Collaboration continues to feature high on agenda of corporates and startups

05 May 2017 Consultancy.uk

Startups and corporates have the potential to offer each other mutually beneficial engagements. In a new report trends related to the kinds of engagements undertaken between startups and corporates are considered, as well as the key challenges faced in the interface between the young and the incumbents

The phenomenon of startups has, in recent years, become increasingly prominent. Startups tend to be highly innovative, agile, risk taking enterprises driven by entrepreneurial mindsets. The startup scene, when successful, has created considerable economic returns – from considerable jobs across various industries to unicorn status.

One area in which startups are able to outperform incumbents is innovation. Innovation remains high on the corporate agenda, at number one at 19% of corporates, among the top three at 43% of respondents and among the top five in a further 30% of corporates. Corporates however, tend to be stuck in the mud, taking a risk adverse position and focusing on improving what they already do, rather than transforming their operations through innovation. the consequences of not innovating in a dynamic environment can easily see a business fall from its perch.

In a new study from A.D. Little, titled 'The Age of Collaboration', the consulting firm explores current economic trends affecting corporates and startups, as well as their respective willingness to engage with each other towards some mutual advantage. The study, across 50 countries, involved 400 participants, of which 177 were corporates, 103 were startups and 82 were industry stakeholders.

Key challenges for European startups

The threat from successful startups can be multiple, from disrupting an entire sector, such as Netflix and to a lesser extent services likes Whatsapp and Skype, to picking off customers from elements of wider businesses. Yet startups do not necessarily have it all their own way. When asked about what their key challenge is, sales/customer acquisition took the number one spot at 19.5% of respondents, followed by raising capital at 15.7% of respondents.

How important do you consider collaboration with startup?

Corporates, in their quest to innovate, and with the rapid proliferation of innovative startups, have increasingly turned to courting and engaging with startups as part of their wider business practices. The importance of such collaboration is noted as important in various stadia of the businesses strategy. 35% of respondents say that such collaboration is somewhat an immediate business concern, while 26% say it is very much is an immediate business concern.

In the mid-term however, the majority of respondents sees collaboration as very important, while 14% say that it is extremely important. The long-term perspective of companies (3+ years), is the area noted as most of very and extreme importance, at 49% and 34% of respondents respectively.

What vehicles did you use for collaboration?

Accessing startups has taken a number of different forms in recent years. The research shows that different groups leveraged a number of different tactics to achieve collaboration. The corp-up, which tends to deployed when startups begin to mature, involves a commercial agreement focused on creating joint value between parties – it was used by 63% of startup respondents, 55% of corporate respondents and 52% of industry stakeholders.

The second most leveraged channel for cooperation was the one-off event, which usually occurs at the seed stage. 37% of startups said that they used the format, 38% of corporates and 53% of industry stakeholders. Other areas used for engagement include corporate venture capitalism, used by 24% of startups and 41% of corporates, and M&A, which was used by 7% of startups – the event tends to occur at maturity – and by 41% of corporates.

What were your objectives for the collaboration

Corporate respondents were also asked about their key reasons for collaboration. Access to new technology & products was the biggest drawcard, as cited by 30% of respondents, followed by market/customer access, cited by 16%. Financial returns and image enhancements followed at 16% and 14% respectively. Access to talent was noted as the key reason in 9% of cases.

What makes collaboration a succes

Managers were further asked what makes of breaks collaboration efforts. The top cited positive benefit for collaboration was aligned interest/common goals, with both corporates and startups giving the factor a 4.6 out of five. A dedicated contact point was of key importance to startups, at 4.5, but of less concern for corporates, at 4. Good personal relationships were cited by startups at 4.1 in terms of importance, and 3.9 for corporates.

Areas of least concern for all parties include physical proximity, at 2.7 for corporates and 2.4 for startups, while a streamlined process had an importance score of 3.4 for startups and 3.2 for corporates.