Collaboration with startups – Navigating through an innovation driven business landscape

Collaboration with startups – Navigating through an innovation driven business landscape

Sridhar Rao

Management Consultant and Coach

@emesar2

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Before the Software industry came up and innovation became a norm, technology upgrades happened at a much slower pace.

Industries were essentially manufacturing focussed and capital intensive; they were therefore cautious of frequent changes which could affect their return on investments as well as fresh capital needs. As a result, major changes in technology in areas such as Automobiles, Household appliances, Electronic goods such as Televisions and Music systems etc happened, but gradually.

The initiative would be taken mainly by the leading brands, who had the capacity to invest in Research and Development.

With software penetration into every aspect, innovation has taken a new meaning. It is not just limited to product design and efficiency improvements. Introducing I.T. into every aspect from product functionality to production systems, to sales, service and marketing aspects, has enabled disruptive changes in the environment. Almost every industry is now in the throes of changes inspired by I.T. developments.

Innovation and Disruption – gaining momentum

The pace of innovation, is therefore speeding up rapidly; from happening once in a few years earlier, to almost annually now.  It will soon become continuous and an integral part of business life.

Innovation is now no more the prerogative of  large players in each industry. Tables have turned and now, it is new entrants or smaller players who show greater agility, vision and capability to bring change and cause disruption. Venture funding plays a big part in supporting innovative ideas, giving the larger incumbents a run for their money.

The other big change is that a lot of new developments, specially in external process management, such as sales, customer management, vendor management etc are initiated by startups which are not even part of a particular industry.Change and innovation, therefore, now come as an unplanned and unexpected event, with the disruption not from within the industry but often from outside.

Incumbent businesses need to manage fast paced obsolescence

Recently, we have seen some big names being hit by obsolescence . Nokia, which was a market leader with a huge lead, was suddenly nowhere and forced to reinvent itself. Yahoo and Hotmail were overtaken by Google. Mobile wallets came up, from outside the banking industry, to replace cash or even card payments. The wallets may in turn lose to smartened up banking apps which may reclaim lost territory from mobile wallets.

These are just some examples of well entrenched large players, stuck in their own shells, as disruptors took over. The disruptors, in turn, may be out of the markets faster, than the time they took to establish themselves. As businesses become large, they tend to become very focussed on the work already in hand. Therefore, product development and process innovation get restricted to only what they can see as predictable direction.

They miss out the unpredictable – the disruption.

Innovation is becoming a highly decentralised or fragmented process. So no one will know what’s going to hit them and from which direction.

With a global, fragmented and unstructured community called startups growing rapidly, the reality now is that there will be some disruptor lurking somewhere who could suddenly upset the plans of any existing business; a disruptor who sees the industry, its products and processes from a completely new angle. How much can in-house innovation teams do to counter such out-of-the-box possibilities?

What therefore is the way to cope with this very uncertain and unpredictable environment?

Collaboration with startups will soon be a logical way forward

Narrow focus on current targets, bureaucratic systems, laid back attitudes, “not invented here” syndrome, complacence, mistrust of the startups who approach them with ideas, inability to visualise a future scenario – all of these and more, plague managements of businesses as they grow large; including those which were startups just a few years back.

Every business, needs to have its windows open to ideas flowing in from outside. For this, interaction and collaboration with innovative startups would be very useful.

A good example of this is the way progressive banks in India have started inviting fintech startups to participate in incubation/acceleration programs of the bank. The obvious goal is to take advantage and align with the changes that can come, rather than building high walls. There are many other cases of startups being bought out by larger entities, precisely to take advantage of the new age technology and creative skills.

Some steps businesses could take in this direction are

  1. Create innovation cells in the company, whose job should be to drive innovation in every part of the business.These innovation cells could involve teams from every function to start building an eye for innovation opportunities.
  2. The innovation cells could reach out to incubators in major startup hubs to meet startups and explore what’s coming up in the environment.
  3. They could create opportunities and invite startups to customise products. It gives the startup a great pilot opportunity while the corporate benefits from out-of-the-box thinking and low cost innovation.
  4. Businesses could set up their own incubators or invest along with others and invite startups to work on specific areas.
  5. Businesses could align with startups as strategic partners and investors.

Everyday sees new startups being set up with great enthusiasm, by brilliant young minds, with exciting ideas which could impact lives in different fields. Many don’t succeed simply because converting the idea to reality needs infrastructure and funds which they are unable to get in time.

Collaboration between established businesses and startups could create great synergies to deliver continuous innovation in the market and business growth for both participants.

 

Please do leave your comments at the bottom and do share with others if you like this article.

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Dr Meenu Sareen
Dr Meenu Sareen

Very well written. This kind of collaboration with startups will maintain the youthfulness of the organisations. Innovation then can be a parallel endeavour for them.

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Sridhar Rao

Thanks Meenu! The days of working in isolation and exclusivity are over. It is also more economical.

mm
Indira Rao

You’re absolutely right, Sridhar! As an example, AT&T, over the last decade or so has held Hackathons where talent from universities and startups participate to help design software solutions using APIs provided by the company.

mm
Sridhar Rao

Thanks Indira!

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