Although they may have huge differences, startups and corporates both overwhelmingly agree that strategic fit is their top priority when looking for a partnership with each other, according to The State of Startup/Corporate Collaboration 2016 by MassChallenge and Imaginatik. However, what strategic fit means for startups and corporates can be very different, and this can lead to what we call a lost in translation problem.
Well translate what strategic fit means for both startups and corporates, and how the two can best work together to make the most out of their partnerships. This week, well focus on what corporates mean by strategic fit, and next week well focus on startups.
When corporates say strategic fit
Nearly 45% of corporate respondents cited strategic fit as the most important factor in success or failure of a given startup relationship. In fact, strategic intent determines not only which startups a corporation chooses to interact with, but also how they build the relationship, and which vehicles, processes, and people are involved.
Generally, when a corporate leader says strategic fit, it often is referring to three different types of efforts. These efforts can be grouped into three categories:
Improve core business: The simplest aim is to improve the core businesse.g., cutting costs, boosting margins, expanding market share. Startups can be very useful for these purposes because they often take novel approaches, work faster, and are more cost effective than more established providers or partners. Lucas Moreno, Innovation VP at Cementos Argos, a global leader in the cement and concrete industry with operations in more than 15 countries, focuses on finding startups that can solve current business problems within the company. For example, a data/analytics startup that is applying big data techniques to improve energy efficiency in their manufacturing plants.
Moonshots: Moonshot innovation objectives occupy the opposite end of the spectrum focused solely on disruptive industry shifts, and are often accountable to no one except the CEO and Board. Insurance companies, increasingly threatened by fintech and insurance startups, are a good example. We spoke with several large insurance companies that are either building, or have already built, a dedicated incubator or accelerator unit to nurture internal and external startupsan effort typically driven directly by the CEO and firewalled from the core business.
Technical or product innovation: Technological or product innovation is the objective most familiar to many organizationsparticularly in high-tech and engineering-heavy manufacturing industries. As Innovation Officer Marty Curran explained, Cornings innovation centers orchestrate a global network of startup scouts looking for leverage in building new technologies and/or commercializing new product lines in their core focus areas of glass, ceramics, and optical physics.
Startup takeaway: As a startup approaching corporates, its best to understand which of the three categories you fit into and approach corporates with that awareness. You dont want to be pitching big ideas (like moonshots) if they see you as helping improve their core business. Similarly, you want to find the right person within that organization who is responsible for the right issue area. For example, do you need to talk to the Google X or Google Ads leader? It helps to know exactly how you fit in with corporate strategy, and how you navigate corporate bureaucracy to make it work for you.
For both parties, the benefits of collaboration far outweigh the negatives. Startups get to partner with market leaders, and gain further insights and resources into developing their products, thereby enhancing their offering. By partnering with startups, corporates get a shot of innovation DNA, which most freely admit they need – its a win-win for both.
For all the benefits to be gained by working together, partnership is not an easy, instantaneous process, which is why its important to understand the other side as best as possible from the beginning and speak the same language.
Next week, well explore what strategic fit means for startups and how corporates can best work with startups to maximize the opportunity.
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