It’s no longer enough for technology companies to blaze a trail forward on their own. Shameen Prashantham, esteemed author and thought leader, outlines why the tech giants must partner with startups to maintain competitiveness in this new guest article.
Addressing digital disruption has become one of the defining strategic imperatives of contemporary corporations. In the era of digital innovation, startups’ entrepreneurial opportunities cause disruption via business model innovation and radically new offerings. Even before Covid-19, many managers were anxious because of digitally enabled disruption. Industries from automotive to banking and retail are being disrupted by startups that pursue new opportunities, with a nimble organizational culture, and pursuing business model innovation that are changing the rules of the game in their industry.
However, startups can also, potentially, be allies to large corporations to help them prevent being disrupted. Corporations need entrepreneurial management skills to combat disruption – and one way to do this is by partnering 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.
Partnering with startups is effortful, nor effortless, and yet many corporations are clearly taking it seriously – because they believe the effort is worth it in the end.
Author & Thought Leader
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.
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Author & Professor International Business & Strategy, China Europe International Business School
Shameen Prashantham is Professor International Business & Strategy, and Associate Dean (MBA), at China Europe International Business School. He is author of Gorillas Can Dance: Lessons from Microsoft and Other Corporations on Partnering with Startups (Wiley, 2021).