Open Innovation: 3 Startup Hesitations & Enterprise Remedies

Startup engagement is high priority for many large companies. It makes sense: get the latest innovation to support corporate strategic initiatives from fast-moving startups. Typically, this startup engagement is handled by a corporate innovation team through programs like Open Innovation, Challenges, Labs and other startup-facing enterprise opportunities.

In the past, startups targeted business units directly to pitch their solutions, rather than going through a centralized “front door” for innovation. Using LinkedIn and email-matching tools, startups broadcast their message to any corporate contact with relative ease. But here’s where the roadblock happens: business units are primarily focused on running their business lines, not evaluating each and every startup that comes their way.

So to make the process work, enterprises have centralized all of their innovation needs. This relieves business units of the vetting responsibilities. It lets them focus on their core business. Then innovation teams take charge; they create a streamlined process to guarantee a better outcome on what they do best.

Just because enterprises shifted vetting to innovation teams, doesn’t mean startups know why they should use this approach. I’ve heard many hesitations from startups when suggesting they pursue the innovation team within large companies. The reasons? Here’s what startups perceive most often:

1. Budgets are within business units
2. Sales cycle made longer with innovation department
3. Relationship lost in internal contact handoff

So what should innovation departments do to ensure startup engagement remains strong? Let’s look at each issue and potential solutions.

Budgets within business units

Startups believe Proof-of-Concept (POC) budgets fall within business units, rather than innovation departments. Why? Because that’s what venture capitalists, advisors and even large companies tell them.

Seasoned entrepreneur Andy Byrne, CEO of Sequoia-backed startup Clari, advises startups that 95% of enterprise innovation teams don’t have budget to spend on partnerships. Whether accurate or not, that’s what startups believe.

To remedy this perception, effective innovation departments promote partnerships that they’ve successfully completed. Then they offer transparency about POC budgets and decision-making process. They let startups know if small testing budgets are within the innovation team; and at what point the budget comes from business units, etc.

Startups need to know WHY they should use innovation teams to navigate enterprises. Is the process more effective? Efficient? Better outcomes? Tell them.    

Sales cycle made longer

Enterprise sales cycles are long - especially for cash-strapped startups. For innovation teams, slow cycles can be frustrating. For startups, they can be deadly. Long and burdensome legal reviews and traditional procurement procedures are typically an overkill for startup partnerships - especially for proof-of-concept tests. If startup partnerships are a mandate within your organization, streamline the bureaucracy. Not only will your startup partners be happier, word will spread that your company is startup-friendly.

An example comes from one of SwitchPitch’s corporate clients, Chick-fil-A. Innovation and startup partnerships are a corporate priority and Chick-fil-A takes them seriously. Instead of starting with their standard agreement, they marked up our agreement. Their legal team made light-touch, startup-friendly changes. From our perspective, we could easily understand their intentions and resolve without outside counsel - a huge cost-savings!

We focused our resources on security questions, integrations, and executing the partnership - rather than over-papering the perfect, high-touch document.  

Relationship lost in handoff

Let’s face it - passing a startup from innovation to business unit can be a difficult transition. Innovation teams typically scout, analyze and present findings. Business units (BU) are focused on their day jobs - running the business.

I’ve heard from too many startups their frustrating tales of getting lost in the corporate shuffle. One of the top issues we hear from enterprises considering our platform is their frustration with gaps in handing off startups to business units.

When the innovation team organizes startup data and relationship in an easy-to-digest format, the business units get up to speed faster. Relationship communications, notes, sales decks, etc. all provide BUs with background and context for the introduction.

Transitions are seamless and momentum continues. Startups feel prioritized and like an important partner and communication standards are established.

Conclusion

Enterprises and startups largely recognize the benefit of partnerships. While startups historically pitch to business units; enterprises are centralizing startup engagement with greater frequency. Enterprises typically publicize how they engage with startups. Startups need to hear why they engage and follow established processes.

When corporate innovation teams are attuned to startups’ perspective and potential hesitations, they can address startups’ perceived concerns proactively and ensure the best outcomes.

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