Adapt or Die: The Sustaining Relationship between Big Corp and Early Stage Venture-backed Startups
by Hessie Jones
This is a part of a series highlighting how partnerships between Big Corp and early-stage venture-backed companies are incredibly valuable for both sides — even though integrating early stage companies and technologies into large and multi-layered corporate structures brings its challenges and requires very specific guidance and direction.
The world we once knew has been turned on its head. There was a time when big business strongly influenced how markets behaved. In the last few decades, this influence has been in decline and big business has been held hostage by their own doing. They built infrastructures based on markets that were predictable and environments that were relatively stable. Business transformation has become an inevitability. The market pace is rapid and adoption is swift however big corporations are mired in complacency, legacy systems and archaic processes.
The tables have turned and today markets are moving at a speed where business is struggling to keep pace. Dave Gray, Author of The Connected Company says this:
Customers are adopting disruptive technologies faster than your company can you adapt.
Disruption is more than just an idea. The pace of technology and innovation has obsoleted the very practices we’ve known to be true. Information is bringing intelligence technology to a more networked world, in real-time. It enables decision-making at all levels of the organization that is increasingly precise and effective.
Large organizations are besieged with early-stage companies who are disturbing the status quo with new ways of doing things to streamline processes, connect disparate systems, automate and distribute information and effectively communicate across functional business units.
In 2016, PWC’s Global Innovation 1000 Study, revealed companies that allocated 25% or more of their R&D budgets to software offerings “reported faster revenue growth” in comparison to those with smaller R&D allocations. The top 1000 companies spent a total of $858 billion on R&D in 2018, which amounted to 40% of the R&D spending in the world. For big corporations, this investment was more than just about survival, this was about how they sustain themselves where “uncertainty is the only certainty”. Dave Gray, author of Connected Company, refers to this as a business “dismantling of its precious infrastructure”.
What has been clear is that disruption is rarely kindled from within organizations. The trend is to look externally to startup and early-stage solutions that allow Big Corp to incrementally innovate. For organizations that do this, they open up a well of opportunities that allow them to slowly evolve in the process. More importantly, early-stage venture-backed solutions provide viable solutions that provide more customized opportunities, longer runway with less risk of failure.
Legacy has been stifling innovation for large organizations. Everyone understands that in an environment of uncertainty, there is a desire to move faster. However, the reality of change seeps itself into processes that have been there for decades, that take several layers of red tape, potentially years to implement and eventually will provoke a cultural shift. Startup Bootcamp released a report that justifies the need for collaboration between start-ups and corporations. In it, they confirmed,
Tackling innovation from the inside out requires significant cultural shift and investment. Yet the potential to make changes from the outside in and collaborate with the startup ecosystem is proving hugely popular.
This is why organizations that are willing to embrace the agility and new thinking from early-stage ventures, will be more tolerant of small “shake-ups” to internal complacency that will eventually open doors to new market opportunities and organizational efficiencies. While it would be unrealistic to wholly embrace radical disruption, the influence of running small sandbox programs that model real-world scenarios will minimize risk to the currently established infrastructures.
In addition, large corporations realize they are slowly ceding control to market forces and to early-stage start-ups primed to quickly shift with market demand. While enterprise does not have the same briskness to respond, they can redefine their strategies to “extend activities” that link to startup solutions within an ecosystem. By being an active player in this ecosystem, enterprises can begin to take notice of the other potential start-up solutions that may eventually prove valuable.
Over time, Big Corp’s increased exposure to this agile mindset begins to slowly influence People, Processes and Technology (PPT) however finite. The challenges to innovate as a culture, which may have been daunting in the beginning, may now be more plausible in aligning these initiatives with an expected return to the organization.
More importantly, as the culture begins to transform, the opportunities to evolve organizational mindsets towards speed and new business practices will take on a life of its own. Initiatives like “intrapreneurs in residence, designed to help absorb innovation culture first hand and apply those learning back to their day-to-day jobs” will greatly improve employee retention and further create new roles to support the new functions and processes.
The Startup Boot Camp report references Cisco’s internal mentoring program with early-stage companies to “help open up people’s minds to innovation.” Deloitte released its 2019 Millennial Study that declared 49% of Millennials would quit their jobs within two years: citing, “unhappiness with compensation, lack of career advancement and lack of professional development opportunities, “ etc. An earlier study in 2016 cited reasons including “lack of leadership, and skill development, and the need for flexibility”. Enterprise can leverage their relationships with early-stage companies to develop training programs to further their professional development, at the same time, foster an environment of continuous learning, and workplace flexibility while improving workplace culture.
The enterprise will begin to successfully pave the way for its future leaders to further evolve the organization into the next age of disruption. The future organization will now begin to morph a culture of incessant learning that allows its employees to collaborate and innovate and iterate to maintain market relevancy. Being perpetually embedded within an ecosystem of innovation will create new roles and market opportunities for enterprise, and better promise for a sustainable business.
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