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