Written by Miguel Van Damme
Established companies or ‘incumbents’ increasingly face challenges imposed by the fourth industrial revolution. Customers are empowered, better informed and more demanding. Every day, the bar is raised: customers enjoy an unprecedented user experience and convenience, and they expect this exact same level of quality and customer centricity from all the companies they interact with. Today, banks, insurance companies, telcos or car dealers are compared to Spotify and AirBnb when it comes to transparency, accessibility, convenience, instant serviceability. For most incumbents, it is very difficult to live up to these expectations. One of the approaches to overcome this challenge is to partner up with the players that have started the disruption in the first place – start-ups.
Partner up with start-ups? A win-win situation fostering corporate innovation!
The advantages of partnering up with start-ups, called corporate venturing, are numerous. For good reasons, incumbents are often focused on and defensive about their current – “core” – business. This slows down or blocks disruption and expansion to emerging business fields. Therefore, externalizing new business initiatives will foster innovation while maintaining focus of the organization on its core business (=cash cow).
Working together with start-ups may bring corporates new revenue streams by offering creative products and services that could not have been created internally. Sourcing your technology or other resources from start-ups increases the likelihood you are looking at the latest developments at the best price, allowing you to outperform competition. As start-ups tend to innovate closer to customer needs than established corporates, they can adapt and customize solutions more easily, acing in customer centricity. Another big asset offered by a start-up is its agile and entrepreneurial culture that it can inject into an established business environment. Companies can greatly benefit from adopting such an agile mindset across all their business processes. Working together with innovators allows a corporate to better stay on top of market developments that may bring disruption to its industry.
Choose the collaboration(s) that fits you best
There are three main ways to collaborate with start-ups. The simplest one is to just buy the product or service the start-up has developed. For example, BrightWolves is currently helping one of its Healthcare clients to respond to the changing industry landscape. Charlotte, consultant at BrightWolves, comments: “By partnering up with a start-up, the healthcare player is now able to offer a new and smart service, enabled by Internet-of-Things technology. We led the search for a new solution, selected one and coordinated the test phase of the new service in the Belgian market. Currently, we are further implementing the service, taking into account the learnings and feedback gathered during the pilot phase. Thanks to the partnership with the start-up, the healthcare player was able to launch a new and differentiating service and cope with the fierce competition and changing market.”
Another collaboration strategy can be for a corporate to opt for multiple bets and invest in many small start-ups. The key to success here is to inject funding but not to intervene in the start-up way of working. BrightWolves helped a financial services provider to select a number of start-ups that matched predetermined criteria like size, geography and cross-sell potential. Hélène, consultant at BrightWolves, says: “For years, the client had been struggling to grow its revenues per customer. To counter that, they decided to invest in different small companies that would enable them to cross-sell the young companies’ products and services to its existing customer base. In three weeks, we screened over 2,000 potential target companies and selected 5, with whom our client entered into a partnership.”
A third way of corporate – start-up collaboration is for a corporate to invest in another company only in a later stage, when there is significant proven business. A recent example is SalesForce acquiring Tableau, a data visualisation solution provider.
In all three ways of collaboration, partnering up with a start-up might be the key to unleash your innovative capabilities and keep up with increasing customer expectations.
Source: World Economic Forum, White paper: Collaboration between start-ups and corporates – A practical guide for mutual understanding (January 2018)