Disruption is commonly associated with startups. Corporations tend to lose the ability to take smart risks and move quickly once they reach a certain level of growth and success — but it doesn't have to be this way. Large companies can combat stagnation by engaging with high growth startups. While recent research shows that 82 percent of large companies view interactions with startups as important or mission critical for innovation, many struggle to actually bring new ideas to life through collaboration. By conducting a pilot with a startup, large organizations can mitigate risk through a small, controlled test of existing technology applied to their customers, and start to show the exciting opportunities that are possible.
These collaborations infuse companies with the methods, tools and mindsets to increase the empathy, risk-taking and agility that drive disruption from within. Long-term, these partnerships may lead to a deeper relationship such as an acquisition, joint venture, or investment. Startups also find much value from these partnerships including inside industry expertise, connection to large customer bases and access to potential capital. They are motivated to pursue these deals, often bringing with them unbridled enthusiasm and new ideas that can rejuvenate the vitality of their corporate partners.
Here are five guidelines that will help you get started:
1. Identify Growth Areas at the Intersection of Market Opportunity, Customer Need and Startup + Technology Advances.
Start by investigating key business areas that may be at risk for disruption. Talk to cross-functional executives to understand the most important strategic priorities of your business. You'll need a full understanding of what your firm does well and what could be improved, how customer expectations are shifting, what strategies key competitors are pursuing, how startups are taking market share, and what new possibilities technology is creating. By connecting insights from this diverse set of inputs you are likely to identify compelling growth areas to pursue.
2. Set a Bold Vision (But Be Flexible With How To Get There.)
The next step is to create a bold vision that will inspire key executives, and the company at large. From our experience, it takes roughly the same amount of effort to build something disruptive as it does to build something incrementally better. The difference is that your team is much more likely to rally around a bold vision, actually making these ideas more likely to succeed. When they do, the impact will be much greater than simply tweaking existing products/services.
While having a clear vision of where you want to go is critical, getting locked into a single approach is a common pitfall. Too often, corporations enter a pilot with a startup and a pre-determined set of goals, objectives and deliverables that are too limiting. Having a plan that's too rigid might mean missing out on potential business opportunities on the periphery, which is where many compelling and overlooked opportunities reside.
It's important to remember that you are bringing a startup in because you need a team that can approach the project with fresh eyes. Set a bold vision and be willing to be surprised by what you learn through the journey.
3. Surface Critical Uncertainties
Once the vision for what you hope to achieve is set, you'll need to fully understand, at a micro level, what it will entail to bring it to life. Specifically you need to know what assumptions are being made both explicitly and implicitly about the business you want to create.
These assumptions will point to the critical uncertainties that you need to design experiments for in order to clarify the components of the business and de-risk the road ahead. Typically these fall under one of three categories: desirability, feasibility and viability. Desirability is all about whether or not a customer believes a product or service will address their need (ie. Do people want this?). Feasibility is about whether or not your company is actually able to deliver the offering to customers (ie. Can we build this?). Viability addresses the profitability potential of a new business venture (ie. Can we make money on this?).
Typically, we recommend starting with the uncertainties that focus on desirability. This is because if customers do not find value in what you are hoping to deliver, it does not matter if your company can produce it or make money on it, because customers will not buy.
However, when dealing with new technology, sometimes the most critical uncertainty is does it work? If this is the case, find ways to build the minimum amount possible to prove out whether or not something works as promised. If at all possible, find ways to test new technologies directly with customers (or whoever the end users might be.) This way you can test the technology while simultaneously capturing important user feedback. This approach can also help avoid the 'solution in search of a problem' problem.
4. Establish Benchmarks for Success
Before launching your pilot, work with key stakeholders in the project to define how you will measure success. Keep in mind that these milestones might not be related to your corporation's overall profitability. Intrapreneurship involves a process of interconnected successes and failures — in the case of your pilot, as long as there are lessons learned, a failure should be considered a success. For example, if you partner with a startup to pilot a new app and it turns out the app does not fit your customers' needs, think of all the resources you save by learning this information through a small experiment leveraging existing technology compared to investing in building a full product, only to find no one wants it. You'll find the amount of time and money saved to be substantial.
Instead of looking at top-line business outcomes, focus on what constitutes a successful working relationship, like the speed of new product development or how much time it takes to learn something new. A pilot is meant to test the efficiency of your working relationship and to test drive what a technology implementation and relationship might be like.
5. Build Up a Body of Evidence
If a picture is worth one thousand words, a prototype is worth a novel. Customers often say one thing but behave differently. Because of this, creating a prototype of a product or service and getting actual customer behavioral data is much more valuable than a survey or even an interview (ie. Did a customer buy a new product? Did he/she sign up to be notified when something is available?) Answering questions like these with hard facts will equip you to tell a much more powerful story of why it makes sense to invest in developing something new.
As an added benefit, seeing a working product, or even a close approximation, will generate much more excitement and interest from key stakeholders. A prototype provides a much clearer idea of what something is and could be compared to simply seeing 2D renderings and a surrounding deck.
These are 5 important principles to keep in mind for creating successful pilots between corporations and startups. Another important one is to constantly keep your eyes and mind open to possibility.
When attending demo days, meetups and conferences, look for startups that align with your organization on values and product direction, as well as those addressing key needs of your customers. This sets the right foundation for a smooth partnership implementation. Even if a partnership doesn't result in a deeper level of engagement, investment or an acquisition, the learnings that both corporates and startups gain from working together are invaluable. Startups benefit from the wisdom and sophisticated infrastructure of corporations. Corporate partners benefit from the startup's fresh approach, innovative thinking and cutting edge technology. There's no better way to disrupt and advance your industry from within than conducting numerous pilots in order to find those that can lead to lasting partnerships with startups, and ultimately, add meaningful value to your customers.
Looking to launch a pilot series of pilots - with a startup to expand your corporate innovation efforts? Learn more about our Startup Engagement Program and how we help corporations work with startups around the world.