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.