DSP - 3 key steps to a successful corporate open innovation strategy
If you’re leading innovation in a corporation, listen up!
Today more than ever, startups have more opportunities to work with corporations. While this is certainly a good sign of growth for the ecosystem, it is a challenge to build a successful strategy to not only attract startups, but create successful partnerships and synergies. Internal politics, challenges working with business units, long diligence, and a host of other challenges can slow down or outright stop open innovation.
In order to make the process more efficient, I’ve outlined 3 key steps that all corporations need in order to lead a successful startup partnership program. These ideas are based on our experience for over a decade working with open innovation teams and advising to create successful startup partnerships.
1. D - Design First, Then Do
Before engaging with startups, it’s critical to have clear goals of what you want to accomplish through open innovation, then build each step along the way. Too many corporations and groups have led startups down never ending rabbit holes of discussions without a clear process and end goal. As a result, many startups are hesitant to engage with new corporations out of concern they may drain their limited resources with low chance of success. Therefore, it is critical to first build your internal strength and processes then start engaging. This can save many mistakes along the way and potential hazards for both the corporation and startup.
A few key questions to ask at this stage include:
What are your innovation goals for 1, 3, and 5 years?
Innovation focus: Partner, Invest, and/or Acquire?
Business Model: B2B vs. B2C? Solutions for internal use, or to resell to your customers? If co-creation, do you have the full buy-in and resources from the business units to put in the time to work with the startups you bring?
What resources are required from a startup in order to work with you? Do they need to be local, or can you work together remotely?
2. Scouting Strategy
Once there is clarity on your open innovation goals, finding the right startups and technology is not as easy as it sounds. While resources like Crunchbase are a great starting point, many lack the latest updates and complete details of companies. In addition, some early stage startups prefer not to be noticed yet by these resources. In order to identify all the potentially relevant startups, the best strategy includes both inbound and outbound. Inbound means to create tools like a landing page with details, application, and easy contact details. Outbound includes direct research and outreach, digital marketing, and working together with local partners. Partners are one of the most important parts of scouting as they already have the network and dealflow.
In our work with Ford Motor Co. on their annual Make it Driveable Challenge, we helped design a complete scouting strategy. Each year, we research and review over 1,000 startups across Europe ourselves, and work with over 50 local partners to share dealflow, promote the challenge, and host mini events. Our marketing efforts include email campaigns, social media posts across 4 platforms, and the creation of virtual “roadshow” events with the Ford innovation team and local startups to network and learn about the challenge.
A few key questions to prepare for a successful scouting strategy include:
Geography: Are you looking only for local startups, or open to international as well?
What sectors and stages of startups are most relevant? What is the earliest stage that you consider mature enough to work with?
Do you have a network in the ecosystem? How many investors, VC’s, accelerators, consultants, service providers, universities, other corporations can assist with dealflow?
Does it make sense to do scouting yourself - or is it better to work with a scouting partner with the established network and experience?
3. P - Create a clear scouting Process and timeline
Once you have identified a startup you want to work with, what happens next? For many corporate innovation managers, this can be the most difficult stage. Internal politics, budget issues, red tape, procurement issues, and other challenges can make collaboration with a startup far from glamorous. From our internal surveys of corporate innovation managers, the sales cycle can be long - usually 12-24 months - and it’s important to align those expectation with startups in the beginning.
While some issues cannot be changed, others can be mitigated or prepared for in advance. Here are several questions we have found extremely useful:
Budget: Is there a budget for running paid POC’s with startups? Who is responsible for this? If not yet, when does the budget need to be submitted/requested? Is the budget from the innovation department, or the operating unit, or divided?
Procurement and legal: What are the processes for a POC with an external vendor like a startup? How long does it take to get comments on an NDA? Are the appropriate teams ready and willing to work with you on this?
Is the CEO or other C-level executive involved in open innovation? Can he or she assist in this process?
These 3 steps are just the start, and there is much more to be said about each one. Moreover, every company has their own specific needs and challenges when doing open innovation. At Axis Innovation, we’ve built expertise in these 3 stages with a proven methodology and track record of working with dozens of multinational corporations on successful startup partnerships. To learn more about our open innovation work for corporations, visit our website https://www.axisinnovation.com/corporate-consulting and contact us at firstname.lastname@example.org.
Jason Weiss, COO & Dealflow Manager @Axis Innovation