Innovation is the key to success in today’s business world. In the last decade, the emergence of new technologies has led to the rise of small companies. The traditional corporate innovation model is evolving with the demand for startups and early-stage companies in the market, now we see increased interest by large corporations in partnering with startups.
Corporations are looking to engage with innovative companies to collaborate, experiment and co-create new products or services. Startups on the other hand are also looking to work with larger corporations to secure growth outside of their traditional markets. This is resulting in a new corporate innovation model that continues to evolve as companies continue to engage in business with one another.
Let us dive deep on the subject, in our conversation with Dr. Shameen Prashantham, professor of International Business & Strategy at China Europe International School, Author, Gorillas Can Dance.
EA – Tell us a bit about you?
My name is Shameen Prashantham. I am a professor of International Business & Strategy at China Europe International School. I was born to an Indian father and Sri Lanka mother. My earliest years were spent in the US. My family returned to India and my parents were involved with an NGO, in the area of mental health, and in fact, it recently celebrated its golden Jubilee. I myself ended up in the UK, specifically Scotland, and now live in China. So all that is to say that I suppose it’s not a big surprise that I ended up being a professor of International Business.
In the course of my academic research, I became very interested in how big companies and startups partner and that’s what I mainly focus on in my search. When I was doing my doctoral studies at Strathclyde University in Scotland, I was fortunate to be in an international business research unit set up by two eminent scholars, Neil Hood and Stephen Young.
They made a name for themselves by studying large multinational corporations, primarily American companies that had subsidiaries in Scotland. They had a number of doctoral students who began to look at how smaller companies go international, and I was one of them.
EA – What caught your attention that you decided to research the subject – Corporate Innovation?
While pursuing my doctoral research, I began to observe that some smaller companies were partnering with large corporations, and I mentioned this once Ph.D. was done as I was thinking maybe this could be the next thing I look at. I mentioned this casually in a hallway conversation, to Neil Hood who at the time held a position of leadership in Scottish Enterprise. He said, “Well, this is interesting you should say this because at this moment we are thinking about how to help the multinational subsidiaries in Scotland that want to up their game and do more innovation to connect with our very talented smaller entrepreneurial firms that want to scale up”. That was my first opportunity to observe this phenomenon.
Then I ran into another eminent professor, C. K. Prahalad, at a conference and asked him whether he thought this was worth studying and he said, “In my opinion, the small company has no choice but to partner with the large gorilla”, and that gave rise of the notion of ‘dancing with gorillas’ which became the title of an article I co-authored with Julian Birkinshaw of London Business School in California Management Review. I continued to study this phenomenon over time and kept observing how it evolved and how big companies started taking this seriously.
I then flipped my focus to looking at it from the point of view of the big company, the gorilla. It seemed that many gorillas were learning to dance with startups and I decided to distill lessons for corporate managers from their experiences. The result is my recent book titled Gorillas Can Dance.
EA – If a new corporation wants to build such programs to engage with startups, how should they approach it?
The important thing is to get started with something – as Simon Sinek says, “Think big, start small, but start!” To give you an example, this is how Bayer, the German pharmaceutial company, got going. Jesus del Valle, a Bayer scientist and manager, decided to start what he called a “passion project” which entailed giving small grants to students to develop digital apps relevant to healthcare. He called the initiative Grants4Apps, or G4A for short. In the next iteration, he targeted startups. Then, he brought together five startups in Germany for a 100-day accelerator programme in Berlin. The following year, it was opened up to startups from around the world. And then Bayer subsidiaries in various markets started running G4A accelerators in their own markets. And thus grew G4A into a global programme. But the start was small and humble. Indeed, the people initiating and running these startup partner initiatives are often middle managers. As I observed in the case of Sheelpa Patel who founded Nissan group’s Infiniti Lab, they need to be skillful in spanning boundaries not only with external startups but also internally with business unit managers whose support is critical for startups to be able to engage in meaningful collaboration with a corporation. Something I have heard multiple times from the likes of Jeremy Basset who founded Unilever Foundry and Gregor Gimmy who co-founded BMW Startup Garage is: “It is better to ask for forgiveness than permission”. The bottom line is that a bias for action is needed – and entrepreneurial managers like Basset, del Valle, Gimmy and Patel need to get involved.
EA – There have been very few successes in this model, why do most of the programs shut after the initial few years?
Well, the reason for writing the book is precisely in order to provide guidance to managers in corporations who seek to partner effectively with startups, my book, Gorillas can Dance, draws upon my research to unpack three aspects of partnering between corporations and startups: the why, the how and the where. Failing to think deeply about these facets is often why corporate-startup partnering fails. So a prerequisite is that corporations need to take startup partnering seriously as opposed to simply paying lip service to it because it seems like a “cool thing” to be doing, as opposed to a strategically relevant endeavour.
In terms of the why, the starting point is that corporations need to be more entrepreneurial in a world characterized by complexity and disruption — and one way to do this is by engaging with external startups.
As for the how, the key is to that there is a paradox of asymmetry, which is that the very differences that make it attractive for large companies and startups to partner with each other also makes it difficult for them to work together. That is, while it is attractive to combine the scale of large corporations with the agility of small startups, these complementary capabilities also reflect huge differences that get in the way of smooth partnering experiences. One of the main messages in my book, Gorillas can Dance, is that partnering effectively with startups requires corporations to understand these asymmetries and then find ways to mitigate them. I highlight three strategies that can help: clarifying synergies, creating partner interfaces and cultivating exemplars or success stories. Companies that I have studied including Bayer, BMW and Unilever have done a good job at these. More companies need to follow suit.
And finally in relation to where, there is scope for large multinationals to harness, in a nuanced way, partnerships with startups in different locations, across both advanced economies and emerging economies such as China and India and indeed, beyond including, increasingly, in Africa.
EA – How has the corporate innovation model evolved and how do you see it evolving further?
In the early stages of my research the examples of effective corporate-startup partnering that I came across for mostly happy accidents and ad hoc efforts. Over time, corporations have become more intentional and systematic in their startup partnering activities.
Two broad types of partnering interfaces I have seen are what I call cohorts and funnels. Cohorts involve peer groups of startups, such as a corporate accelerator, while in funnels startups are progressively screened, such as in innovation challenges. Funnels like BMW Startup Garage or Unilever Foundry help deliver more predictable outcomes whereas cohorts such as Microsoft Accelerators or the Bayer G4A Accelerator may lead to serendipitous outcomes such as unexpected partnerships.
Trends I am observing now include the rise of venture studios through which startups are actually built from the ground up to pursue an identified opportunity. Some corprorations are launching corporate venture studios with this in mind. As a recent example, the Dubai International Finance Centre (DIFC) recently announced a launchpad studio to facilitate the development of innovative fintech startups that collaborate with corporations partnering with DIFC.
Also of great importance are growing efforts to harness corporate-startup partnering to help achieve the seventeen Sustainable Development Goals (SDGs) adopted by the United Nations. Indeed, as I discuss in my book, Gorillas can Dance, corporate-startup partnering represents an important facet of SDG 17 – partnerships for the goals – which is the importance of non-traditional allies coming together. This is all the more important and urgent in this Decade of Action (the 2020s) in which the world needs to accelerate its efforts to pursue the seventeen Sustainable Development Goals, in particular poverty alleviation (SDG 1) and climate change (SDG 13).
The key message is for organizations, large and small, to leverage their unique capabilities and pool them with the complementary capabilities of partners, even (or perhaps, especially) if they are highly asymmetric or dissimilar partners. Examples in the book, notably from Africa, indicate that NGOs could well partner with startups and, say, the foundation of a large company to pursue a socially relevant goal such as financial inclusion. Or, a large entity within the United Nations system such as UNICEF, which focuses on the welfare of children, could itself be a “gorilla” and work with external startups in the pursuit of innovation that could lead to, say, better education outcomes. As another example, an organization I mention in the book, the Christian Medical College (CMC) Hospital in Vellore, India, which provides high-quality affordable medical care might, in the future, engage with digital health startups in the way that Israel’s Sheba Hospital is doing. As Paul Polman, former CEO of Unilever, has observed: “It is imperative for large organizations to partner with more nimble startups to help create a better world.”
EA – How beneficial are these partnerships for startups?
For startups, gaining access to resources is greatly important, and partnering with large coprorations can be advantageous in this regard. There are three benefits in particular that I have observed: startups can gain legitimacy, learning and leads or opportunities for revenue generation through these partnerships. To illustrate, a Ghanain healthtech startup, Bisa, partnered with Bayer through the latter’s G4A startup accelerator programme, later forming links with Bayer Foundation.
This association enhanced its legitimacy which meant that it got taken more seriously by other stakeholders. It was able to augment its technical and marketing expertise by interacting with experts and mentors at Bayer, thus learning new things. And it gained leads for new opportunities – including ultimately, setting up its first overseas operations in Senegal, after being introduced by Bayer Foundation to another German foundation which worked closely with the Senegalese health ministry. When Covid-19 struck Bisa was in a position to help worried customers get relevant information and advice.
But getting access to these benefits of legitimacy, learning and business leads is effortful, not effortless.
The phrase “dancing with gorillas” – the title of an article I wrote at the early stages of my research program, from the perspective of startups seeking to partner with large corporations – appeared to resonate with a lot of people. The reason, I believe, is that it conveys a sense of danger: a startup can get trampled while dancing with a gorilla. “Swimming with sharks” is another phrase used to describe corporate-startup partnering that also connotes this. So startups need to combine optimism and proactiveness with caution in forming, consolidating and extending relationships with a large corporation. In all three steps.
When forming the relationship, they can proactively leverage local allies to get introduced to a corporation but at the same time should ascertain if the corporation is really interested in a prospective collaboration. When consolidating the relationship they should play to their unique strengths (even if that means sidestepping tangential opportunities) but also not give away too much of their knowhow too quickly. In extending the relationship they could take the initiative to engage with other business units of the corporation but also avoid putting all their eggs in one basket. Building other partnering options can be prudent too. So, holding this apparent contradiction that there is optimism and caution at one and the same time is, I believe, vitally important for working successfully with a large company.
EA – What’s your view on CVC?
Corporate Venture Capital (CVC) which is investments from large companies in startups traditionally has tended to come into play at a slightly later stage than non-equity partnering, which is what my research has mainly focused on. BMW had its CVC arm called iVentures even before it established the BMW Startup Garage, through which it engaes in non-equity partnering. BMW Startup Garage talks to startups at an earlier stage in its life cycle – say, a series A round of funding – whereas CVCs like iVentures typically come in at the B round or later. Gerald Brady at Silicon Valley Bank who knows a lot about corporate venture capital said to me once – and I quote this in the book – that “you can partner without investing, but you can’t invest without partnering”. And so whether there is investment or not, having a collaborative mindset is the important thing to focus on.
EA – What opportunities do you see for people like us, the enablers – companies building communities, companies running accelerators.
Startup ecosystem enablers have an important role to play in facilitating corporate-startup partnering. They can help by educating both startups and corporates on the benefits – and pitfalls – of partnering. Beyond this, they can facilitate the match-making process, for instance.
Plug and Play have in fact made a major business out of this. They can help to run startup partner programs, as Techstars has done for many years by running corporate accelerators for various companies.
In Africa, Reach for Change, a Swedish NGO has done this as well, not only for corporations but also multilateral agencies like UNICEF. Some players are now helping to develop startups from the ground up to pursue opportunities arising from the prospect of partnering with specific companies by operating corporate venture studios – such as Silicon Foundry in the US, Founders Factory in the UK and Singapore Deep Tech Alliance in Asia. So there are many different ways in which startup ecosystem enablers can help gorillas to dance and startups to dance with gorillas. And Africa – where I love to teach at the Ghana-based Africa campus of China Europe International Business School – has many promising startup ecosystems where enablers can have a lasting impact.
|Shameen Prashantham is a Professor of International Business and Strategy, and Associate Dean (MBA), at China Europe International Business School (CEIBS) in Shanghai, China. Prior to joining CEIBS, he taught at Nottingham University Business School (NUBS) China and the University of Glasgow. He pursued doctoral and post-doctoral research at Strathclyde University in Glasgow, Scotland. Prof. Prashantham is best known for his work at intersection of global strategy and entrepreneurship on partnering between large multinationals and startups – which he refers to as “dancing with gorillas.” This focus evolved from his extensive research on new venture internationalization. He is also interested in strategy-as-practice and is currently focused on partnerships that contribute to the UN Sustainable Development Goals (SDGs). His latest book is Gorillas Can Dance: Lessons from Microsoft and Other Corporations on Partnering with Startups Wiley, 2022). His academic research has also been published in journals such as Entrepreneurship Theory & Practice, Journal of Business Venturing, Journal of International Business Studies, Journal of Management Studies and Organization Studies. He currently serves as Associate Editor at Journal of Management Studies.|