Until now, established corporations have made an effort to collaborate with the startup community through incubators, hackathons, and accelerator programs--many of which operate on a mentor-mentee dynamic. But today, corporations and startups can get to know each other on more equal footing through open innovation programs.  

Open innovation programs typically bring together a diverse mix of partners, startups, and non-competing corporations, whose executive and technical teams play a role and work closely together on big tasks, without the red tape.

Stephan Kuester, head of international consulting at tech startup adviser Tech Nation, participates in 'grand challenges' projects--ongoing, open-sourced initiatives that focus on solving health and development problems for vulnerable global populations.   

"Grand Challenges address problems that are too complex for one organization--large or small--to solve, let alone develop and scale the solution," Kuester says. "Think propositions such as solutions for an aging population or future mobility." To use Google's language, moonshots should be welcome.

These activities can offer a symbiotic boost not only to startups but also to the global competitiveness of local startup ecosystems. However, companies still need to find the right fit. Through its work with startup and ecosystem leaders in more than 50 cities and 25 countries, Startup Genome has identified four principles startups should look for in a corporate open innovation program.

 

1. The program breaks open the walls of the corporation.

Instead of being confined to a startup space, successful programs allow the work to move on the corporation's home turf, where operations leaders and technical experts roll up their sleeves and work directly with the startup team.

"It was clear all of the right people were in the room," says Clara de Soto, co-founder of chatbot builder Reply.ai. De Soto participated in BridgeCommunity in Atlanta, which brings large multinationals together with local and global startups. (A sister program exists in Tel Aviv.) De Soto's team was able to quickly build a pilot, work through KPIs, and move into an actual agreement with Coca-Cola, one of the corporations involved.   

2. Corporations invest resources before the program even starts.

As a founder, you want to be able to work not only with several corporations but also with a variety of functional leaders and technical experts within those corporations.

Anthony Newstead, CEO of corporate consulting firm  TechPublic and co-founder of the Bridge programs, identifies corporations with "the right motivations" in part by how many players they commit to the meeting of minds.  

According to Newstead, putting more "skin in the game" forces a company to clarify its needs and interests upfront and creates more opportunities for founders to connect, share insights, discuss business challenges, and explore pilot opportunities.

3. Corporate scale is put to work.

The sheer scale of large corporations creates the opportunity for startups to work on actual problems that are "worth solving." A small problem at a Fortune 100 is a $10 million opportunity for a startup and most likely indicative of a global need and export opportunity.  

For startups to actually benefit from corporate scale, the program must be geared toward  creating a Proof of Concept and the signature of a first contract for commercial use. That way the startup is positioned for rapid growth right out of the gate.

4. There's freedom to operate.

When startups work at corporate scale, it also means the players around the negotiating table are unbalanced. Open innovation program organizers must be experienced in acting as a counterweight to asymmetries in power between the startup and the corporation. They should work toward a win-win deal that protects the startup's freedom to operate.

"It is important to guide corporates in reviewing their internal processes and to coach key stakeholders," Newstead says.

Tech Nation calls it Tech Immersion--providing leaders of corporations with an understanding of entrepreneurial culture, working styles, methodologies, and even the language used. "This helps a great deal in preventing friction by building understanding and respect," adds Kuester.

As an entrepreneur, look for programs that do this crucial homework with participating corporations. Corporations are good startup partners only if they prioritize the long-term success of each cohort of startups over the value they can capture on each deal. Then corporations truly contribute to the startup revolution and benefit from it as a source of global competitiveness.

Published on: Oct 1, 2018