Driving a Successful Partnership between Large Corporations and Startups

Startups and larger companies don’t have to be fierce competitors. They can work together to help each other thrive.

We all know that relationships take work. They require compromise, balance, and playing up one another’s strengths and weaknesses. The same applies to business partnerships. Big or small, personal or professional, everyone is looking for that winning combination that brings out the best each party has to offer.

Although large, established enterprises and rising startups reside on opposite sides of the business spectrum, magic can happen when the two work together. However, the spark in such relationships can quickly fizzle. This is not only because 90 percent of startups fail, but also because the two types of partners have different approaches to innovation – a key ingredient for business survival. So, how can these partners work together more efficiently?

What’s mine is yours

Big companies and startups each possess something the other needs to innovate. Frankly, many large corporations struggle with the process of innovation itself. Although equipped with brand recognition, resources, and funding, time spent blazing a trail could potentially take focus away from core products and services. Similarly, financial teams are driven by numbers and will often be reluctant to invest in something unproven without clear ROI validation and other metrics. Thus, innovation can mean bottlenecks, uncertainty, and shifts in market perception.

On the other hand, while startups crave credibility, cash flow, and better resources, they offer cutting-edge talent, best-of-breed expertise, less bureaucracy, agility, and faster time-to-market than their corporate counterparts. But, when large and small players bring their complementary strengths to the table, they fill in the other’s gaps and create new ideas, opportunities, and revenue growth.

Feel the fear and do it anyway

Smaller companies and startups sometimes fear that an enterprise partner is really out to steal their intellectual property. That’s not the case – corporations put their muscle behind scaling ideas, not so much in developing them. In contrast, startups are more focused on their people and culture. Harnessing these invaluable resources to innovate and execute together speaks volumes to established companies and potential partners.

Despite their attraction to startups, big companies must overcome a few challenges in working with their smaller counterparts, and startups need to take note. Often driven by fears of being taken advantage of, startups are reluctant to be fully transparent. This can make it difficult for the bigger companies to accurately assess a product or service’s viability. When a startup holds its cards too close to its chest, it becomes challenging for larger corporations to determine whether the startup is the right investment fit. Add that to the lack of a track record and partnering can be a risky proposition. These barriers – some real, some based on misperceptions and fears – have kept too many potential partners at bay. Akin to “taking the plunge” in marriage, businesses will find that a leap of faith can lead to positive outcomes.

A better engagement model

As with any relationship, big companies and startups must spend time together, far beyond emails and phone calls. For example, large technology companies should offer events for startups, inviting them to industry conferences, hackathons, or competitions centered on a particular solution or market theme. For startups developing solutions based on specific business or industry needs, this is a great way to gain visibility. These events and interactions provide opportunities to get to know each other one-on-one, strengthen relationships and build mutual trust – as a vendor, channel partner, or even potential acquisition. Startups need to use these types of industry events to find companies that share their philosophies, as well as their passion for ideas and partnership.

Similarly, both types of companies should also get involved in their local technology and innovation communities. This will allow everyone to remain in the know about the latest processes and protocols, and uncover new ways to solve business problems. Partner to offer challenges, mentorships, events, and opportunities to meet potential customers. Large companies can also establish or engage with innovation accelerators that give startups access to expertise and allow them to further their solutions.

Most importantly, emphasize open, two-way communication throughout this process – both externally and internally. The last thing big companies want is to appear foreboding to potential entrepreneurs. Be bold in your approach and respectful in your interactions.

True story: A tale of mutual success

When my company, Cisco, decided to partner with the Japanese Internet of Things (IoT) firm, smart-FOA, both parties recognized that the value of the partnership far outweighed the risks. FOA, which stands for Flow Oriented Approach software, provides an information-sharing platform that can resolve problems and enable real-time decision-making. This is achieved by creating “information strips” that combine with the raw data collected by manufacturing workplace sensors – letting all of it flow on the network so information can be accessed from anywhere. It is essentially fog computing – decentralized processes at the network edge. With Japan known for its ability to utilize data from manufacturing plants, FOA was a natural evolution.

As we worked together, we made sure to understand how our strengths and solutions complemented one another. From Cisco’s perspective, investing in smart-FOA would generate new value by bringing together goods, people, processes, and data. In doing this, it would significantly expand Japan’s IoT solutions across global markets. But to unearth this value, we had to maintain open lines of clear communication, exhibit mutual respect, and trust, and relish the quick and nimble pace of innovation that comes almost naturally to a startup.

Every relationship requires compromise, communication, and a little faith. When combined in the business realm, these elements establish the trust needed to drive a mutually beneficial partnership, with each side gaining confidence through investment in the other. The result is faster innovation, greater market share, and hopefully, making magic together for many years to come.

Meanwhile, if you have questions, get stuck, or need an innovation therapist, don’t hesitate to contact me:

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This article originally appeared in Cisco Blogs on January 7, 2019

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