Fresh-faced startups and long-established corporations might not sound like the most natural of allies, but as Natalie Mortimer finds out, getting this relationship right can deliver great results for both.
Suits and ties v beards and buns. A stereotypical description perhaps, but it is difficult to deny that established corporations and new startups could hardly be more different... and not only when it comes to appearances. But while lean, nimble startups and monolithic corporations might sound like unlikely bedfellows, getting under the sheets together could actually make perfect business sense for both parties.
According to figures from StartUp Britain, a record breaking 581,173 new businesses were registered with Companies House in 2014, while the number of new UK startups in the fast-growing financial sector rose 28 per cent. Bringing permutation and fresh attitudes industry-wide, these entrepreneurs could be the ignition fuel needed to spark innovation at corporates bogged down by process but big on scale. One of the major sticking points when it comes to striking up a working relationship, however, is accepting each other’s contrasting approach.
“Both sides have value to bring to a partnership. It’s about finding a way to make the differences into assets, not issues,” says Eleanor Orbei Gann, head of tech and business PR at Visa’s innovation hub Visa Collab. “For example, startups are better placed to innovate – they have the flexibility, the agility, the freedom – but a big organisation can bring scale, experience and an established network that can help develop, accelerate and roll out those innovations.”
Visa is in good company. A growing number of corporations, brands and agencies have launched innovation programmes of their own to tap into the startup community’s working mentality. At Visa, the Collab, which operates separately from the main business (the hub is based in Shoreditch, away from head office), works with startups and fintech entrepreneurs in an agile way to turn around ideas at speed. It qualifies companies and potential partners within an initial 14-day period and then delivers proofs of concept through a 100-day innovation sprint that can then be passed back to the main Visa business for incubation and potential rollout.
“We want to embrace the next generation of entrepreneurs, rather than pitting ourselves against them, and to create a winning proposition for everyone – our partners, Visa Europe and ultimately, of course, the consumer,” adds Gann.
In a similar scheme, automotive lubricant business Castrol set up a hub named innoVentures to allow the company to "not break the rules, but to set a framework”, according to technology director Harry Cassar. This allows it to test new ideas nimbly and make investments in innovations outside of the normal business. Via innoVentures Castrol has invested in a number of startups, including US-based roadside repair company RepairPal, but the road to harmonious working has been pitted with a few potholes.
“We tend to want a lot of reporting and check-ins, and if you’re in a startup culture the last thing you want to be doing is the monthly power point deck, so that’s a mismatch of cultures,” admits Cassar. “For us [at innoVentures] we know why the mothership requires it – it’s like a tax we have to pay and it’s there for good reason. Just like a startup we have to keep our sponsors happy, so the mothership for us is a bit like the venture capital.”
Cassar says his team often clashes with startups who feel that, as a large company with vast resources, Castrol should be able to “magic stuff up quickly”, with confusion sometimes arising over who is responsible for what. “There really is an impedance mismatch between the two worlds,” he adds.
Castrol isn’t alone in its challenges. Many corporations have problems communicating with and working alongside startups and vice-versa, with the majority of issues arising over timescales – the processes and governance required in a big organisation can feel clunky and slow to startups, which are used to far more freedom of movement and independence, spurning a lack of unrealistic expectations. These issues, amongst others, have led to the creation of various middle-man companies to help smooth over the cracks.
Speaking at Ogilvy’s Lab Day during Digital Shoreditch, Google Campus head Sarah Drinkwater urged brands to approach such bodies to help aid the process. “A lot of the language of startups is so excluding while agency language can also be difficult to wade through,” she said. At Google Campus the search giant has the ability to validate the startups it works with and act as a connecting bridge between the two parties.
Likewise, management consultancy Accenture offers the ability to “de-risk” the procedure for both startups and corporates and aims to help entrepreneurs target top brands by taking on management of the business case to avoid draining precious resource.
Another challenge for the startup/corporate collaboration says Accenture’s UK fintech innovation lab director Samad Masood, is that startups tend to be focused on the bigger picture of what they are trying to achieve, whereas established players may have lost sight of their initial aim. “Startups are closer to the coalface in a way, whereas large businesses are often focused on operational things,” says Masood. “They become so big that they have strangely enough lost sight of the big picture. On the other hand the startup has the big picture but lacks real understanding of operational issues such as regulation or the distribution channels that are required.”
Despite the minefield both parties have to overcome on the journey to collaboration, the end result far outweighs the negatives. “The value of working together is great enough that it’s worth both sides finding a way to adjust their expectations, and to work around those challenges, so that they can deliver something great,” argues Gann. “The big organisation can find ways to enable and support the innovation of the startup and the startup can learn from the experience and expertise of the larger partner.”
This feature was first published in The Drum's 10 June issue.