the outcome of the pilot, and decide whether to scale it or try something else” says Balakrishnan.
Diageo’s top tip for other corporates: It is important to have a clear entry point for startups and a clear internal system that does not waste anybody’s time, especially startups’, that is very precious.