While research on corporate-startup collaboration is not new, it has attracted increasing interest in recent years.
In fact, there was a staggering 81% increase in the number of scientific articles on the subject between 2016 and 2020 compared to 2011-2015, which coincides with the exponential rise of information and communication technologies, Uberization in particular, and their huge impact in many sectors of activity on existing business models relating to large groups.
While encouraging developments should be highlighted, this type of collaboration still needs a number of enhancements, especially when it comes to establishing symbiotic relationships where each partner wins.
Two important questions, in particular, still need to be addressed.
First, what are the key factors promoting harmonious and fruitful collaborative innovation between corporations and technology startups?
And second, how can we increase the chance of success of collaborative projects between these asymmetric partners from the outset?
Let’s take a closer look at both questions by focusing on the relational and organizational factors upstream of collaboration.
What is corporate-startup collaboration?
Collaborative innovation between large corporations and technology startups can be considered a type of strategic partnership, a "voluntary agreement between companies involving exchanges, sharing or co-development of products, technologies or services" (source).
This definition reflects the importance of the relational dimension of strategic collaborations beyond the financial and legal dimension that’s widely highlighted in research. The management of this relational dimension is all the more crucial as the partners of the collaboration are asymmetrical and independent at the organizational and financial levels.
Here's what Marisol Menéndez says about collaboration with start-ups and its impact on digital transformation for corporations.
Collaborative innovation between large companies and startups has two overarching objectives: on the one hand, the partners pursue their own innovation and growth goals with a view to generating or maintaining a competitive advantage, and on the other hand, the collaborators pursue common goals related to the collaboration itself.
To make the collaboration a success, the intra-organizational benefits expected by each partner must be aligned with the common, inter-organizational goals of collaboration.
The complementary resources and skills each partner can offer trigger the desire to collaborate in pursuit of their individual competitiveness objectives. Collaboration usually takes the form of an innovative solution co-development (an R&D partnership) or a customer/supplier relationship on an innovative solution developed by the startup (a commercial agreement).
"Let's share the best we have and enrich ourselves with our mutual differences."
Paul Valéry
While corporations and startups have many complementary assets and are increasingly engaging in collaborations to innovate, these are not natural partnerships. Their intrinsic and organizational differences can create significant cognitive distance between the partners and generate misunderstandings that can hinder or even prevent the smooth interaction and exchange of information and knowledge. This asymmetry can therefore pose a number of challenges. While cognitive distance is necessary for everyone to learn, if it is too strong, the partners cannot understand each other. Even when collaboration involves effective engagement, challenges related to the differences between the partners can still disrupt the relationship.
The major factors influencing organizational differences are:
The relationship to risk (large corporations are generally less sensitive to risk than small startups)
The relationship to time (large corporations are typically able to develop projects over longer time periods and the process of change takes longer than in startups)
Recent work has highlighted the existence of two main phases of collaboration between large companies and startups: the design phase (from the meeting to the decision of the parties to engage) and the process phase (the joint work on the project and the interactions until the achievement of the intended result).
These two phases are preceded by an essential anticipation or preparation phase: the upstream phase (factors existing before the beginning of the relationship). This phase aims to create the conditions conducive to the design and process phases of collaboration and, consequently, to the success of the collaboration.
This recent research has highlighted that adequate preparation of the upstream phase by large companies, internally and externally, is decisive in the success of their innovative collaborations with startups.
"The whole success of an operation lies in its preparation."
Sun Tzu
So, how can these asymmetric actors manage their differences in order to come together to collaborate effectively on innovation projects and ultimately benefit from their complementarities? What are the key success factors of their collaboration?
Collaborators must, above all, prepare!
Given the challenges posed by the differences between large groups and startups, collaboration can’t be improvised.
Key factors for internal preparation
Optimizing the collaborative relationship with startups sometimes requires the collaborating organization to make significant adaptations that need substantial implementation time.
Sharing collective intelligence from top management with the company's operational actors is key to open innovation business models, and needs strong and fluid links between internal and external collaborators. This type of management, based on sharing information and knowledge and the transversality of activities, also promotes a culture of innovation across the organization.
Developing a culture of innovation through internal training and the establishment of a favorable working environment enhances organizational agility and the speed of decision-making. It enables organizations to better adapt to change. A culture of innovation at all levels increases cognitive proximity with startups and facilitates the advancement of collaborative projects with them.
Externally oriented key factors for preparation
Externally oriented key factors relate to the development of an open innovation strategy. Creating favorable conditions for collaborating with startups upstream goes hand in hand with adopting an open innovation strategy. Open innovation increases the ability of the large company to both exploit its own knowledge internally and explore new ideas externally. Open innovation also enables organizations to connect their internal and external resources increasing their ability to collaborate with startups.
Utilizing autonomous regional offices in the decision-making process can significantly accelerate the progress of collaboration projects with startups, closing the gap in the relationship to time between startups and large groups. Research highlights this positive and significant link between decentralization and the outcome of a company's innovation efforts.
Key stakeholders in the company's ecosystem (including incubators, accelerators, open innovation clubs, digital management consultants, etc.) can support the company in its transformation and enable it to collaborate with startups that are relevant to its innovation needs. The large company can also offer its expertise (training, thematic conferences, etc.) to startups in its ecosystem.
This interface (person or team), competent in innovation management and with proven relational skills, is invaluable to successful collaboration because they build trust and mutual understanding, and enable speedy decision making.
The key to successful collaborations between large groups and startups is, above all, strategic and organizational anticipation to bring asymmetric actors closer together from the outset through strong and fluid exchange of knowledge. This places the relational and human aspects of the collaboration at the heart of the process in the upstream phase and lays a solid foundation for the design and process phases of the collaboration.
Successful collaboration between large organizations and startups also depends on the partners’ local ecosystem. The community of actors (networks), the infrastructures of the ecosystem, and its contingency factors.
Bottom line
The success of a corporate-startup engagement depends on how well each party is prepared for it. Both partners must do their homework internally and prepare themselves culturally, and both must know what they want to achieve through the collaboration. And it’s vital to integrate external stakeholders into the ecosystem and create an accessible interface for both parties to collaborate.
Our HYPE Partnering platform does exactly that – making your collaborations successful, intuitive and straightforward. By building the entire ecosystem, we enable you not only to prepare for upcoming collaboration but also to find the right partner to make your collaboration a success.
Ready to explore a bit more? Talk to our team!