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There have always been biblical battles between the underdogs and the establishment. Tales of the victorious underdogs being retold and embellished while the more common victories of the giants, often forgotten. However there are an increasing number of participants in this story exploring a more enlightened approach. One where David and Goliath work together to conquer greater prizes than either could on their own. It is not a new approach but the need for innovation and the need to make things happen faster, has never been greater.
A report by Mckinsey on the topic quotes that almost 75% of the Top 100 companies now have active venture or innovation units. But there are many different ways David and Goliath can work together and the potential for a lot of expensive mistakes. We know this because as ZAG, we were set up to drive innovation and new business models within a large corporate and it is safe to say we have had the opportunity to make some valuable mistakes ourselves.
There are many different models out there, attempting to bring corporate scale and start-up smarts closer together. From innovation labs to accelerators to sandboxes to venture catalysts to venture builders to what seems like almost old-fashioned corporate venture capital. At a macro level, there is fertile ground for a beautiful relationship.
Corporates want get closer to Start-ups because:
Many Start-ups want to get closer to Corporates because:
The synergies seem clear, feeding the beautiful optimism of any new relationship. But the reality can be rather more traumatic. Initiatives can end up as expensive marketing or even more commonly, lost at the periphery of the business, with frustrated talent and disappointed stakeholders all around. There are many potential causes but chief amongst these are a misalignment in objectives and expectations between everyone concerned.
Entrepreneurs are quite rightly excitable and optimistic about working with a big partner. Executives within complex organisations tend to be a little more sceptical (“we tried this X years ago..” a commonly heard refrain) and of course they have the small matter of business as usual to keep on track. Added to this, the Start-up sees their participation in a discussion as a key opportunity while the corporate has a portfolio approach. The results are often lost opportunities or complicated non-value adding deals that become difficult to untangle.
However the prospect of what could be remains exciting. Lets indulge in a couple of What Ifs.
What If you are one of the world’s leading food and beverage companies but were struggling to innovate or plug into the latest consumer led opportunities. And What If you are a start-up delivering critical services to emerging food and beverage entrepreneurs. And What If the two connected to provide emerging F&B brands a route to scale and the corporate a steady stream of proprietary real-time market intelligence.
What If you were a large telco struggling to find ways of differentiating, while also looking to grow your revenue per customer. What If you were a start-up with the technology to enable an enhanced customer experience for mobile users on a daily basis and are looking for distribution for their technology. And What If the two connected to create a new level of personalisation for consumers and access to new data and revenue for the Telco.
In both cases, data and scale could come together to make new things happen faster. While the connections above are hypothetical, the corporate challenges and the start-ups are very real.
Bringing David and Goliath Together
When corporates and startups work together they can both benefit, but only if the relationship is carefully cultivated. Over the years, Zag has worked as a venture builder, an investor, and a facilitator of these relationships. We have had the opportunity to make many mistakes and learned a few lessons along the way
1) Ensure alignment between the C-suites
This can be hard given the different models, ambitions and priorities. However if it is important, the relationship requires C-suite or senior P&L accountability. Obviously more easily done on the start-up side and often missed on the corporate side leading to expectation misalignment and heart ache.
2) People over processes
We have seen process led tunnel vision where corporates and start-ups, often guided by 3rd party service providers, become so focussed on specific methodologies that the entrepreneurial vision can get missed on all sides. Maintaining flexibility in thinking and doing is essential.
3) Timing is everything
It is important to know when to start (or end) the conversation. Until David has the bandwidth and a mature enough product to really engage with Goliath, the risk of being overwhelmed is high. And until Goliath is able to really prioritise an engagement, the risk of disappointment is high. It’s in nobody’s interest to rush into things despite the pressure to make things move faster.
4) Create a bridge
Our biggest learning is about communication. As ZAG, we have learned the importance of having individuals who can act as a bridge between both sides. They should be fluent in the language and culture of start-ups but also fully understand the corporate ecosystem and realities so they can identify and engage with the right evangelists to really help make things happen.
As ZAG, we have worked on both sides and are convinced there is huge potential. There could and should be more examples of success out there and perhaps with just a little nurturing, David really can love Goliath.