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Corporates, startups and innovation
Everyone wants to work with startups and accelerate disruptive ideas nowadays. Corporates have also realized, they are not fast enough to develop new models and react to external changes with their old operating models. That’s why they want to cooperate with startups, accelerate internal and external new projects, and also invest in new companies and businesses. But in reality it is not so easy. Telcos have also been active in this area, and often failed badly. What is a model that could work in real life?
Do you remember Vodafone 360 some years ago, when Vodafone wanted to ‘manage’ a social networking business, i.e. copy social media startups? Needless to say it was an expensive and total failure. And more recently Telefónica created Wayra, a startup accelerator. It had accelerators in more than 10 countries until Telefónica decided to leave that business. Many other carriers have had some level of venture capital, accelerator or startup cooperation programs. Have you heard about many success stories? Maybe not so often, but there are many stories from startups and entrepreneurs that have been quite frustrated, how the cooperation has worked, how arrogant and slow those corporate guys have been to entrepreneurs, and on the other hand, how carrier’s operative people cannot see value from these startup programs.
Almost each main city starts to have a few dozens accelerators. There are few successful examples, like Y Combinator and 500 Startups, in that category. But the reality is that it is very hard to make successful business with accelerators, or they can end up in facility management and consulting businesses. Typically there must be some other benefit and value from an accelerator business than a pure revenue or ROI. Public sector accelerators can create new successful businesses, new taxpayers and boost the local economy. Corporate accelerators should bring value for corporates daily and future business.
Why it is so difficult? It is not so hard to hire a so called ‘startup expert’ to hand pick interesting startups, select some startups into an accelerator program and give a small sum of money, or organize pitching events. The problems are often much more fundamental. Telcos, as other corporates, want to play ‘like a small venture capitalist’, to not really think a model for their real business needs and processes.
First, to invest time, money or other resources in any company, the approach must be very systematic, based on real data and clear targets. For venture capitalists or business angels, it can be enough to find a few winning lottery tickets, but for a corporate that also looks for help in their business needs, the approach has to be a systematic process. Those startup partners can potentially be clients, partners and developers for a corporate, and the value can come in many different ways also with big volume of small pieces, not only 10 or 100 times ROI as in the VC business.
Second, the cooperation should not only include startups, but small and medium size enterprises (SME) as a whole. Startups usually refer to new companies that look for very fast growth and are financeable by VC’s and business angels. But, for example, for a Telco it makes sense to cooperate with hundreds of SMEs that never plan to go to Silicon Valley or get VC money but can be good businesses with stable revenue. Those companies can cooperate with Telcos to implement some services and technology, be customers, and help to innovate solutions for new needs.
Third, the SME cooperation should also be integrated to the whole organization and operations of the corporate. This means that it cannot be just a few ‘startup experts’ that manage the cooperation and maybe sometimes organize pitching events where operative managers can participate. If the cooperation includes a lot of SMEs, enough data is available from each SME, and all operative units have access to this information and models to cooperate with SMEs, we can expect much more practical value. And in this way the whole organization is engaged in developing this cooperation and get value from it.
Fourth, it must a symbiosis of all parties, not to utilize anyone. Apple and Google have created a mobile app business model that is excellent business for them, but at the same time app companies can also make good business. Another model of the symbiotic ecosystem is a SME, corporate and public services project of city of Helsinki. They are building a concept and processes where the city’s services to entrepreneurs and SMEs work together with local SMEs, universities, accelerators, and corporates. One part of this is to build a common platform and databases (based on Startup Commons open platform) to get cooperation to work. Its target is really to make all communication more effective and information and measurable data available to all parties.
Many corporates, including telcos, have wanted to play venture capitalists. It is probably a lot of fun for those few guys who can invest money normally without personal risk as angels or VC partners, and those external consultants who focus to look for startups, listen to their pitches and tell their wisdom about how to run business, to entrepreneurs for a nice compensation from a corporate. Corporates should think a more realistic model that is really linked to their current or future business and organizations. It means more boring things than to play venture capitalist, like creating processes to work with hundreds of SMEs, collecting internal and external data from needs, companies and solutions, develop different models to get value from this cooperation and guarantee all external and internal parties get value from this. And especially it requires the right attitude, it is a lot of hard work, all parties must respect each other and value has to come from the systematic work, not by finding winning lottery tickets.