Four Stages of a pilot in a Corporate and Startup partnership

It has been a while since I wrote something, precisely 6 years ago, so excuse the rustiness! I recently had a conversation with a fellow executive friend around corporate startup engagement in a non- investment capacity. We started talking about her experience both as a executive currently and entrepreneur in the past, and her experiences on both sides, and how in many ways the dynamics require both the startup and corporate to change. As she shared some funny and heart breaking anecdotes of her experience in engaging startups, I reflected and shared back some of my own. Having been a entrepreneur who engaged with corporates, governments and startups for over 15 years now, I had plenty of stories some of them glorious and some of them a complete failure. After our exchanges and mutual agreement that there were many things that can be addressed, we concluded that there were 4 main stages to highlight… so here they are:

Stage 1 — Do your homework and identify real problems — Weather you are a corporate executive looking to engage a startup or a Entrepreneur looking to land a large corporate client it is important to identify a real problem to be solved, instead of focusing on buzzwords. What matters in the end is translating technology to real tangible use cases that are digestible internally in an organisation. As a startup know who your decision maker is and who has the motivation to help you internally. Be wise on who to engage with, as both parties have a real problem that needs to get solved. For a startup that is to gain traction, credibility and scale. For a corporate that is to innovate quickly enough to thrive in a business landscape that is changing quickly.

Stage 2 — Procurement through legal and commercial sandboxes — Unless we are talking about one of the few corporations that have set this up well, most of internal processes for commercial vendor relationships are not set up to work with Startups. However, it is these very approaches which focus on cost and risk that create a major barrier for effectively working with the newest and most exciting startups. A study by Startupbootcamp found that almost 70% of startups experience a complicated or long internal process working with corporates and half of startups had taken more than 6 months to sign a deal with a corporate. While we all talk neatly about the virtues of ‘failing fast’, the procurement and legal mechanisms have been engineered to protect us against exactly that outcome and are inadvertently slowing corporate ability to innovate quickly. Having that in mind it is important for a corporate to engage procurement teams early in the process so that they can understand this changed dynamic and be part of identifying a solution and as a startup you need to ask for the same or at least receive procurement documents early on. So you can understand your legal costs and if you have or want to spend this much time and money. I know what your thinking right now, and that we will do anything to engage with Corporate X but that attitude needs to change, as I often say your biggest challenge as a founder is to decide what not to do. You need to asses what is the best way to use your time to scale and gain traction and sometimes Corporate X is not the best use of your time. In parallel corporates need to start adapting a culture of“freedom within the framework” and collaboration allowing for ‘failure’ every now and then. To scale corporate startup engagement we need to create legal and commercial ‘sandboxes’, focusing on what’s relevant for the context — passing the obligations and parameters of the buying on to the startup when necessary. Just as Y Combinator released the Simple Agreement for Future Equity (“SAFE”) investment instrument as an alternative to convertible debt and that has become widely used in early stage investments due to it’s simplicity and low transaction costs, I would like to see the same but for procurement instruments as an alternative to the Master Services Agreement, Statement of Works and NDAs. I understand that there are concerns regarding a “SAFE” as there will be concerns regarding any alternative to the current procurement instruments, but it is a work in progress instrument helping both parties to innovate quickly enough to thrive and gain traction to scale.

Stage 3 — The Minimum Viable Pilot (MVPi)— I first heard this term in a Harvard Business Review blog and thought it was perfect word to describe a pilot. Derived from the “minimum viable product” of Eric Ries’ Lean Start-Up; a minimum viable pilot is a targeted test designed to deliver unambiguous insight into business value from key innovations. For a successful pilot to happen both parties need to have a fast focus on a particular issue with the objective to yield actionable insights more quickly. That will be a challenge for a startup as you will find different conflicting needs and priorities from within the corporate, which requires effective startup leadership zooming in and out and learning to fly at 40,000 feet or 40 feet depending who you are talking to within the organisation with a laser focus on what the client wants/needs to test. With that in mind the focus of a pilot is to demonstrate value that can create exponential difference for the corporate in the future. Pilots are not a about buying but it is about creating the BUY-IN that makes the procurement decision economically possible. In order to achieve that BUY- IN and creating a success story it is important to set expectations and identify clear KPIs as the outcome of the pilot so that all stakeholders are focusing their efforts on achieving that KPI. In the process of identifying the value to be delivered from a pilot you will find tensions from different areas of the business which will surface previously unknown or unanticipated issues. I found that flying below the radar, appearing less risky, focusing on ease of use and integration and not trying to do too much, provides a higher rate of success as it invites for a collaborative learning experience. Aligning the insights you gained from the pilot to KPI improvements and making everyone aware how and why the MVP did — or did not — deliver that KPI improvement is key to the next steps.

Stage 4 — Next steps in pilot failure or success — It is helpful and motivating for both a corporates and startups to identify what are the next steps after the MVPi. Should we scale what succeeded, pivot what failed or add a feature? Whatever the next steps clarity is key in designing a pilot. Using a a future back approach to define next steps, is a method of defining a future state and working backwards. This enables you to open the way forward — to imagine how can this pilot add exponential value to the future but understand what are the practical steps you need to achieve that future. Knowing what a future relationship can look like and who are the stakeholders that you need to involve in your pilot journey helps you in designing a pilot that can scale. What I found out is that even if a pilot is successful and the different business units especially the ones doing the day to day and having to deliver results are not involved they will not sacrifice their time or risk trying something that might not help them achieve their targets, when the time comes to scale the pilot. On the other hand everyone wants to be part of a success story and if they join the journey or at least are made aware of a pilot’s results and insights the chances are higher in them believing that this can help them achieve their goals. A well designed MVPi never fails as the learning from failed pilots opens the door to valuable insights that you would never have achieved if it were not for the failure. Just as in life, sometime our biggest lessons are learnt through our biggest failures.

So to sum it up… Pilots are about experiential learning and demonstrating unambiguous value and insight.