Corporation-Startup Collaboration: Barriers and Solutions (part 5.)

Corporation-Startup Collaboration: Barriers and Solutions (part 5.)

Key takeaways:

  • Corporations’ process barriers include inflexible, complicated and slow decision-making processes that can be discouraging for startups.

  • The challenge with these complicated internal processes is that they exist for a reason - They’re optimized for frequent activities and that has consequences for streamlined processes facing the unexpected and different.

  • Processes should be made simpler, however not on the cost of efficiency

  • The need to change these clumsy processes should be communicated from the top down.

  • Deadlines, goals and expectations for the collaboration should be set beforehand

  • Consider creating parallel processes for startup collaboration that are simpler and more streamlined

 A frequent annoyment of startups is larger corporations’ inflexible processes that are sometimes unfitting to their particular demands. The corporate machine often handle the collaboration with startups as if they were large companies, insisting certifications for instance.  Startups are often discouraged to consider collaboration or partnership because of the long and complicated procedures fit for larger partners. This is a continuous problem that every organization experiences to some degree. This problem, however, becomes pressing when there are a lot of similar transactions to carry-out, as in some specific business sectors (i.e. manufacturing, construction)  and functions (i.e. acquirements).

 The challenge with these complicated internal processes in larger companies usually exist for a good reasons and are optimized for daily activities. This optimization has consequences for streamlined processes that become insufficiently flexible when faced with the unexpected and different. These processes should move towards exploring new opportunities instead of exploiting old ones. There’s always a danger that the core competencies become the core elements of stiffness in internal operations. Corporations should be cautious if they decide to change these processes to better attract startups, so they don’t end up trading efficiency for flexibility. However, some tasks and jobs should and need to be changed and broken, but it’s very important to not disregard the people affected most by these changes and communicate also the upside of these changes.

Some solutions could be explaining the need to change the existing processes and set deadlines for decision-making, or for example set incentives for employees to give preference to the collaboration processes with startups to speed up the process. Another option could be creating parallel processes that are specialized and dedicated for startup deals.

 An Italian energy and utilities company Enel, started working with startups to cover technology gaps in smart grid technology, energy storage, data analytics and existing business models. Enel found that the collaboration process was too complicated and painful for both parties so they decided to make some changes in their decision-making processes.

According to Nesta’s interview Enel successfully changed its processes and corporate culture to make collaboration with startups faster and simpler.

 Here’s what worked for them:

 1. Preliminary scanning: Enel started gathering startup submissions through a dedicated web platform: startup.enel.com. (Obviously they hadn’t heard from Catapult, because phases 1&2 can be done much more efficiently by outsourcing it to a party who knows the scene and what they’re doing.) This preliminary scanning process was done by the Innovation Venture Team (sidenote: if the corporation doesn’t have a team like this, or you work in a team that’s doing this you should contact us). As part of the process the innovation team consults the business line experts, who are required to give their opinion about the introduces startups within two weeks. Startups that were judged to have a strategic and technological fit, would then be presented to an Advisory Board made up of the Head of the Venture Team and various innovation managers.

I would like to add on behalf of Catapult, that it is absolutely crucial to meet the business line experts to locate the areas that need to be developed and/or changed and after detailing these business development needs can the scanning and screening process start! Surprisingly many departments inside the corporation are very unaware of the challenges and problems in other departments and disagree about the general development needs of the corporations. Without doing this part thoroughly you can waste a royal amount of time.

 2. Second step in the process is that Enel’s Advisory Board decides whether or not to proceed with the suggested collaboration. If they get the thumbs up from the advisory board, the project will proceed to the next phase, the due diligence phase.

 3. The startup is then formally assessed in order to understand the value and the impact of the proposed project. This phase has a deadline of no more than one month. From our point of view the startups should be assessed at least to some degree, before making the decision to work together (the collaboration is less risky if the startup already has market proof or has a tested product that is ready-for-markets) and what would be the purpose of the collaboration (which problems can the startup solve for the corporation).

 4. Structuring the deal. If the assessment then, has a positive outcome, the Holding Venture Team will start the negotiation phase. When all the aspects of the agreement are defined, the legal and procurement team will structure the contract. This stage is given a deadline of three weeks maximum. Reminder: it’s essential to know who the key person is that takes the responsibility of making sure everyone is sticking to their deadlines and that the project is moving forward. You have a person assigned for it.

 5. Final approval: Once all the terms of the agreement are agreed upon, and Enel’s resource commitment is cleared, the Chief Information Officer and the C-level management will give their final approval. The key thing for this streamlined process is very disciplined timing to ensure that concrete steps are being taken. The CEO of Enel made it clear that the commitment comes from the top, and that senior management is taking an active role in the new process. Enel makes sure it provides incentives for the key staff in the process to respect the deadlines. Enel also created a ‘preferential lane’ for innovative agreements, including a dedicated legal team specialised in contracts with startups, as well as a fast-track acquiring process for startups, which in some cases include an upfront payment instead of the regular terms.

 Tips for corporations: 

  • It’s important to set clear expectations and goals, internally as well as externally, for the collaboration and its’ duration.

  • You need a key person to monitor the collaboration processes in order to understand the bottlenecks of it and make sure the collaboration goes smoothly forward.

  • Management and staff should know and remember that time of great importance for startups due to limited resources

  • Pace matters! Incentivize employees to perform within deadlines

  • In processes where bottlenecks aren’t easily removed or startups are require very different procedures, it’s smart to consider parallel processes that are simpler.

  • Don’t put too much indemnities and liabilities on startups and reduce the costs required to enter into agreements.

  • Even if the processes are complicated internally, it doesn’t have to look that way externally, just make them timely and simple on the surface.

Corporation-Startup Collaboration: Barriers and Solutions ( Part 4.)

Cultural barriers

KEY TAKEAWAYS:

  • The typical corporate culture favors a more conservative decision-making process and is more hierarchical than the entrepreneurial culture.
  • The organizational structure of a startup is flatter & suggestions are made across different functional areas which boosts innovativeness.
  • If a corporation wants to establish a more entrepreneurial culture to boost innovation, certain factors and leadership characteristics like embracing experimentation, accepting failure and taking risks should be present.
  • An entrepreneurial culture is an environment where new ideas, creativity and risk taking are encouraged and expected, failure is accepted and learning from them promoted and continuous change is considered to bring new opportunities.
    • Corporate culture can be hostile to some of these entrepreneurial attitudes, which can make collaboration with startups more difficult.
  • Tips for corporations!

The typical corporate culture has a climate and a reward system that favors a more conservative decision-making. Larger corporations base their decision-making on large amounts of data, and riskier decisions are often postponed until facts are gathered. Decisions require many approvals before they actually move to a direction and individuals don’t necessarily have a sense of personal responsibility for the project. The traditional corporate culture is hierarchical in its nature and has well established procedures, lines of authority as well as controlled mechanisms. This is not necessarily the best culture to encourage new venture creation.

Startups on the other hand, have a more of an entrepreneurial culture, obviously. The organizational structure of a startup is flatter and close networking and teamwork helps establish an atmosphere where trust supports the accomplishment of shared visions. Suggestions are made across different functional areas, which results in innovative and fresh ideas. These two cultures produce different types of management styles and individuals. These two cultures also have different motivators.

Traditionally corporate managers are motivated primarily by promotion and other typical corporate rewards. Entrepreneurs are motivated by the ability to create and be independent. There are often time orientation differences: Managers emphasize short run, entrepreneurs the long run.

An entrepreneurial culture is an environment where new ideas, creativity and risk taking are encouraged and expected, failure is accepted and learning from them promoted and continuous change is considered to bring new opportunities. Corporate culture can be hostile to some of these entrepreneurial attitudes, which can make collaboration with startups more difficult. If a corporation wants to establish a more entrepreneurial culture to boost innovation, certain factors and leadership characteristics should be present.  Since R&D is important for new product development, the corporation should operate on the cutting edge technology and encourage and support new ideas. Employees should see startups and innovation in a positive light and.

The lack of entrepreneurial culture can stem from poorly implemented previous changes and rational actions by employees who aren’t incentivized to act outside their immediate job description. Most employees don’t usually have a stake in the business they manage so they lack motivation to think about the long-term implications of the company and are motivated by projects and activities that don't risk their status, wealth and job security. Most corporations want to copy the startup mentality of embracing failure, but in reality rarely do anything to embrace it in practice.

Employees (feels like especially in Finland) are taught since school-age that failure is bad. Employees focus on concentrating on their existing role and strive to perform in their formal tasks as efficiently as possible, which of course shows great working morale. However, the cumulative effect is the corporate culture of risk aversion and the fear of failure which slows down the decision-making process. Sometimes employees may feel threatened by the adoption of disruptive technologies and innovations because these implementations can change their role in the organization. This is especially true in very specialized functions, or in cases where employees have been working for years on a particular project. In these cases, employees may be reluctant to collaborate with startups and prevent the collaboration. It’s important to achieve a culture where the resistance towards innovations created outside the company is changed towards an enthusiasm and proudness of finding the innovation from elsewhere.

In all the instances above, signals from the senior management level are absolutely vital. Executives must genuinely understand the need for innovation and collaboration and transmit this message to the staff. Personal incentives should reflect this as well and out-weight the reasons not to pursue them. Suggesting new ideas and collaboration should be encouraged. Assigned innovation champions mentioned in the blog part 3, can help change the internal culture and help legitimize other people’s innovation activities.

Corporations should also embrace experimentation, this includes accepting mistakes and failures. Without the opportunity to fail, only few corporate ventures will be developed. An organization should also make sure that there are no opportunity parameters like turf protection that can significantly inhibit creativity. It’s important that the resources of the corporation are available and easily accessible. Funds are often allocated towards solving problems instead of creating something new, one option is to have a separate venture capital for funding entirely new ventures.

“You can’t change the culture in one day, but you can find change agents inside the company who are capable of infecting other colleagues with their enthusiasm. If you’re able to spot them and empower them, support them and protect them, these people will do the job for you” – Carlo Napoli, Enel

 

Tips for corporations:

  • Engage a person who has the ability to navigate the organizational structure and sell the innovation processes across departments
  • Show sensitivity towards those whose roles are changed by the implemented innovations to relieve jealousy and insecurity and make sure you communicate the reasons behind these changes
  • Encourage employees to mentor startups to promote collaboration and sharing of experiences, reserve time for this monthly. It’s advised that the employees gain experience about how startups think.
  • Hire enthusiastic, inspirational and entrepreneurial people that welcome and encourage fresh ideas.
  • Study incentive schemes and implement incentive systems that reward innovation and responsible risk-taking
  • Embrace experimentation by accepting mistakes and failures as learning curves
  • Make sure resources are available and accessible for the implementation of innovations.

How Coca Cola fostered an entrepreneurial culture

Coke is a massive corporation with 700 000 eployees, 24 million customers and 129 years of operating. The secret to Coca Cola’s continuing success is according to Mariano Maluf, Lead of Cloud Brokerage Ecosystem at Coca-Cola Co, is experimentation. Coca Cola approaches technology with a startup mentality and embraces the mentality of focusing on mistakes to learn quickly from them. According to Maluf this is how Coke made sure each employee from management to junior roles embraced entrepreneurial culture.

Coca Cola appointed their product designer and entrepreneur as the Vice President of Innovation and Entrepreneurship. The new VP’s challenge was to harness Coke’s capabilities in business model innovation and startup collaboration, while fostering a more entrepreneurial culture across the organization.

The fresh VP took several steps in order to lower the cultural barriers for innovation and startup collaboration within the company.

1.     Partnering up: Selected startup founders were asked to work with Coca-Cola on new products and solutions and they were experimented and launched in different cities to how they caught on. Bringing in entrepreneurs helped employees to think in a more agile manner and the startup mindset and excitement caught on.

2.     Coca-Cola encouraged their employees to work like startups. They provided a co-working space for people across the organization, unstructured meetings, organized hackathons and startup weekends where employees worked together to develop ideas.

3.     Failure conferences: The company encouraged people to talk about their failures in business and went through lessons learned from those mistakes. You’re never happy to fail, but it’s your attitude that defines how much you can learn from those mistakes and how fast.

By appointing a senior figure with an entrepreneurial mindset Coca-cola gained a powerful innovation champion. This helped the company to partner and collaborate with startups and foster a entrepreneurial culture within the corporation.