Eight keys for large companies that want to work with startups
Tuesday, August 21, 2018
Economy and business online
Claudio Barahona Country Manager Telefnica Open Future
More and more large Latin American companies are starting to work on startups on their digital transformation process through Corporate Venturing program. This is a hybrid model that combines the internal efforts of companies' innovation and works with third parties on open innovation, through tools such as investments in startups, incubation, acceleration or collaboration. Some companies create hackathons or pitch contests, while others deepen their programs, corporate accelerators or venture capital investment areas.
This is clearly a phenomenon that will not stop and that it is not fashion, because it is a survival tool for companies to reinvent themselves in an increasingly global and digitalized market.
In this context, a report from Prodem with support from Telefnica, available at corporateventuringlatam.com, shows that there are already more than 150 companies in the region that connect to startups and 28 of them do very interesting things in Chile, he becomes the leader from Hispanoamrica.
After more than eight years of being active in open innovation and Corporate Venturing and with a global portfolio of 429 startups, in Wayra de Telefnica, we want to share some of our most important experiences with those big companies that are starting to venture this world.
1.- Do it seriously. This can not only be for RSE, or image enhancement. It is not a topic to get a good TV spot, which is well cataloged for your company for public opinion. The innovation to determine the future of your business, so that the capacity you have to innovate and reinvent your company, implies that your company will join the digital revolution in 5 or 10 years.
2.- Assign people and own resources. If you follow the previous point, if you are going to do it seriously, to really innovate, you will have to start and finance your own initiatives. Otherwise, there is a risk that only sporadic results are achieved or that no significant impact is achieved. This is a long term, and having your own innovation muscle is the key to having the necessary strength.
3.- Accept the test and error. There is no innovation without constant learning. It has been proven that 80% of the innovation projects you make ultimately fail and with a return close to zero. But the gamble in the medium and long term is that 20% define your future sources of income. And it is even possible that 1% becomes your next big business, which completely redefines your business. Uncertainty and failure are part of the game.
4.- A part of a bit. If you are just starting out, you do not need to put together a corporate venture capital fund of billions of dollars. You can start small, test and pilots, just like startups do. In that sense, start before you set up an area, employ people and spend many hours on legal figures and business bureaucracies, with just a few cases, so that you can gradually learn. Invests 10 million pesos at a startup; Rent and use the services of others and integrate them into your product catalog of a startup to offer them to your customers. Only with these exercises do you have the learning and the necessary vision to set up a more ambitious program.
5.- Give autonomy to the program. An area that works with startups requires dexterity, flexibility and an enterprising style. An initiative of open innovation and corporate venturing requires independence, both on a hierarchical level and on a budget. Ideally reports to the board, with a strong link to the general manager and the strategy manager.
6.- Startups are your partners, not your suppliers or employees. It is a big mistake to think that startups can only be suppliers of a large company. It is not enough to do pitch sessions for that great company to hire your services. The bet must be stronger and in line with the company's strategic plan. The startups you work with can be the future breaker of your company. They are strategic partners, so they have to be treated that way, in integration, procurement and care processes. Entrepreneurs are not your employees, they are your partners.
7.- Create linking mechanisms between the startup and your company. It is not worth it to just select a startup, reward it or invest it. The great value of working with innovative companies is exactly how you manage to link your company to the strategy of your company. The leading companies in corporate venturing worldwide admit that they spend more than 70% of their time and resources on achieving this strategic link. It is the most difficult and it takes the most time, but once it is achieved, the mutual benefit is remarkable and it becomes a competitive advantage for the big company, difficult to overcome by the competition.
8.- Measure what you do. It is not enough just to look for vain statistics about how many entrepreneurs participated in your competition or the press releases that your innovation program had. The most important thing is to define from the first moment what the actual impact you want to achieve in the company: financial return on investments; new income generated by joint work with startups; measure savings and efficiency by entering into an innovative service, etc. What you do not measure does not exist.
There is no single recipe to link to startups, but the key is to give a sense of urgency to the transformation of companies because new threats appear in every industry. But by innovating and also by collaborating with startups, by creating open innovation programs, these threats can be turned into real opportunities.