15 innovation tips: how large corporations can successfully engage with startups

Innovation, performance excellence and risk management are top agenda items for corporate leaders. Their innovation strategy usually covers ten types of innovation: product, service, platform, structure, process, business model, network, channel, customer engagement and brand.

For long-term success, corporate innovators need to cultivate habits of curiosity, deliberate observation, diverse information seeking and engagement with other creative people, according to Andy Boynton and Bill Fischer, co-authors of ‘The Idea Hunter’ (see my book review). In addition to idea flow, enterprise innovators need to nurture habits of taking ‘little bets’ via creative play, prototyping, learning and pivoting, explains entrepreneur and author Peter Sims.

At an individual and organisational level, corporate innovation calls for skills in questioning, observing, networking, experimenting and making associations, according to Jeff Dyer, Hal Gregersen and Clayton M. Christensen, co-authors of the bestseller ‘The Innovator’s DNA: Mastering the Five Skills of Disruptive Innovators.’

All this is easier said than done. Tightening up of long-term R&D budgets, increasing digital disruption, organisational bureaucracy and the bias of prior success are making it harder for large enterprises to innovate on their own, and thus driving them to tap new sources of innovation: startups.

In an increasingly competitive and globalised economy, it is only ‘unrelenting innovation’ that can help companies sustain a long term advantage, says Gerald Tellis, Director of the Centre for Global Innovation, University of Southern California. Engaging with startups can be one way for corporate giants to get fresh ideas and break out of ‘incumbent’s curse,’ as these 15 tips and examples below show.

1. Acquisition

Companies like Cisco, Google, Facebook, Qualcomm and Intel are veterans in business growth through startup acquisition, with well-established corporate venture arms. Partial investment in startups or outright acquisition can be effective ways for larger firms to directly get new technology and expertise, but not all parent companies and startups can manage the culture change effectively.

This trend is spreading across the world to countries like Germany and India as well. German heavyweights such as Bayer, Merck, Deutsche Telkom, Evonik and Metro are now investing in nimble startups for digital expertise, according to a Reuters report. Investment in German startups in 2014 was $1.74 billion as compared to $49.39 billion in US startups. German startups catching the attention of industry giants include POSpulse, Dinnery, Bauerntuete and KptnCook.

Traditional Indian IT services firms are also engaging with startups for new ideas. Infosys has created a $500 million fund to invest in fields like automation and artificial intelligence. It recently acquired automation startup Panaya for $200 million. Wipro has set up a $100 million corporate venture fund in Silicon Valley. TCS has been screening over a thousand startups from around the world.

Successful entrepreneurs themselves are becoming angel investors in other startups aligned with their sectors, such as MakeMyTrip ($15 million fund for travel sector startups) and Nazara Technologies (Rs 5 crore seed-stage fund for gaming startups). Snapdeal itself recently acquired five other startups: Grabbon.com, eSportsbuy, Shopo.in, Doozton and Wishpicker.

2. Accelerators

Launching an accelerator is a promising way for large companies to better understand and leverage emerging technologies in areas like SMAC (social, mobile, analytics, cloud). Bangalore is regarded as the ‘SMAC Valley of the East’ with dozens of startups in this space, making it a ripe area for accelerators of giants like the world’s second largest discount retailer, Target.

Target Accelerator has selected startups in the areas of supply chain, mobile and digital marketing for its second batch in Bangalore, such as Twiddly, WhoDat, Wazzat, Torch and Visarity. The first five startups of the Target Accelerator Program were presented in 2014. Startups from the first batch such as muHive and Konotor continue to work with Target. Ideas from the startup Torch were tested by Target in San Francisco, and are now live in about 60 stores.

“Startups are vital to technology innovation and India is a hotbed of startups,” says Manish Choudhary, Vice President, Global Engineering and Managing Director, Pitney Bowes Software India. Pitney Bowes Accelerator in India has engaged with enterprise IT startups such as Tagalys, GetFocus, Ideata and Audianz. “The talent fostered through the Accelerator Program has the ability to develop disruptive technologies that can be scaled globally,” Choudhary adds.

The Microsoft Ventures Accelerator Program in India recently picked 16 startups: Appointy, Bookpad, Boutline, Imly, InstaSafe, IntouchApp, Metaome, Sliderule, MyBusTickets.in, Praxify, Thinxtream, Touchfone, ZingHR, Voonik , Zoom and App Virality. Two earlier graduates, Adepto and Plustxt, have been acquired.

Kyron Global Accelerator offers upto $30,000 in funding in return for 6-10% equity stake, in addition to providing CXO Services, corporate connects and access to a global network of investors. Its most recent batch of startups includes Cubito, Xpense Manager, Eywa Media, Viamagus, Cashkumar and Adwyze. One of its portfolio companies, Bookpad, was acquired by Yahoo.

Little Eye Labs was accelerated at GSF Accelerator and acquired by Facebook. The accelerator GenNext Innovation Hub, a joint initiative of Reliance Industries Limited (RIL) and Microsoft Ventures, has graduated 11 startups in entertainment, taxi services, IoT, retail, logistics, search, education, analytics and recruitment: AxleRate, CarIQ, Coitor, Health Vectors, InterviewMocha, Light, LogiNext, Tootle, Oztern, Flexiguru and Fropcorn.

Microsoft Ventures and the Deshpande Foundation have teamed up to create Sandbox Startups, an incubator for startups in Tier-II and Tier-III towns of India such as Hubli. Zone Startups India is another accelerator set up jointly by Ryerson Futures Inc. of Toronto and the BSE Institute. Such accelerators are targeted at investors as well as prospective corporate customers and partners. Other successful global corporate accelerators have been launched by Samsung, Telefonica (Wayra) and Orange (Fab).

3. Calls to collaboration

Instead of approaching startups through consultants or third-party accelerators, large companies can directly engage with entrepreneurs as well. Annual summits of the Mobile Marketing Association have shown how brand giants such as Unilever, P&G and Mondelez are engaging with startups. For example, Unilever engages with startups through a direct call for collaboration at global events such as the annual Mobile World Congress (MWC) in Barcelona. “We signed up with 11 startups at MWC in 2014,” said Rahul Welde, VP for Asia and Africa at Unilever.

Unilever has launched The Unilever Foundry, a platform that will provide a single entry-point for innovative startups seeking to partner with Unilever. “Although we have been working with startups for years, we now want to scale up our efforts and, ultimately, embed this as a way of working throughout our organisation,” says Keith Weed, Unilever Chief Marketing Officer.

The Foundry will also give startups the option to apply for funding through Unilever Ventures, the venture capital arm of Unilever. “In an always-on, data-driven and connected world, innovative and forward-thinking technology companies will play a vital role in helping our brands continue to engage meaningfully with people everywhere,” says Weed.

“We are teaming up with startups to stay on top of the innovation game,” says Peter Mitchell, Global Media Innovations Director at Mondeléz International, the snack giant owning brands such as Cadbury, Nabisco, Oreo, Tang and Trident. Its Mobile Futures initiative is intended to boost consumer connections by collaborating with entrepreneurs. Mondelez has received hundreds of applications from startups in the areas of social TV, mobile retail and SoLoMo (social/location/mobile).

Tech Mahindra invites startups to present their innovative approaches and business use cases, and offers support in technology development and marketing. Standard Chartered Bank has been engaging with startups in data analytics, and explores the technology and business angles of the startups.

Siemens’ Tech StartUp Meet engages with startups in cities like Mumbai, Berkeley, Munich and Shanghai, and recently hosted a startup pitch in Bangalore featuring Altizon Systems, DataWeave, ConnectM, Enlightiks, Flutura, Kavai, Meddiff, Osteo3d and ParaBlu.

Education leader Pearson has launched the Pearson Catalyst for Education initiative, which picks 10 promising startups each year to work with its domain experts. Engagement with and rollout of startup technologies help pursue ambitious goals of going further and faster in digital technologies than the rest of the industry, according to Stephanie Naegeli, Digital Innovation Manager at Nestlé’s Silicon Valley Innovation Outpost. Disney and Nike have also invited startups to work with them in their respective sectors.

4. Hackathons and Hackdays

Hackdays and hackathons are time-defined problem-solving engagements with creative minds to solve specific technical, business or social issues. Examples include the IBM BlueMix Cloud Hackathon and Nokia’s earlier ‘Do Good’ Hackathon. Hackathons reveal new insights into problem solving, promote emerging technical solutions and give large companies a chance to develop ideas into working products. Some venture capital firms such as Sequioa have also launched hackathons to better identify and mentor new entrepreneurs in healthcare, payment and transportation.

5. Startup competitions

Some large technology giants have launched their own startup challenges to attract and cultivate the best talents from around the world. These include Intel Global Challenge (which attracted 20,000 young innovators and entrepreneurs from 60 countries), GE’s Ecomagination Challenge, Microsoft’s Imagine Cup and Amazon Web Services Global StartUp Challenge.

There are regional challenges as well, such as Swisscomm Startup Challenge and Ernst&Young EU Startup Challenge. Large companies and industry organisations such as World Information Technology and Services Alliance (WITSA) are sponsoring awards for digital excellence like the World Summit Awards, which draw innovators from around the world.

6. Conferences and local meetups

Startup conferences are springing up in cities around the world, and startup showcases such as YourStory’s annual TechSparks draw a stream of entrepreneurs as well as industry heavyweights looking for the next big thing. Week-long events like the Construkt Festival held in multiple venues across the city are a good draw for entrepreneurial insights as well.

It also helps to bring startups as speakers at broader industry events. For example, the Mobile Marketing Association’s Asia-Pacific Summit regularly features startups, such as Crayon Data, MobileWalla, Art of Click, Bonzai.ad and biNu.

There is a range of industry and professional meetups in themed topics like knowledge management, where corporate players get to meet startups in specific domains. For example, the periodic meetups of knowledge management professionals in the Bangalore K-Community have featured speakers from startups such as K-Point and accelerators like Kyron; topics discussed include business impacts and acquisition strategy.

7. Startup hotspot visits

Large corporations and international trade delegations regularly make tours of startup hotpots like Silicon Valley and Bangalore to meet and learn from entrepreneurs. YourStory has hosted meetups between Bangalore startups and trade delegations from countries like the UK, Switzerland and Hong Kong. This included the competition, ‘UKTI Calling India’s Most Innovative Companies To Work With The Best of UK.’

Industry body NASSCOM has set up a Startup Warehouse incubation and co-working facility in Bangalore, which has received visitors from companies like Citrix, Google, Walmart, Cisco, Wipro, Intel and Bosch.

8. Customer engagement models

It is not just startups who want large companies as their customers – some large companies also want startups as their customers. For example, Amazon’s cloud unit is actively pitching its scaleable infrastructure services to startups in growth stage, and has secured redBus and BookMyShow in India as customers. It has tied up with ecosystem partners such as accelerators and venture funds.

SAP has launched HANA technology meetups to network with startups in Big Data and analytics, and promote its offerings in this space in cities such as Dallas, Vancouver, Shanghai, Bangalore, Munich and Melbourne. IBM is also pitching its cloud, analytics and IoT solutions to startups. GE has teamed up with Quirky, a crowdsourcing platform, to make its patented technologies available to other innovators.

9. Thought leadership via startup media

Reading startup media and contributing expert commentary are effective avenues for thought leadership for corporate innovators. Entrepreneurs tend to be drawn to niche media in their domains more than mainstream media, and startup community sites are thus useful sources of insights as well as platforms for thought-leadership articles by corporate innovators. Companies like IBM and DBS Bank regularly contribute articles or sponsor sections of a number of startup news sites.

10. Special interest groups

Some technology areas and business models will take a long time to mature, such as smart cities powered by Internet of Things (IoT). This calls for long-term engagement by large players via forums like a Special Interest Groups (SIG). For example, TiE Bangalore has launched an IoT SIG with large players like Intel, Cisco, Bosch and Infosys working with startups in the areas of Design for Manufacturing (DFM), testing and interoperability.

11. Startup networks

A number of startup communities have flourished around the world who meet for grassroots events, such as MobileMonday, Startup Week, Open Coffee Club, Creative Sundays and Startup Weekend. For example, MobileMonday meetups draw local mobile developers, startups and other professionals who meet regularly to discuss industry trends, propose solutions and network on promoting innovative ideas. Ooredoo has engaged with this community by offering co-working spaces as well.

These events are active sources for engagement with entrepreneurs, and have drawn sponsorships and participation from large firms like Microsoft, Orange, Google, Adobe, Paypal, McAfee, TCS, Sasken, Morgan Lewis and Bank of Ireland.

12. Entrepreneurship networks

In addition to spontaneous volunteer-driven startup communities, there are formal entrepreneur promotion organisations like The Indus Entrepreneurs who host regular events for capacity building, mentorship and matchmaking between corporates, investors and startups. TiE has 2,500 charter members in 61 chapters across 18 countries. Sponsors for such events have included eBay, SAP, Vodafone and Microsoft. These networks and events open up new avenues for idea generation, validation and business deals.

13. Incubators

In addition to accelerators run by corporates or investors, there are longer-term incubators for early-stage startups run by government organisations and universities ranging from Stanford and Georgia Tech to National University of Singapore and IIT Bombay (see the YourStory ‘Startup Hatch’ series of articles on incubators). These incubators serve as good platforms for corporate engagement with startups via investment and mentorship.

14. R&D grants to entrepreneur-focused universities

University R&D centres open up additional avenues of exploration and testing beyond corporate R&D labs, and the presence of entrepreneur-friendly faculty and research programmes helps large corporates in the long run. IBM, Loreal, GE, Dupont, Bosch and AXA are examplars of large firms who contribute to university R&D budgets, with MIT and University of Virginia as good examples of institutes with strong support for entrepreneurship.

The IIT Madras Research Park is also regarded as a good example of a bridge between innovations created in the classroom and industry, with participation from corporate research arms as well; TCS has an innovation lab at the Park.

15. Entrepreneurs in residence

Some companies have entrepreneurs in residence (EIR) programmes, in which startup founders spend some time within the offices of large corporations. This helps the larger company open up ‘innovation pathways.’ This EIR model is more popular, however, in business schools and VC firms.

Startups can be a real strategic advantage for large companies, who must investigate and assess deliberate mechanisms for engaging with entrepreneurs, advises Krisztina Holly, EIR, City of Los Angeles, and founding executive director of the Deshpande Centre for Technological Innovation at MIT.

In sum, large companies are actively engaging with startups for new ideas, shelf-ready technology, fresh talent and cultural infusion. “Not only will we support the startups, but we’ll also bring home their innovative spirit. We’re creating a culture of ‘intrapreneurship,’ reflecting new ideas and ways to connect with our consumers,” said Natacha Volpini, Digital Media Manager at Mondelēz Brazil, while launching its regional startup engagement initiative.

“Become a valuable partner to worthy startups,” advises Cameron Campbell, head of business development at WorkBench, a New York City-based accelerator. “Make innovative friends,” add Navi Radjou and Jaideep Prabhu in their new book, ‘Frugal Innovation.’

For more insights on how enterprises can engage with the world of startups, see my framework on the ‘8 Is’ of design thinking for startups: intent, insights, immersion, interaction, ideation, integration, iteration and intensification.