How does corporate-startup collaboration help companies innovate? At Plug and Play, we work with hundreds of leading corporations across 20 industries, and we connect them to the perfect startups to foster innovation and growth. After years of doing so, we have seen firsthand the key role that this open innovation model plays in a good strategy.
Corporate and startup collaborations, like any collaboration, require learning from both sides. In this article, we will dive deep into this topic: we will evaluate the benefits, as well as the challenges, and how to overcome them. We will also help you understand how to measure successful partnerships, and will try to give you a glimpse into what the future of corporate startup collaboration has in store. With insights from our partners, colleagues and innovation strategists, we aim to demonstrate the value of this innovation model, and how they contribute to a successful open innovation strategy.
What is Corporate-Startup Collaboration?
Open innovation aims to leverage both internal and external resources to come up with new opportunities and solutions. In other words, this strategy wants to go beyond a company’s internal boundaries to explore new ventures, which are often originated by the synergies between internal and external participants in the innovation process.
While large companies often lack speed in identifying and grasping disruptive opportunities, startups are the opposite. Innovation and disruption are at the core of these companies, so they thrive at reimagining the norm and developing new technologies. Amid this landscape, collaboration has proven to be the best way for both sides. In corporate-startup collaborations, they work together to develop PoCs or pilots.
At Plug and Play, we promote corporate-startup collaborations. By leveraging the strengths of both sides, it’s possible to find disruptive and innovative technologies that create a positive impact for all stakeholders.
Defining the scope of the partnership
How far should each side go in corporate-startup partnerships? It depends.
The extent to which both companies collaborate with each other is unique to each partnership. An indispensable factor of a corporate-startup collaboration is the definition of the scope of the partnership; it should be mutually defined to manage expectations, work with clear vision and objectives, and define metrics to measure success.
The Benefits of Corporate-Startup Collaborations
Corporate-startup collaborations bring many benefits to those involved, from specific business units to C-level executives, investors, and, of course, to the startup itself.
Let’s analyze some of these benefits.
Accessing knowledge and resources
Engaging in a collaboration immediately increases a company’s access to external knowledge, experience, tools and technologies. This propels an organization to new fields of research and development.
Gaining and retaining talent
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Whether in the form of startups or individual advisors, gaining access to diverse and skillful talent is key in innovation. Corporations should not only find new talent but work to retain the employees that they already have. Corporate-startup collaborations provide employees with a stage to purposefully engage in the innovation process. Thus, they are able to participate in and work towards the emergence of new business models, products and solutions within the organization.
Creating new products and revenue streams
This is often seen as one of the key results of corporate-startup collaborations. Whether in the form of a pilot project, or a fully implemented product, corporations and startups share the burdens and therefore reduce costs, risks, and project timelines, fast-tracking the development of disruptive solutions.
Open innovation contributes to an abundance of new opportunities for the corporate, the startup, the venture capitalist and everyone in between. The opportunities arising from corporate-startup collaboration are many. They’re also not necessarily constrained by geographical borders and should be leveraged to build lasting relationships to further provoke innovation and progress.
The Challenges of Corporate-Startup Collaborations
No innovative effort is free from any kind of risk. As with every kind of collaboration, these partnerships have some risks that are important to keep in mind:
- Where there is continuous risk in changing the norm, there is the risk of revealing private information or intellectual property, as well as collaborative, financial and market risks.
- Beyond these, there is also the challenge of ensuring external innovation be integrated into internal development, which comes with its own project & implementation costs.
- In collaborating with external parties, corporations also risk becoming dependent on external knowledge, which can cause a loss of flexibility, creativity and strategic power.
Facing Challenges From Both Sides
It is important to note that the definition of risks will be different for each stakeholder; in fact, we understand that large corporations do not speak the same language as emerging startups.
To overcome such challenges a strong collaborative process is required from beginning to end. At Plug and Play, we act as intermediaries to smooth the collaboration process for both sides. Let’s see two examples:
- Helping corporations: Where the corporates struggle with, for example, procurement, internal legal departments, and assessing the feasibility of technologies, we can help in translating these lengthy processes into fast-tracked PoC or Pilot-focused programs to strengthen a corporate-startup collaboration.
- Helping startups: Similarly, startups find it difficult to access good testing conditions, reliable data, and fair and equitable partnerships. We introduce startups to the largest corporations and expand their opportunities in 20+ industries. We give them guidance along the entire end-to-end innovation process, to ensure the collaboration goes as efficiently as possible.
Often, corporations have trouble deciding which changes to make to introduce innovative solutions. That is why there are so many open innovation models to accommodate each individual situation. A corporate-startup collaboration will always be a custom fit; depending on who is in the room and who they decide to work with―each partnership will be different.
Now that both the challenges and benefits of a corporate-startup collaboration have been outlined, we can move onto the question of how to evaluate whether the collaboration is working, or if it can be successful in the long term.
How to Measure if a Partnership is Working
A successful corporate-startup collaboration is one that provides positive impact or mutual benefits to all parties involved―it is quite difficult to provide a single indicator to measure success considering how unique each situation is.
There are of course financial indicators that determine the success of an innovative product. However, it's also important to measure how successful the collaboration itself was, regardless of the financial results.
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Depending on the scope of the partnership, the evaluation criteria will be different. Criteria should be defined in the very early stages to assure mutual understanding and manage expectations for all stakeholders. These milestones, or expectations, should be defined from the get-go to ensure a streamlined process for regular evaluation from both the corporate and the startup sides.
Evaluation of collaboration can be based on a multitude of factors, for example:
- how technically feasible the technology/project is,
- whether it creates a profitable business model,
- and whether it creates a competitive advantage.
Another key factor, which is harder to measure quantitatively, is that of the partnership potential―is this a collaboration that can bring long-term success? Many elements play a role in this, including trust and openness as well as mutual support and smooth communication.
Apart from individual and interpersonal qualities that can contribute to successful collaborations, there is also the idea of collective understanding and acceptance―in this case, from large companies and their workforces towards the concepts of open innovation. This is to say that to continuously leverage the opportunities available, companies should adopt strong corporate cultures that promote innovation and corporate-startup collaborations, and are focused on networking, knowledge-sharing and personal development.
The Future of Corporate-Startup Collaborations
We cannot predict the future nor can we predict future innovations; however one thing is certain, without collaboration, we will not solve the challenges of the present or the future.
It has been an underlying thread in this article that innovation is specific to each company and innovator themselves. As such the future will look different to everyone. Where some industries will fully digitize and move towards new, more modern ways of business, others must modernize current practices and adapt what currently exists to more effective, efficient and sustainable processes.
Due to external pressures like climate change and the COVID-19 pandemic, companies have been re-evaluating their short & long-term strategies to remain competitive and ahead of the game. This alone shows how companies have the power and resources to change, especially when unexpected risks come up. However, the issue is really in figuring out how to change.
Corporate-Startup Collaboration: A Conclusion
We've already seen great benefits from corporate-startup collaborations, and the results can be extremely satisfying and successful in both the short and long term.
Although there will continue to be challenges, Plug and Play will continue to provide guidance, matchmaking, support through partnership building and more along the entire innovation process. The road ahead is very long, but we can assure you, the opportunities are endless.