Engaging with startup communities has become a must for corporations pursuing innovation.
But when you set up an accelerator, incubator, hackathon series, or any other kind of startup program, copy-paste doesn't work. You need to create a program that fits your specific goals and needs.
And so, how to set up an effective “startup engagement program”?
During our recent Innov8rs Learning Lab on Startup Collaboration & Ecosystem Engagement, Paolo Lombardi and Adam Berk (Co-authors of “Startup Program Design”) shared essential tools to help leaders and corporate innovators design a compelling program and attract the right startups to accomplish their innovation objectives, as summarized below.
What Are Startup Programs?
Corporates have three major options when it comes to driving innovation: build, buy, or partner. These solutions are not mutually exclusive and can coexist in most cases. That said, it's crucial to select the approach that aligns with your organization's overarching strategy and objectives. Thus, before committing, thoroughly evaluate the advantages and disadvantages of each option to ensure the best fit:
· Build: in this case, innovation happens mainly within the R&D departments. While this gives leaders and corporate innovators full control, internal innovation efforts can fall short if they’re too far removed from the core business.
· Buy: here, innovation happens through acquisition. However, integrating different talents, skills, cultures, processes, and technologies may be complex and result in odd conglomerates without a cohesive strategy.
· Partner: this approach provides a similar level of customization as the "build" option but without absorbing the external partner completely as in the "buy" option. It offers a unique way to tap into ideas and solutions you may not have previously considered. Partners can be of various natures, including: suppliers, customers, distributors, players in other industries, universities, or startups. And again, before entering into any partnerships, you have to carefully evaluate how potential partners align with your organization’s goals.
“If you want to go fast, go alone; if you want to go far, go together" - African proverb
In this article, we'll dive deeper into how to effectively partner with startups. In fact, as Paolo and Adam point out, this is a key strategy that can make a real difference for your corporate. Once again, it’s important to note that partnering with startups doesn't need to be the only route to innovation. You can still leverage your internal R&D and consider M&A deals while collaborating with startups.
In order to be successful, partnerships must be well-designed and executed based on clear objectives and resources. In other words, to engage with the external startup ecosystem and establish long-term partnerships, you need a robust "startup program". Examples of startup programs are incubators, accelerators, corporate venture funds, and hackathons. While each program is unique, they share common features that facilitate effective management, repetition, and improvement over time. These features include:
· Duration: startup programs have a defined duration that varies from a few weeks to several years, depending on the goals and needs of all involved parties. Hackathons typically take a few hours, accelerators a few weeks, and incubators last several years. Shorter programs are attractive for entrepreneurs seeking a quick infusion of resources. In contrast, longer programs give them more time to develop their businesses.
· Location: the location of a startup program can significantly impact its success and depends on the corporate's resources and infrastructure. It can be located on-site at the corporation's headquarters, in a separate incubator or accelerator facility, in a coworking space, or even in a virtual location.
· Funding: funding is a critical feature and can be offered at the program's onset (as in accelerators), at the end of the program as a prize (as in hackathons or challenges), or distributed throughout the activation stage (as in incubators).
· Education and mentorship: education and mentorship are vital components of startup programs and are usually provided during activation.
Why Startup Programs?
To effectively engage with external startups, it's better to use a structured program rather than ad hoc, one-off partnerships. According to Paolo and Adam, case-by-case engagements lack structure and can lead to uncoordinated efforts across organizational units, resulting in chaos and unpredictability. Conversely, startup programs provide an organized approach to engagement, making it easier to control risk and achieve valuable results.
“There is no holy grail in startup programs”
There's no one-size-fits-all solution when it comes to startup programs: the best program depends on your corporate objectives. Therefore, to maximize the impact of your collaboration and attract the right startups, it’s crucial to design a customized program. Whether the goal is to launch new products, boost brand recognition, or expand into new markets, you can create a tailored program by adjusting and tweaking the features mentioned above into a unique combination.
To help you clarify your goals and identify the features that will best support them, Paolo and Adam have developed the "Strategy Canvas" tool, which is illustrated below. As a business leader or corporate innovator, you can use this tool to establish a more focused and strategic approach to partnering with startups. This tool will ultimately enable you to design a program that aligns with your corporate objectives.
The Startup Program Strategy Canvas
After thoroughly analyzing numerous successful startup programs, Paolo and Adam created the "Startup Program Strategy Canvas" tool. Their research indicates that you should consider three contextual elements to determine your startup program's context:
· The (sponsoring) corporate: carefully considering what your organization can bring to the table is crucial. Hence, analyze its unique assets, networks, resources, and knowledge, but also identify any potential bottlenecks or limitations.
· Innovation objectives: clearly define your program's objectives, whether it's to integrate external innovation, find diversification opportunities, or enter different markets. Ensure that these goals are specific, coherent, and measurable to avoid internal politics and opposition.
· The startup ecosystem: understand the startup ecosystem's maturity level, available technology, and expertise, and take into account what startups want when creating an offering to meet their needs as well.
“A startup program exists at the intersection of corporate elements, innovation objectives, and startup ecosystem characteristics”
Balancing these three contextual elements is key to identifying the necessary features your startup program must have to align with your organization's strategy, goals, and resources. And this also explains why copying other entities’ programs isn't recommended: each context is unique. “To succeed, you can’t help but go through the trouble of designing your own startup program”, conclude Paolo and Adam.