Innovations vs corporations: why partnership with small companies is beneficial for giant сorporations
Dmitry Pankrushev, Country Manager at Nullgravity, is telling about the benefits that corporations gain from synergy with small product companies.
INSTEAD OF PROLOGUE. DIFFERENT NUMBERS, GENERAL DENOMINATOR
Olivetti. Does this word say anything to you? Something from cooking? Italian? Guessed almost right. Olivetti is an Italian giant company, a producer of typewriters, computers and printers. From 1980 to 1995 — it was the leader in the market of computer equipment sales, which provided personal computers for the state structures of more than 40 European countries. In 1982, their Olivetti M24 became the main computer in production, ahead of IBM. Great attention to design. Great attention to details. Great attention to the challenges of the market, where they were pioneers in many ways.
But already in 1997 the company ends the production of all computer equipment in order to completely close the brand in 1999 and become a part of Telecom Italia. Did something go wrong? Losing the race in the 1990s, Olivetti repeatedly tried to restore its market position. In 1995, they released a product ahead of time — Envision, the first home multimedia PC. And yet the company did;t see big sales. But the absolutely identical product from Packard Bell, released in 1997, became many times more successful. Why?
The main problem was the inability to combine innovations with the quality standards which the company was committed to in times of market rules changings. Thus it didn’t happen to be at the right time in the right place with the right product. And Olivetti is not the only example. We can recall Nokia, Sony Ericsson, General Motors. They all have a common denominator — sluggishness.
SMALL AND FAST
Overgrowing with long-term plans, global strategies, R&D offices in different parts of the world, giant companies are gradually losing flexibility. Klaus Schwab, the chairman of the board of directors of the World Economic Forum, stated: “Today, not a big fish eats small fish. Today a fast fish swallows a slow one.” This quote is the most accurate diagnosis of the market of the 21st century.
Kodak initiated its bankruptcy, refusing to invest in a digital photo to save sales of the film. In 2001, the same thing happened to Polaroid. Borders Group gave out digital sales to Amazon and went bankrupt in 2011. At the same time, starting in 2004, Facebook was able to increase its capitalization to 15 billion dollars in 5 years. Uber during the same 5 years increased it to 40 billion. At the same time, Dell was able to achieve a growth rate of 1 billion a year 9 years after the company was founded in 1986. The art of making it in time became the most important of the arts.
EVERYTHING THAT DOES NOT KILL A COMPANY, MAKES IT WEAKER
“If you do not come up with something that will destroy your company, someone else will do it,” Mark Zuckerberg assured in 2012. And bought Instagram. Since then, potential competitors — Whatsapp, Snapchat, Oculus VR — have not only ceased to be competitors, but also have become a part of Facebook. Those “little” fish in a few months have become sharks with billions of profit. So did Apple, IBM, Microsoft. In this approach, it is not always possible to remain in the black, but, by taking risks when assessing someone else’s potential, you can remain a giant. And if mergers and acquisitions do not apply, then synergy will always be appropriate.
THE AGE OF VUCA
The modern world of business, like the entire post-industrial world, lives in the times of VUCA — Volatility, Uncertainty, Complexity, Ambiguity. Time has accelerated, and the changes have accelerated with it: in the market, in the minds of consumers, in the organization of companies. There is a direct correlation between the size of the company and its sensitivity to changes. That is why small product businesses today feel much more confident. The absence of bureaucratic delays, the fear of loss, the braking perfectionism guarantee young and daring success in poorly studied niches. Equally the same as the lack of distribution channels, sufficient funding, consumer confidence cannot guarantee the easiest start.
But what can small companies give to companies-giants? What they lack is flexibility, speed, courage.
Personal financial assistant for Alfa-Bank from Rubbles
In mid-2014, Alfa-Bank arranged an accelerating program to discuss several projects. One of them was a personal financial assistant, using computer training to analyze and predict the financial costs of the user. The concept was proposed by the Octoberry team, Alfa Bank supported it, and in less than a year the Sense application was presented at Finovate in New York. Created in collaboration with a team from Rubbles, the application entered the top financial mobile applications in 2016 by the version of Deloitte. Sense allows users to transfer money to any Alfa Bank card in two steps, which increases the loyalty of the old and stimulates the influx of new customers. Currently, the number of Sense installations from Google Play exceeds 50,000.
AR-application from Nullgravity for Leroy Merlin
In 2017, Leroy Merlin, the largest European retailer, founded in 1923, signed with us a partnership for software development. It is uncommon for large companies to invest big money in research and development, and small IT companies are forced to monitor technological trends in order to meet the changing challenges of the market. After all, this is the main advantage of technology companies with a small staff — to remain relevant.
That is why in 2017 our Nullgravity team offered Leroy Merlin the idea of creating an AR application. The idea of the application is to allow users to view items of furniture and appliances from the assortment in their interior and immediately make a purchase. As mentioned above, not all companies are ready to invest in innovations that can’t be instantly monetized. But Leroy Merlin decided to, looking back, perhaps on the experience of IKEA, who earlier released a similar solution. Developing an application for iOS, we achieved certain results: increased the number of installations, and also increased the average time spent by users in the application. As a result, we received positive feedback and suggestions to add other models. At the moment, we are adding new models based on two criteria — the wishes of the application users and business objectives.
Cross-platform game marketplace DMarket is becoming a partner with Unity 3D
In June 2017, a young DMarket company collects $10.9 million for the ICO during the initial placement of coins. The staff doesn’t exceed 100 people, including R&D offices. As a global decentralized cross-platform area, DMarket allows developers, gamers and entrepreneurs to evaluate, buy and sell game content. The platform is based on the blockchain technology and smart contracts. At the moment, this is an innovative solution for the gaming industry, because the site provides an opportunity for all gamers of the world to become participants in a new market, the volume of which is estimated at $450 billion. Why did none of the big players try to implement something like that? Perhaps the question is rhetorical.
And of course, the giants of the game shakers world could not pass by, and already in March 2018 Unity 3D, the world leaders in the VR and AR games market, entered into a long-term partnership with DMarket. The partnership makes it easy to connect any game based on Unity technology to DMarket for virtual trading and the exchange of in-game assets. Also, users have the opportunity to create an inventory of assets on the marketplace, buy and sell virtual content. By increasing audience loyalty, providing a new channel of profit for both parties, this partnership is another example of a victorious synergy strategy between the corporation and a small company.
Food delivery from Foodfox joins Yandex
In December 2017, “Yandex.Taxi” closed the deal to buy a share in the food delivery service Foodfox, becoming partners for the joint entry to the market of food delivery from restaurants. Yandex almost managed to outperform: by the time of purchase, UberEATS has already entered the Russian market. Since UberEATS has not yet received much recognition in Russia, and still it will be necessary to “get along” with them in the future, the partnership between Yandex and Foodfox is still more than justified.
For reference: at the time of the launch of Foodfox in March 2017, they had 20–30 restaurants connected, and the team was staffed with two salesmen, four people from IT, a person in charge of all operational work with restaurants, one operator and one courier. And by September 2017 Foodfox was making 500 deliveries a day, 500 restaurants were already connected to the service, and the staff expanded to 30 employees. And already in winter Yandex, correctly estimating the potential of the young company, entered into a share with it, investing about $ 8.5 million in development.
Leaders now deal with the increasing volatility of the market, its uncertainty, complexity and ambiguity. That’s why today’s leaders need to become VUCA leaders, where the abbreviation will acquire a new transcript: Vision, Understanding, Courage, Adaptability.
Today, corporate executives feel the spirit of the times and see specific figures. In the context of VUCA and the associated permanent transformation, more and more corporations want to learn how to work with start-ups. Business does not work the way it used to. And if you do not recommend to trust the feelings, then the figures illustrating the speed of increasing profits by small food companies need to be trusted. Giants are ready to offer budgets and strategies, start-ups — ideas and skyrocketing time-to-market indicators. So why don’t they team up?
Originally published on nullgr.com
