Recently, KPMG released their annual New Horizons report, which analyzes the landscape of startup-corporate collaborations in the Netherlands. The insights came from interviews with 137 startups and interviews with several large corporates. Since the results from the paper are quite interesting, we thought it might help to summarize the 52-page document here, in case you don’t have the time to go through the entire document. We took the key lessons out and aggregated them into this summary.
The paper starts off by introducing the challenges that are faced when initiating a startup-corporate collaboration. Most corporates nowadays have formed so-called innovation teams: teams that connect the corporate with the startup world. This development is a great step forward, but both the startups and innovation teams face a number of challenges.
Although the innovation team is a very accessible entry point for startups, finding the right person in the business is the actual problem. Both startups and innovation teams have trouble finding the person within the corporate that is looking for the solution the startup is offering and that has the authority to launch such a project. Also, the innovation teams have a hard time getting their budgets approved by the Board and quite often get shut down by their organization.
It turns out that startups are quite cautious of collaborations with corporates. They try to avoid innovation teams that are unable to provide a quick entry and an actionable approach and therefore waste the startups’ precious time and resources.
Advice towards succesful collaboration
The report brings forth several tips for both corporates and startups towards successfully establishing a collaboration.
1. Make innovation a part of organizational DNA
Merely establishing an innovation team is not enough for successful corporate-startup collaboration. The entire organization needs to truly embrace innovation.
2. Establish the connective tissue
Corporates need to establish a team that has a strong internal network that can really help finding the right people within their organization who need the solution a specific startup is offering.
3. Be concise and clear
Often, corporates send wrong signals to startups about a possible collaboration. This makes it very hard for startups to estimate the value of a corporate lead. Corporates need to give more honest feedback on the chances of a collaboration.
4. Set up experiments and earmark a budget for pilots
Corporates have to find the shortest route possible to setting up an experiment (pilot) to test the viability of the startup's product. The corporates should allocate a budget to these pilots upfront, as opposed to unlocking the budget on a case-to-case basis.
5. Consider the documentation
Corporates need to consider the fact that their usual documentation (e.g. Terms and Conditions) is a good fit for a collaboration with another large organization, not with a startup.
1. Get the basics right:
“Corporate entry points” are usually very, very busy. Startups should therefore make sure to make life as easy as possible for their contact to understand the proposition.
2. Nice to have is not nearly enough
Implementation of a new product usually has a large impact on a corporate, startups should therefore consider the contribution they can make to a corporate before engaging with them.
3. Make sure there is a business rationale
Startups should do the math before engaging with a corporate: Determine if there is a business rationale behind collaborating with a corporate at this stage.
4. Pull the plug if you have to
When the results of a collaboration or pilot do not match expectations, both parties should discuss and evaluate the situation. When there is no clear solution at hand, it might be wise to part ways.
5. Commitment from both sides
“The days of unpaid pilots are behind us.” - In order to evaluate the product’s true value and the commitment from both sides, it is necessary for the client to pay for the startup’s service.
The report then describes some of the characteristics of outperforming startups: startups that have a successful collaboration that has already (or will over the next 12 months) provide a return on investment. Outperforming startups …
- ... overcome hurdles on the road to collaboration more efficiently.
- ... are more focused on defining the objective of the collaboration up front.
- ... are 30% more likely to use standardized governance models or partnership establishments when preparing the collaboration.
- ... take an average of eight months to set up a collaboration compared to the 10-months average required by underperformers.
- ... are more likely to have found a market fit and are focused on expansion.
- ... have a more mature team with more years of sales-, business-, and technical experience.
Overall, the report by KPMG gives some very useful and interesting insights into the current landscape for corporate-startup collaboration. It also shows that KPMG, being a corporate, genuinely recognizes the importance of collaborations with startups and allocates time and resources to these types of collaborations. If you would like to read the full report, you can find it HERE.
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We recently wrote an article summarizing our presentation at EY on how to innovate a large professional services firm. Read the article here.