How to make startup and corporate partnerships work?
Pandemic hit, business circumstances changed, and companies had to adapt. Many businesses chose open innovation as the way forward and out of the crisis as the traditional methods did not seem to be the most efficient direction in the new circumstances.
As open innovation becomes a more common business management method for innovation, we also see corporations more often choosing partnerships with startups as the best open innovation option for them. "Now more than ever, with the global health crises and due to the worsening economic situation, it is necessary to be more innovative and step outside the comfort zone. To give our effort to more sustainable business and at the same time stay competitive new solutions must be found, and this is where we believe partnering with startups to be the right direction towards innovation. The biggest advantage is the opportunity to find ways and solutions to our challenges in order to be even more sustainable company we could not have found or thought of on our own," the motivation behind partnering up with startups shares Zanda Sadre, Corporate Brand & Communications Director at Rimi Baltic.
The collaboration is a new playground for both sides. As the partnerships between startups and corporates grow in numbers, the challenges that come with them become more apparent, and luckily so do the best practices and success keys.
Aligned goals and motivation crucial at corporates side
When asked what are the most common challenges corporates face when starting a new partnership with a startup, long time open innovation expert and Board member at TechHub Riga Viesturs Sosars named two. First, he points out the internal communication and how not aligned internal views on the startup partnership's importance and its unclear motivation can damage the partnership already from the beginning. Second, to put it simply, the lack of expectation management. Companies tend to over-estimate a startup's ability to deliver as startups often are still developing their products. To avoid both of these setbacks, the company should make sure that the partnership's goals and drivers are aligned with both the executive team and team working on the project and anticipate the fact they are not only a customer but a source of learning.
Startups must focus on relationship building
On the other side are startups. As a recent McKinsey and Company study shows, only 27% of startups are happy with their corporate partnerships. The CEO and Co-founder of Nordigen Rolands Mesters points out finding internal champions and sponsors for the partnership within the corporation as a common challenge. “Large institutions typically deal with a multitude of problems and clashing agendas at any given moment. Partnerships can take a lot of time to yield results, which means they are always at risk to be overshadowed by other priorities and hence lose relevance for the partner institution. Having a strong champion as well as a sponsor, which typically are not the same people, is critical for a successful partnership. Unfortunately for startups, there are no hacks or workarounds - partnerships with large institutions is all about relationship building,” explains Rolands Masters.
Startups Managing startup and corporate partnerships
In his experience, Viesturs Sosars notes that customer-centric startups and intrapreneurial corporates create the strongest possibility of a win-win in such co-operation. More than that, there are various support tools for both corporates and startups, a recent novation in this field being the startup supplier programs.
"An open innovation format popular and favored by large corporations is so-called startup supplier programs such as Future Hub. It is a great alternative for equity accelerators and works as a corporate and startup partnership management tool. Instead, these accelerators focus on intensive sprint programs and solely strive to find synergies between startups and enterprises and give access to the market. In this way corporation manages to integrate new solutions into its business while the startup gains possibly the first large client," explains Marija Rucevska, Co-founder of innovation strategy company Helve and Chair of the Board at TechChill.
With various new opportunities and innovation models being discovered, the way startups and corporates coexist is changing. We see more collaboration in multiple formats, and while the motivation behind these partnerships might vary, at the end of the day, this means better solutions and products for the customer.