Friday, September 27, 2019

How and Why Corporations Should Team With Startups to Drive Innovation

1.  By collaborating with startups, corporations get access to cutting edge talent, fresh ideas, and an entrepreneurial environment.  The corporations themselves can never recreate this because:

   A. Their bureaucratic structure is designed for risk avoidance and delivery on a large scale, not innovation, experimentation, and quick, iterative cycles of test, fail, and succeed.

   B. Because of this structure, cutting edge talent is not attracted to corporations.

2. A lot of times, corporations are failing to engage with startups because they act as if the startup is another corporation.  For example, I know a true story of a corporation that, a couple of years ago, tried to collaborate with a hot, innovative startup in Silicone Valley.  The product would have really helped the corporation, which was losing market share to an innovative, new disruptor.  However, just before they sealed the deal, the corporation's legal department dumped a huge legal document with hundreds of pages onto the startup.  The startup neither had the resources nor the patience to deal with that, so they killed the deal.

3. A good example of a successful partnership is Coca-Cola's collaboration with startup Wonolo (an on-demand, technology-driven flexible staffing company). Coke actually helped fund them.  The secret to their success together is that:

     1. The startup had skills that Coke did not possess.  Coke's corporate structure is designed to create beverages, not run a staffing company.  However, they had a big problem because they distribute to so many outlets, many of them small.  If some of these retail points run out of product, their existing structure wasn't flexible enough to quickly provide more product.  As a result, they lost money.  Now, with Wonolo, Coke's local manager can use the app to hire flexible workers to rush Coca cola products to the retail outlet.

     2. For Wonolo, they gained funding from Coke, a large customer, and access to advisors inside the company.  What's also important is what they didn't get—micro-managed with oppressive rules and contracts.

In conclusion, the key to making collaborations work between corporations and startups is space.  The corporation can fund them and offer resources, but they need to take a hands-off approach to startups, otherwise they will eliminate the flexible, entrepreneurial, cutting-edge environment that made them attractive in the first place.

© 2019 Praveen Puri

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