Seeing Both Sides: The Challenges When Corporations Collaborate With Startups
The ever growing markets and the product/services they put in is becoming a problem for enterprises. The products provided by them has been proven and accepting new things is sometimes risky.
Without making too bold of a stereotype, large enterprises tends to take things slow with a calculated risk.
Unlike them, startups are able to have a strong position in the market over a small amount of time -- this is due to their high risk-taking and fast way of making prototype.
Startups employ smaller workforce making them change their business strategy as quickly as possible to be able to meet market demand.
The collaboration between nimble startups and big corporations is therefore inevitable and necessary.
The collaboration would better and will help quicken the innovation process and also increase the efficiency of technology usage.
Big corporations most times go into this collaboration to be able to keep track of the mind-blowing and game-changing ideas that are being made, this, in fact, will give them an edge over their competitors in the business world.
For a collaboration between startups and big corporation to take place, a win-win partnership is required to keep the relation stable. This could drive the whole ecosystem and lead to increased economic growth both locally and internationally!
The corporation’s benefits are clearly seen; they get the latest technology available while avoiding the inflexibility they might encounter when doing this by themselves.
This then gives the corporation a bigger stand in the market when they produce high tech products. This why the corporation collaborates with the startups to make them take risks and provide valuable innovations.
What then is gained by the startup; they will have unlimited funds to finance more projects for better innovations, better organization, increased motivation, better equipped to take more risks and to be able to challenge the status quo.
Having the support of a big corporation, startups will have more resources in exchange for ideas and innovations. This type of collaboration if properly done can have a great impact on the two parties and also increase their strength while removing their weaknesses.
Collaborations between startups and big corporations do not happen without risks of different nature. Knowing the risks that affect both parties is crucial and important to understanding the concerns they both have in entering a collaboration.
1. DEMAND FOR REVENUE
With any external resources or capital to fund their projects, startups have little time to get customers and people to fund their operations. This time factor affects very collaboration.
2. FOCUSING ONE CUSTOMER
Focusing on a particular solution for the corporation will make startups not being able to provide a universal product and strategy. This will eventually lead make them not being to grow.
3. PROJECTS BEING DELAYED
As the corporation try to formulate and find the right requirement for a collaboration between startups, there is often delayed. The amount of time used by the corporation in formulating their requirement is very much, and this affects the startups negatively.
4. LOST OF RESOURCES
Some corporation may not want a collaboration with startups and as such make them a source of consultancy. This takes a lot of startups resources and time. They will have to source for better collaboration, and this will take time.
5. EARLY SCALING
The startups may scale the market too early sometimes. This might be because of a proof that their concept works or maybe signing of a client. The successful sale of an innovation or the landing of a client does not mean the market can be scaled. A lot of startups makes this mistakes and the face the repercussion in the figure.
6. LOSING THE STARTUP MINDSET
When the dependency of a startup on a corporation is very high, and decision making is done by the corporations. The startup mindset will be altered in a negative way. The minds and brain involved in the startup mindset will also be affected.
THE RISKS FOR CORPORATIONS
When a corporate firm has a collaboration with a startup and the startup fails to make progress the reputation of the corporation is affected negatively. So it is a risk when corporations go into a collaboration with startups. People might not see this until they take a closer look at collaborations.
2. INVESTMENTS LOST
When a corporation invests in a startup, and it ends being a disaster, the funds spent on the startups is lost, and the corporation loses a lot of money in the process. So corporate firms have a lot to lose when a startup fails.
3. DIFFERENT EMPLOYEES
Corporate firm’s employees know that a failure on their part is a big problem for the firm as such do everything to maintain success.
The employees might feel threatened when they are working with startups because they might not have the same orientation.
4. UNPREDICTABLE OUTCOME
When there are unfinished products or work with the inexperienced staff of startups, the result is quite unpredictable.
5. MISALIGNED PROJECTS
When startups come up with projects that are misaligned with the corporate firm or projects the corporation are not ready to use or take to the market, a fruitless collaboration takes place.
Apart from the risk involved in corporation and startup collaboration, there are some challenges involved.
1. The Time Involved In the Sames Cycle
Sales cycle of corporations may conflict with the startups time to generate revenue, and this can be disastrous.
2. Inability to Pitch the Corporation
Most times startup lack the ability to get to the right people in the corporations to help them land a collaboration. They lack the ability to tell corporations about what their innovation is about (especially if it's cutting edge).
This, paired with larger amounts of red tape, and an extensive hierarchical structure, could make getting the right stakeholder to take an interest in the startups' venture a difficult endeavor.
3. Middle Management Friction
Startups mindset most times clashes with corporation culture and the middle management may protect the company’s ideas and culture. This might be disastrous for the startups.
1. Difficulty in adopting corporation’s innovations
Startups move quickly. Their ability to enter into an organization and implement their new product or service could quite literally happen overnight. So what happens when the corporation is unable to keep up with this speed? The startup gets uninterested and looks for growth elsewhere.
2. Lack of managerial support
Startups are not only looking for money and product market fit from their corporate-startup engagements -- they also want guidance from people who have had success in the space and know what works and what doesn't.
3. A lot of conflicting requirements and delays
It's not uncommon for startups to over promise and under deliver. This isn't because they're deceptive -- more often than not its because they're full of hope and radical optimism. This optimism doesn't always pan out when it comes time to show progress.
4. Lack of understanding of new innovation
We're talking about significantly different worlds here. It's not uncommon to have a translation problem when you bring the latest and greatest technologies to a world where they reach them a little slower.
5. Lack of innovative organization
Not every industry is innovative... but, that's why startups exist, right? Consider how unattractive the taxi cab and personal transportation industry was before Uber.
Startups and corporations alike can't expect for both parties to be at the same speed, speak the same language or have the same challenges and goals.
It's important to note both sides, or more appropriately, have a dedicated liaison on the startup side who understands the corporate world and likewise for a corporate liaison who understands the startup world.
About the Author: Simon Hitchens is a startup enthusiast, columnist, researcher and educator living in Chicago, IL.
He dreams of someday living somewhere warm and writing a novel -- in ink.
About Gearbox: Gearbox.AI provides the leading corporate-startup engagement solutions designed to help open innovation leaders, corporate development professionals, and strategic partnership executives master the art and science identifying and aligning with what's next.
Through a unique combination of a membership community, AI-driven software, and cutting-edge expertise, Gearbox is focused on helping corporations keep pace in an ever-changing digital world and providing startups with new avenues for growth.
The result for modern innovators is unprecedented agility, risk management, and superior results. Headquartered in St. Louis, MO with offices in Denver, Chicago, and Los Angeles, Gearbox serves as a pivotal partner to large corporations, government organizations and a champion to innovative startups.
Want more content like this sent to your inbox? Subscribe below. Opt-out any time.
We just sent you an email. Please click the link in the email to confirm your subscription!