The 10 Commandments for Corporations Seeking Startup Innovation — Part 3

By: Orly Glick

The Dont’s

5) Don’t — Ask for Just Any ‘AI Startup’ when Scouting

AI is not a pain point nor a solution, it’s an enabling technology

When speaking about innovation the buzz word is now AI. Consulting companies are publishing articles saying that if you are not an early adopter of AI you will loose the game and so large enterprises now have a great fear of missing out. We often get requests from enterprises to find all “AI companies” in a certain geography, and while indeed there is a strong need to implement new technologies and stay ahead of the curve, executives should realize that

AI is not a solution per se: it is an enabling technology. AI runs across solutions and across verticals. AI is a technology that could be powering customer engagement, data analytics, payments, cyber, IT solutions, predictive maintenance, robots and many other solutions. It is a bit like saying — I want an app. Finding the pain points should be the first step, your technological and your strategic issues, your clients thoughts of their customer journey and where these get stuck, than adding artificial intelligence on top of that needed solution is a plus. Startups now use off-the-shelf AI engines or self built AI. It is challenging to distinguish between the two without speaking to the startup and it is more challenging to find the self developed ones. This attests to the strength of the development team and solution but does not necessarily mean this is the right or best answer for your pain.

So, unless you have a major group of developers looking for ML/AI supporting or enhancing tools, you should seek for the topic or pain point always first.

6) Don’t — Disappoint Startups During and Post-Meeting

Assign a loyal point of contact

As mentioned in Part 1, startup CEO’s most scarce resource is his/her time, communication is key with startups and working only bottom up or running ‘innovation tours’ is only hurting corporates’ reputation. We see that the most successfully innovating companies are assigning at least one person that will interface with the startups and be the gate keeper on one hand, for the organization not to be overwhelmed with the many startups knocking on their doors and for the startups on the other hand to feel that you are truly approachable. Good communication with the startups will help you position your company as a partner to startups and to the ecosystem. It is also important to communicate honestly. Startups prefer getting a ‘no’ quickly, and move on rather than receiving very polite or vague answers or not getting back to them. My greatest advice to corporates here is– email them or have a partner email all of them a thank you note after the meeting, and say no when it’s not relevant. They would appreciate that much more than a polite silence. Some corporates ask us to be that buffer and that also works well(4).

7)Don’t — Disappoint Startup Post-POC

Death by POC

Creating quick wins as mentioned in rule number 4 is important but we have seen companies working with tens of startups on POC’s (proof of concepts) with very low or no pay and than (rightfully so from the corporate angle) cutting off a large percent of them as it is not sustainable to keep up with so many options. This might yield the very opposite result. Beware of ‘Death by POC’ as startups talk, and again, your reputation is at risk. It’s a ‘seller’s market’ now (August 2018… this is cyclical, let’s see how economic and geopolitical conditions will affect things in the future) the good startups are now more sophisticated than ever, looking for good partners. Don’t go for a POC just for the sake of having a POC. Go for less, but better matching Proof of Concepts and if there is no real budget or need for the solution, if there is no decision making power to support a post Proof of Concept long term engagement than skip it. The goal is to have a high conversion rate, for internal efficiency but also external in order to position your brand name as a partner to the ecosystem.

8)Don’t — Think That Money Can Buy Everything

We host two Fortune 10k companies every week that come to seek innovation in Israel. Often the question is — what do we do now in order to move forward with our digital strategy. There are many different options to work with startups and investment is not the only solution. There are indeed technology areas that are not well funded and than investment could be the right choice in order to build or support a new ecosystem, but just another CVC does not guarantee successful digital transformation. As mentioned before, the recent years economic drivers have brought an imbalance in available investment supply and demand, and thus sometimes funding, wherever funds are easily available, should not be the only approach. Sometimes just working with startups on commercial contractual arrangements could be a good first step into your digitalization process, and if you do decide to go down the CVC route, think strategically how you tie it back into commercial relationship to add that value to the startup.

*This part will discuss two out-of-the-box Do’s:

9) Do Go Out-of-the-box to connect several startup solutions into one

‘Supplier Roll-ups’

The term role-up traditionally refers to a practice where Private Equity firms acquire several companies in order to merge them into a full capability solution. Here the intention is not acquisition but the commercial engagement with two or more startups to create a full solution, as often times there will be a gap between what startups offer to what your needs are. The most innovative work with startups I have seen is where corporates took more than one startup and connected their solutions to generate a platform or a comprehensive solution that matches what they were looking for. This requires a new set of capabilities in your team, but is providing a unique position for your digital journey. This is also a call for startups to connect to other startups on their business development, in order to be able to expand their offering and their reach, staying careful though, not to lose focus.

10)Do — go out-of-the-Box and Collaborate with Similar Industry Players

Grow the pie

working with similar corporates to yours seems counter-intuitive when you think about innovation. After all digitalization is a strategic move that is meant to keep you not only alive, but to take market share, stay ahead of the curve, it means beating competition.

From startups point of view, the top down approach is in most cases not the reason for their birth. This means that the way most startups are formed is that there is a technology that is looking for a market. Rare are those startups that start from a very specific corporate pain point, and than building a technology and team around it. After all these are different persona’s mostly, ones that experiences the corporate pain point, and one that starts a new venture.

Also, a solution for very specific problems mean a very small target market, which in turn means a low potential revenue source, and that means startups won’t survive if they have a too narrow solution, let alone in a particular industry.

Thus, when it comes to industry specific pains, it would actually make sense to get together with some of the other players in your field. Most ideal would be similar players that are working in different geographies thus the mutual areas of competition is minimized, but in certain cases even working with competitors would make sense in order to grow the pie.

This way you could truly disrupt the market and make a change, and allow the creation and growth of new non-organic technologies with more than one customer.

Good luck with your digitalization journey.

Orly Glick.