Better collaboration between big firms, start-ups must for innovation to grow
While start-ups can provide new technologies, big corporations have access to market, customers and capital
For innovation to grow in the country, there is a larger need for better collaboration between big firms and start-ups.
In his keynote address at SP Jain Institute of Management and Research’s (SPJIMR’s) flagship event, SBAC 2018 (SPJIMR Business-Academia Conclave), Mohanbir Sawhney, director of the Center for Research in Technology and Innovation and co-founder of Kellogg Innovation Network, spoke about opportunities around better partnerships between companies and start-up.
According to Prof. Sawhney, partnering with start-ups is about sourcing new technologies while from a start-up’s perspective, access to market, technology, customers, distribution channels and capital are important components of growth that an entrepreneur can obtain from the partnership.
“Start-ups may be capable in many things but access to customers or markets is one such thing which they generally lack and, therefore, partnership with large corporations will help them sell their products in the right market. Entrepreneurs are also looking for validation, economies of scale and domain expertise. They are creative and pathologically optimistic,” he said.
Prof. Sawhney is a globally recognized scholar, teacher and consultant in business innovation, technology marketing and new media, and advises and speaks to firms and governments worldwide, with clients including Adobe Systems Inc., Cisco Systems Inc., DuPont, Goldman Sachs Group Inc., Honeywell International Inc., Johnson and Johnson, Kellogg Co., Kraft Foods and Sony Corp., among many others.
Prof. Sawhney says he is quite confident of the ability that start-ups have in exploring every opportunity and their willingness to face challenges, unlike traditional businesses that work in pursuit of market valuation. He thinks that because of cultural incompatibility, many corporate entities do not want to collaborate with start-ups.
“Sometimes start-ups fail to understand the time period taken in completing the entire due diligence. Start-ups have never heard of a word called compliance. There’s also a lack of trust among start-ups in terms of protecting their ideas or intellectual property rights, etc.,” said Prof. Sawhney.
“There’s also lack of clarity of goals on both sides of the dais. Today, partnering with start-ups is like a fashion. The executives in large corporations need to understand the longevity of partnership and patiently deploy capital for which some clarity on goals is certainly required,” he added.
Besides showing signs of concern, Prof. Sawhney also highlighted some steps which start-ups as well as large corporations need to follow in order to collaborate with each other. He stressed the need for a smart risk assessment mechanism.
“Corporates need to figure out the requirement of start-ups. Most importantly, large corporates need to figure out their risk appetite and make equity investments in start-ups accordingly because once an investment is made, the risk gets distributed equally,” he said.
Citing the need for a proper definition of what a preferred partnership is about, Prof. Sawhney also underlined the idea of managing “intrapreneurship”, and advised organizations not to interfere or engage in micro-management of start-ups.
“Corporations also need to understand and accept the monopoly. They need to make sure that the start-up should connect to their mammoth organization and not get lost in the corridors of the organization’s bureaucracy. They also need to build capabilities, become responsive to the start-ups, build faith and that’s the idea of becoming a preferred partner. They need to provide them the platform/assets, which are branding and access to distribution. I have seen lack of deal-making or decision-making skills in large corporations which kills the entire partnership at times,” he said.
While presenting some points on how the whole marriage between start-ups and large corporations could work, Prof. Sawhney also struck a cautionary note about choosing the right set of corporations to partner with.
“In terms of start-up collaboration, even the entrepreneurs should make sure that they are not just buying mandates from the top people, but should have points of presence which makes them connect with the community and partner with the right set of corporations. Entrepreneurs should have a single window clearance and should embed their firm in the local start-up ecosystem. They should build eco-structure, application programming interface, test data and should explore a portfolio of collaboration modes,” he said.
R. Gopalakrishnan, executive-in-residence of SPJIMR, who joined in a tête-à-tête with Prof. Sawhney, touched upon the generation gap which sometimes hinders a partnership. “The probability of learning is comparatively reduced among older people than the younger ones,” he said.
Prof. Sawhney, on the other hand, said that the challenge lies in making people understand the right parameters. “It’s not the old people I’m worrying about but the people who refuse to learn. Education is about replacing a closed mind with an open mind. The leadership team needs to continuously inject the culture of questioning. We tend to focus too much on the leadership team for success and failure to focus on our weaknesses. One should know and work towards where you are underperforming,” he said.
He concluded by saying: “Elephant and mouse should have equal weight. If a start-up’s market is much smaller, then larger corporations need to understand and shouldn’t throw their weight around.”