The collaboration of large enterprises with the external market is well documented. There are many forms these alliances could take, with each offering their own rewards.
We’re all familiar with the speed of change and the need for businesses to collaborate and co-create externally. Organic innovation is not enough, given the ever-increasing pressure of time-to-market.
Tapping into a community of customers and startups is in some form inevitable, due to the rise of new paradigms such as crowd, peer-to-peer, ecosystems, app stores, the shared economy and APIs in almost every successful growth company.
General Electric’s former CEO Jack Welch famously said: “When the rate of change on the outside exceeds the rate of change on the inside, the end is near.” With that in mind, connect to the community and you’ll find that insights, options and agility are infinite.
Connecting for success
There are some obvious examples of hero companies that connect to the external market to remain core yet open. These include Facebook’s apps and its API platform (as well as its business, consumer, media, advertising and payment ecosystems) and Google’s models for search, AdWords and content creators, not to mention its presence with Android and the internet of things.
Other ‘newer’ examples are Apple iTunes and the Mac App Store, eBay, Amazon, Uber, health insurance startup Oscar Health, Airbnb, and the list of growth businesses whose models are based on connectedness to others.
Even space travel isn’t immune: it, too, is shifting from the traditional high-cost, long-term dynamics of governments and space agencies to the open and startups market. Take, for example, Elon Musk’s Space X, Jeff Bezos’ Blue Origin, and the Mars One project for sustainable life on Mars, which is crowdsourcing astronauts and aims to crowdfund a portion of its US$6 billion budget.
Corporates make their move
Collaboration between corporates and startups is well documented. Often the driver for their engagement is a willingness on the part of the corporate to reposition its brand. However, there are a range of nuances in the potential outcomes that it is worth investigating.
By no means exhaustive, here’s a freeze-frame of the options available for corporate and startup engagement:
1. Visit the Valley. Or Tel Aviv, London, New York…
What is it? A visit by executives or executive teams to an epicentre of innovation. This could be to tech startups in the US, the UK or Israel, or any other thriving location.
Why do it? To raise awareness at executive level, educating the board and aligning its members in the need to accelerate innovation within their own corporations.
2. Internal innovation pitches
What is it? Inviting existing employees to pitch ideas, often with the incentive of progressing winning ideas in trials or experiments. Challenges include providing the right process, guidance and time out of employees’ normal jobs.
Globally, the majority of large corporates and governments offer some component of this. An excellent example of this is Cisco’s ‘spin-in’ process, an advanced approach in which employees are allowed to lift ideas out of the organisation, run like a startup, and then be bought back – sometimes returning their startup founders back to the organisation as millionaires.
Why do it? This type of event not only demonstrates a commitment to innovation, but there may be new processes shared during a pitch that could be adopted into normal working practices. Of course, these pitches also open up the opportunity to generate solutions for an organisation by the people that know it well.
3. Open innovation
What is it? Organisations bring in external designers and developers, often with no pre-existing team or product, for an innovation session.
Why do it? By being so open, this approach invites a broader range of interpretations of a subject.
Variations to open innovation include: inviting more established product ideas or startups that perhaps align with what you seek, and can therefore adapt their existing product or service to address the brief; or crowd approaches, in which sites or services such as SwitchPitch, Kaggle or Devpost facilitate innovation ‘marketplaces’ and events, and which are often used by corporates and governments seeking innovative solutions.
4. Accelerators, incubators & sponsorships
Why do it? This type of activity helps drive brand and community engagement. It also taps into innovation subjects that may not be core to the business yet can offer relevance or investment opportunities. Often, the networking between companies, startups and venture funds may not offer immediately palpable benefits, but can drive internal culture within the organisation through association and, down the track, access to emerging talent.
5. Venture capital and investments in startups
What is it? With 52% of the today’s 133 unicorns (tech companies with valuations exceeding $1 billion) being invested in by corporate venture capital funds, this is an increasingly significant category.
Investors include major global funds of Google Ventures, Dell, Citi, Amex, Salesforce, Johnson & Johnson, Intel Capital and, particularly in Australia, financial services. More niche funding mechanisms include Patagonia, which started up a venture fund to support positive environmental impact, Walgreens’ Well Ventures, which supports wellness, and 7-Eleven, which began by investing in companies associated with coffee and customer loyalty.
Why do it? Corporates may wish to buy into a startup’s brand or buying capability. They may be hedging their bets by buying into potential disruptors to their own business (such as Westpac and peer-to-peer lender SocietyOne), access to capability (Google with smart-home product maker Nest Labs), or access to customer base (such as AVIS’s purchase of Zipcar).
6. Research and development capabilities
What is it? Large companies co-create products with startups, usually in an external location. One example of this is AT&T Foundry’s Innovation Centres.
Why do it? R&D of this type enables different tools, culture, and procurement to influence the creation of a product or service.
7. Industry alliances or ecosystems
What is it? This is where public/private/startup alliances form around a common theme, for example Commonwealth Bank’s announcement this week of joining a Bitcoin research alliance.
Why do it? Alliance of this sort allows a brand to link to a new and emerging set of possibilities as well as influence the outcome. It also offers the advantage of getting on the front foot in terms of how the organisation can participate.
Overall, the benefits of collaboration are multifaceted in terms of stimulating and accelerating corporate, government and community innovation and co-creation – as well as a shift to the more innovative culture that Australia yearns to lead the world with.
Our pick? Focus on your purpose and vision and engage your selected mechanism for success. The time for delivering, scaling and being bold is here.