Corporation-Startup Collaboration: Barriers & Solutions (part 2)

Key take-aways:

  • Large corporations are complex organization that often have conflicting internal goals/objectives, this can lead to misalignments among different departments regarding the role and purpose of external collaborators such as startups.

  • Pushing around innovation processes between different departments and people in charge is caused by the lack of proper inner structures and leads to a situation where no real steps towards business development are taken. 1/3 of startups feel that this is the biggest barrier when collaborating.

  • Researches show that these transfers of responsibility arise especially in situations where these partnerships move from the R&D team to procurement and legal teams.

  • There often seems to be a fundamental misconception of what startups are, what they bring to the table and why the corporation is engaging with them within the corporation. This needs to be communicated thoroughly within the corporation, or otherwise these “non-transparent information flows” start creating complications.

  • 4 Tips on how to tackle these strategic barriers from one of India's largest technology and software service companies, Infosys.

Strategic barriers

Large Corporations are complex organizations that often have conflicting internal goals and/or objectives. This can easily lead to misalignment among different departments concerning the role and purpose of external collaborators, such as startups, and can there for become a significant barrier between the collaboration. If the corporation and its departments don’t have a unified view of innovation and strategy, it’s in danger of generating diverse priorities, which is a significant obstacle when it comes to fast decision-making. In worst case scenario this can lead to the hampering of a smooth progression of collaborations. This misalignment is especially obvious when innovation processes are pushed around different departments or different people in charge. This type of 'pinballing' is also a very effective way to avoid taking responsibility within the corporation and to make sure no concrete steps are taken, at least in the pace that is required.

In a nutshell, strategic barriers are the easiest pits to fall to when starting collaboration with a scale-up.  As mentioned in our previous blog post, these types of barriers are also the most common ones. One third (!!) of startups that were surveyed for Nesta’s research found such transfers of responsibility to be particularly problematic. In addition Minshall et al. (2010) found in their research that this issue arises especially in the situations when a partnership moves from the research and development team to the procurement and (dare we mention it) legal teams who treat startups like any other business.

Why shouldn’t they treat startups like their usual business partners? There often seems to be a fundamental misconception of what startups are, what they bring to the table and why the corporation is engaging with them within the corporation. Firms definitely shouldn’t engage with startups for purely cosmetic reasons and activities. Startups genuinely drive innovation, which is crucial to the continuing success of any organization. Startups don’t just offer a cool product or a nifty software that some tech geeks came up with for the corporation look fresh and current. They bring something absolutely vital for the corporation’s future survival in the markets. This needs to be communicated thoroughly within the corporation, or otherwise these “non-transparent information flows” start creating complications.

Too many organizations suffer from information under-sharing (where information is either withheld or poorly shared) but also from over-sharing. The end-result in both of these cases is the same: other departments don’t have an understanding about why a division is working with startups and how their own actions may help or slow down the process. These types of barriers have to be addressed from the top with senior management communicating the legitimacy and importance of startup collaboration and emphasizing the potential benefits, especially if the unit dealing with this type of collaboration is a separate entity. When a corporation starts this communication by voicing a problem that will have consequences on the whole organization if ignored, the whole company will help secure buy-in across the organization.

Top level shake-ups can help change corporate culture and direction, here’s an example how India’s largest tech and software service companies did it:

Three years ago one of India’s largest technology and software service companies hired Vishal Sikka as its new CEO. Sikka was the first non-founding member to lead the company and his task was to turn the company around after a period of stagnation. In about a year and a half, Sikka achieved respectable growth in revenue and a significant share price increase, reviving Infosys. To make this all happen and to catch up to its competitors, Sikka adopted several new initiatives relating to open innovation and startups.

1. First, Sikka ramped up Infosys’ strategic mergers and acquisitions. These acquisitions were a part of a larger innovation fund used to invest in startups and scale-ups that focused on disruptive technologies.

2. Secondly, Vishal Sikka started a crowdsourcing initiative by encouraging all Infosys engineers to come up with an innovative idea which they felt that their clients should be working on. Together with the company’s COO, Sikka selected the most potential ideas for implementation, while praising and supporting other high-quality ideas.

3. Thirdly, Sikka implemented a “zero-distance approach” to innovation. Top managers were put on a Design Thinking Course to learn this type of zero-distance perspective of innovation, which makes individuals and teams ask themselves the what, why and how of their daily tasks in order to try to innovate and improve them. By doing this Sikka wanted Infosys to be able to close the gap between them, their clients and the end-users.

4. Finally, Sikka ensured the top-level buy-in by promoting some of their key personnel and more drastically, hired 16 of his previous colleagues for vice-president roles.

All in all, Infosys’ great turnaround was caused by the new CEO’s actions to promote innovation within the company through the acquisition of startups and changing the corporate culture from the top-down. This raised employee morale, lowered the rate of attrition and brought back team spirit and a sense of belonging.