The Strategic Imperative for Technology Companies to Partner with Startups

Increase in Startup Partnering

Technology companies have expended considerable effort in startup partnering for over a decade. In the case of Microsoft, this has entailed top-down and bottom-up initiatives spanning a range of geographical locations where I have conducted interviews with the company’s managers and startup partners: Silicon Valley, Western Europe, Israel, emerging markets such as China and India, and latterly Africa. Their latest avatar of startup engagement is dubbed Founders Hub and seeks to digitally offer technology and business support to startups at scale – thus digitalization is, in part the means to engage with startups.

Several other corporations have followed suit. A decade ago, the German technology company SAP, known around the world for providing ERP solutions to some of the largest companies in the world, introduced its Startup Focus initiative. It chose to have a team based in Silicon Valley – rather than in its German headquarters – to manage this initiative.

Intel launched a startup partnering programme, Ignite, in Israel – spearheaded by Zack Weisfeld who had previously pioneered Microsoft’s accelerators – with additonal locations in Austin and Munich. Cisco LauchPad, established in Bangalore, is another example of a corporate accelerator seeking to attract talented innovative startups to engage with a technology giant.

Traditional Companies Have Become Technology Firms

From the perspective of traditional companies as well, many now see themselves as increasingly technology firms. Microsoft CEO Satya Nadella often says: “Every company is now a software company.” This notion is echoed in a quote from Ford’s former CEO Mark Fields: “You know, when I first joined the company, a long time ago, we were a manufacturing company. As we go forward, I want us to be known as a manufacturing, a technology, and an information company…That’s where we’re heading.” Unsurprisingly, then, corporations in more traditional sectors have been engaging with digital startups. For example, at Unilever, the FMCG giant, the Unilever Foundry program that helps generate solutions, including around digital marketing, from startups. And BMW created the Startup Garage program in the wake of digital disruption that the automotive industry is facing.

The Why, How & Where of Corporate-Startup Partnering

These various examples highlight the importance of paying attention to the “why”, “how” and “where” of corporate-startup partnering – the three major themes in my book, Gorillas Can Dance: Lessons from Microsoft and Other Corporations on Partnering with Startups:

• In terms of the why, managers who have a nuanced understanding of different types of collaborators can see the distinct advantages that digital startups have over other types of partners by providing complementary capabilities such as their agility to go with the large corporation’s scale.
• In terms of the how, even though many corporations are by now very seasoned at partnering with fellow-large companies, it is important to understand the distinctive process of partnering with startups – which entails systematically dealing with various asymmetries between these very different sets of actors.
• In terms of the where, there is scope for global companies to tap into various pockets of technological innovation around the world, in both advanced and emerging markets.

Partnering with startups is effortful, nor effortless, and yet many corporations such as those mentioned above are clearly taking it seriously – because they believe the effort is worth it in the end.