For an innovative start-up, the chance to work closely with an established company presents a huge opportunity. Large corporations have resources and they have customers – two things that are often in short supply for young companies. Of course the corporation has much to gain also – inviting agile innovation and fresh thinking in.
Collaboration between start-ups and large corporations is nothing new. According to McKinsey, three quarters of Fortune 100 companies have active venture units and between 2013 and 2019 there was a 32 per cent year-on-year growth in corporate venture capital investments.
The key is getting it right – and this requires work on both sides. So as a start-up or scale-up – how do you navigate these opportunities? What should you be looking for in a relationship and how do you find it? We spoke to Abhishek Sengupta, vice president of portfolio and strategy at Hexagon to find out…
Identifying a corporate that you want to work closely with should come down to two things, says Abhishek. Central to this is the customer value creation. “The aim of this open collaboration on both sides needs to be bringing additional value to customers. You must both be aligned on this to create a win-win situation.”
The second factor is more broadly around a shared vision for how they bring this value to a customer. “For example the start-up might want to bring value by democratising -access to a technology, but the corporate doesn’t believe in doing that. Then you’ve got a conflict of interest and it’s not going to work.”
Breaking the ice (with the right person)
So you’ve found your perfect match – how do you make yourself known to them? Programmes like Sixth Sense are obviously a wonderful way to get spotted and test the water working together but this isn’t always an option.
“There’s nothing wrong with identifying the right individual and simply getting in touch,” says Abhishek. “There are many start-ups that approach our general managers and come through that way. You need to start somewhere and then it’s about building up the relationship.”
Of course, knowing the best person is also part of the challenge. It depends on your offer, says Abhishek. “If you’ve got an innovation around joint value creation that could be productised or taken to market within a few months, it’s good to take it to an operational manager. But if it’s more disruptive technology that requires a bit more vision, it’s best to approach someone who thinks outside of the box – such as head of straegy or the chief product officer.”
Are we in this for life?
This is a hard question to answer – it depends on the stakeholders but Abhishek believes one should judge this by milestones. “Certainly both parties should try and figure out what they want to get out of the collaboration and create a plan based on that. But then I believe in setting small goals and milestones and once those have been achieved – scaling from there.”
The secret to success you didn’t think of
One of the key challenges in pushing for the success of a product or partnership is actually at the selling point – which makes incentives very important. “This is an area that can be neglected. Ultimately a salesperson will try and sell the product they have been incentivised to sell. So always keep the business model and value flow in mind. You’ve got to find out what makes the machine tick and work with the corporation to create the correct incentives. A CEO might love a product but if the sales team doesn’t prioritise it, it won’t work.”
Ambition is also an important sticking point. If you create too ambitious a plan this can lead to early disappointment. “If you don’t hit your sky-high numbers, it demotivates everyone.”
When to walk away
It’s a difficult situation but it often comes down to milestones again – if either party isn’t hitting them, perhaps it’s time to call it a day. “At some point you have to make a call. These relationships can be a drain on the partners, especially the start-up,” says Abhishek. “If a start-up is spending 50% of its time working on something for the corporate and it’s not making money, the relationship won’t last long.”
It’s hard but it’s worth it…
The road to start-up and corporate success may appear difficult but if you can get it right – it is worth it. “As we’ve said, work towards a win-win situation,” says Abhishek. “Corporates do have experience and reach into markets that start-ups can’t access, finding the right partnership is worth the effort.
“The strategies and business models for supporting these partnerships are getting better all the time. We’re all learning the best approach and it’s getting easier and easier.”
Further reading and listening: