I had a great time engaging with participants in my recent webinar with MaRS Verge on Collective Disruption topic. It was a precursor to the upcoming MaRS Verge event scheduled for Feb. 29-Mar. 1 in Toronto, where I'll be providing an onsite workshop as part of the event. I have a great amount of respect for MaRS and what they are doing in terms of broad support for the entrepreneurial ecosystem. It's exciting to see them now also embracing corporate collaboration with startups in a bigger way.
As follow-up to my webinar, I was asked to answer a few additional questions that I didn't get to on the webinar. I thought I would share these questions and my answers here for your benefit as well!
Understanding that it's important to co-create and partner with start-ups, from the perspective of a large company, what are the steps to doing this? What's your advice on the 'how' of doing the 'heavy lifting' of innovation?
This is a broad question that I can’t fully answer here… and I’m sure I don’t have all of the answers anyway. But here are a few of the key steps to consider in getting started in co-creating and partnering with startups.
Start with innovation intention – Engaging with the startup community and the further step of co-creating with entrepreneurial companies isn’t for everyone or every situation. As I mentioned in the webinar, we need to begin with overall innovation strategy and how that strategy is aimed at delivering on business growth goals. If you’re focused on core business innovation and even some adjacencies, you’ll likely be leveraging external partners and maybe even some co-development, but this usually be done with the context of existing business processes (e.g. Stage gate processes, digital development processes, etc.). It’s when we’re dealing with more transformative opportunities that I believe co-creation with startups really comes into its own. In these higher risk, higher unknown situations, leveraging the agility and entrepreneurial skills of startups can help you deliver on these innovation intentions much more successfully.
Walk before you run – In my book I discuss the importance of a stepwise appproach to collaboration, especially dissimilar entities such as large co’s and startups. Best to have some interaction in a non-committal forum/format to test the relationship and fit. This also addresses need to work together before entering arrangements of co-creation where intellectual property management becomes more central. Here’s summary of these steps (overly simplified here):
- Begin with non-confidential discussions, with written agreement upfront not to disclose confidential information
- If confidence of opportunity increases, proceed to non-disclosure agreements for initial discussions and diligence — still exploring, not co-inventing here.
- Then move to ’teaming agreements if goal is to study market or external exploration — address I/P and sharing of any learnings and limited I/P creation
- Finally move to in-depth co-development and/or option agreements that spell out roles and responsibilities and fully address I/P rights
Move to pilots as quickly as possible – While stepwise approaches are important, I’m still advocating moving to external exploration and/or pilots quickly. Often you’ll learn not only about the fit of the techology/solution, but about the relationship as well. Too often, companies spend months and months negotiating hypothetical deals should the opportunity move forward, when a pilot or market study can quickly validate whether it’s worth pursuing. Plus, this focus on validating the opportunity will accelerate deal-making if both parties see the market opportunity in a similar way. I’d put this ‘fast pilot’ activity under the heading of ’teaming agreements’ (see above).
Spread your bets – The natural tendancy with partnering on the outside is to be highly selective and disciplined in selecting partners and pilots. I’m not advocating ad hoc work and lack of diligence, but most large companies err too much on the side of too few early stage learning experiments. I’m advocating a clear vision of where your headed (innovation intent) and a thorough search of potential partners, but don’t try to select the one or two partners too quickly. Be willing to run ‘light touch’ experiments with more partners to both learn and to test the relationships.
Attack lower risk opportunities first – There is a truism in these partnerships that the second alliance with a firm is twice as fast and twice as profitable as the first. Recognize that your looking for recurring relationships and try out easier opportunities first, where risks are lower and learning can be faster. Then leverage these proven partners for larger higher risk/ higher return opportunities.
Much more to say here, but hopefully that gives you a start on ‘how’.
Would you spend innovation time in a market not elated to the core? Ie: if your core is automotive, would you look at ideas how to improve the agricultural industry?
I think this is much more of a business strategy question than an innovation question. And I’ll address the broader question, vs the specific agricultural one as I assume that’s just an example. As is evident in the marketplace, you’ll find an infinite number of answers to the question of how far you go from your “core” in defining future sources of growth. Much of this comes down to how you define your business. Ford has recently redefined their business from being an ‘automotive business’ to a ‘mobility business’. This broader definition definitely opens up new and broader opportunities, but as Chris Zook argues in Beyond the Core, companies can move too far afield and miss core and adjacent opportunities. Recall back in the 80’s that Ford invested in Hertz in a previous attempt to grow outside of their core business, then sold that off in 2005 when they needed to refocus on core. In a very recent example, Urban Outfitters, the clothing retailer, just announced their intended acquisition of an Italian restaurant group. The debate will continue of the merits of staying close to core and how companies define and redefine their business spheres.
It’s the wild pendulum swings that we want to avoid and one of the reasons that I promote ‘polarity thinking’ in how you approach managing core and transformative innovation portfolio management. Core OR transformative is not the question, but rather how to address core AND transformative as an interdependent pair that can be leveraged as a system for sustained growth. Look at Google and their recent restructuring under the Alphabet umbrella as I think a great example of long term commitment to core and transformative within larger entity. Venture2 is helping our clients address this dilemma through a recognition that core and transformative need to be executed differently, but in terms of strategy need to be considered as a larger interdependent system. There are practical ways that you can extend and strengthen your core business that support and enable breakthrough explorations. And in your breakthrough portfolio, there are ways to ‘back-cast’ these innovations into nearer term solutions that move you in that direction, while validating the opportunities and contributing to the core.