Corporate adventures in the start-up ecosystem
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Corporate innovation is a rapidly trending term. Across the world, there is an increasing awareness by corporates that their structure, processes and culture are fundamental stumbling blocks to innovation. Article after article describes the need for corporates to abandon their innovation and R&D departments, and embrace start-up ecosystems as a new source for renewal. But doing this won’t be an easy task because many start-up founders have pre-formed opinions about corporates and their behaviour, and are interested in disrupting and breaking the corporate business models, rather than working with them.
In Sri Lanka, conglomerates and large corporates including Brandix, Hemas, John Keells Holdings and others are attempting to tap into the small but growing start-up ecosystem to find ‘disruptive’ new products and services that they can incubate, invest in or acquire. In July this year, JKH entered the local start-up ecosystem by announcing Rs. 3 million in prize money plus opportunities for partnership and investment for start-ups participating in their Open Innovation Challenge. Start-ups are invited to pitch their work in front of judges who will determine the winners. This bold strategy – Rs 3 million for start-ups with no strings attached – got plenty of buzz, generating excitement across the tech ecosystem.
But the verdict is still out whether it will help JKH become more innovative or attract entrepreneurs with world-changing projects. It may, like similar efforts by other corporates, be a temporary blip of activity that will quickly fade away to the safer ‘business as usual’ mode. A July 2015 report “A Guide To Successful Corporate-Startup Collaborations” by Nesta convincingly argues the need for partnership: “In a world where innovation, rather than pure efficiency, is the key driver of long-term success, working with start-ups allows corporates to develop and test new technologies and service solutions with less costs and risk to their core operations.”
Interest should be genuine
However, a recent report titled “The State of Startup/Corporate Collaboration 2016″ warns corporates not to take start-up interest for granted, and that the start-up community is discerning and will be attracted to corporates who have demonstrated their position and commitment to the start-up ecosystem. It suggests that a negative experience will leave a lasting impression on the ecosystem, and that the “top entrepreneurs are savvy enough to focus on corporations that show genuine interest and are capable of making decisions swiftly enough to keep pace.” A few years ago, I worked with two different corporations – one operating at a national level and the other on the global level. My brief was to help introduce innovation and the use of digital technologies for both future-proofing and for creating a culture where new ideas and processes would emerge, thereby improving efficiency and creating new opportunities for growth.
Unfortunately, my efforts were not successful primarily due to internal resistance or more precisely, a lack of interest by those who are in influential middle-management positions. A key lesson learnt was that before embarking on an innovation strategy, an internal analysis has to be conducted to ensure that the corporate is innovation ready. There may be a need to remove ‘dead weight’ before proceeding. And some corporates may never be able to innovate. Sri Lanka’s corporates will also need to conduct a reflective exercise before embarking on an innovation strategy. And if they do, they will need to positon themselves as peers in the start-up ecosystem if they are to meaningfully build relationships with innovators.
They will need to change internal practices to be more responsive and be able to imagine beyond the bottom line. What JKH, Hemas and others are doing on the innovation front is positive and should be applauded. But more needs to be done. These early adopters who have jumped on the corporate innovation bandwagon are in an ideal position to learn, adapt and adjust their strategies and build meaningful long-term relationships with the start-up ecosystem, as opposed to looking for a fast return on investment. Further, it is important that the innovation process is led and managed out of the Office of the CEO or by the Board itself – and not handed down to the marketing team or a junior tasked with scouting the ecosystem for opportunities.
Getting smarter
Start-ups also have to become smarter. They need to identify their own gaps and weaknesses, and develop growth strategies. They need to explore what the corporate landscape has to offer, and identify opportunities that will help them scale more effectively. Last month, Asia’s longest running technology accelerator and incubator program – JFDI – shifted its focus from providing support and seed investment for early stage start-ups, to helping broker and build relationships between start-ups and corporates. CEO of JFDI, Hugh Mason in a blog post says they will now be “exploring new models for start-ups to create new ventures in partnership with corporations”, basing this new direction on a hunch “that it will take collaboration with corporations to make start-ups into scale-ups”.
Sri Lanka has to move beyond an outsourcing station delivering cheap services and start to produce more products and technologies that have a transformative impact on the world around us. Start-ups, with their creativity, flexibility and ability to take risks and move rapidly, will drive this. The role corporates will play in this story is to be determined. But two things are certain: partnerships with start-ups will be critical and the nature of those partnerships will determine the future of the corporates.
(The writer heads a boutique tech incubator – commonEDGE Pvt Ltd. He is also the Country Director and Innovation Advisor for Asia for the non-profit Internews. During his spare time, he helps organize SPIKE, the monthly tech ecosystem meetup and other events such as Start-up Weekend Colombo. He can be reached at sam@edge.lk)