Got questions about corporate-startup partnerships? Shameen Prashantham has answers. Prashantham is a Professor of International Business & Strategy at the China Europe International Business School (CEIBS) who’s spent over a decade researching how corporates and startups can work together effectively. His new book, Gorillas Can Dance, offers a proven roadmap for building successful partnerships. Silicon Foundry spoke to Prashantham about how corporates and startups can overcome their differences to spark innovation and change, drive growth, and open up new markets.
Let’s start with your career journey. You’re an expert in corporate-startup partnering. How did you decide to make that the focus of your research?
The research journey that contributed to the book Gorillas Can Dance began a decade and a half ago. As I was concluding my doctoral studies in Scotland in 2005 it occured to me that most researchers—including myself—were studying startups or large corporations but not both. My own doctoral work was about how startups internationalized into new markets. My PhD advisor’s prior research was on large multinationals. The fact that these were parallel streams of research was indicative of the relatively low incidence of corporate-startup partnering at the time.
Around then, policymakers in Scotland were exploring the possibility of connecting companies like IBM that wanted to up their innovation game with local startups that could benefit from access to the marketing muscle of large companies. I started studying the companies involved in this Scottish initiative and found a few examples involving Microsoft as well. I asked a famous strategy professor if he thought it made sense for me to engage in research on corporate-startup partnering. He said yes, adding that “many startups have no choice but to learn to dance with the big gorillas.”
The phrase “dancing with gorillas” stuck with me. I used it for an article in California Management Review in 2008, written from the perspective of startups. Later, I moved to Asia, and expanded my research to include emerging markets. Over time, many large corporations started actively putting in place startup partnering programs. It seemed that many gorillas were learning to dance with startups. I then decided to write a book about those partnerships, with managers in large corporations as the main audience. The title: Gorillas Can Dance!
Corporations and startups are often eager to partner, but differences in scale and pacing can make collaboration challenging. Tell us more about those challenges. How can corporations and startups effectively overcome them?
Although corporations and startups see an opportunity to collaborate on the basis of their respective strengths—scale and agility—there is a challenge that I refer to as “the paradox of asymmetry.” The very differences that make it attractive to work together also make it difficult (or at least, not straightforward) to do so. In my research I have found three asymmetries that corporations which take startup partnering seriously seek to overcome.
The first is the asymmetry of goals. Established corporations and startups typically strive for different things at different time scales. This asymmetry can be overcome by clarifying the synergy. For instance, some corporations (e.g. Microsoft) focus on building block synergies whereby startups build on top of their platform technologies. Other companies (e.g. BMW) focus on pain point synergies where startup uses its technology to address important issues. When startups and corporations are clear about the win-win they’re seeking, it helps establish shared goals and set realistic expectations for both parties.
The second is the asymmetry of structure. It is difficult to find role counterparts in corporations and startups. This asymmetry can be addressed by creating interfaces as a first port of call for startups. They may be cohorts involving peer groups of startups, such as a corporate accelerator, or funnels that progressively screen out startups, such as in innovation challenges. The latter (e.g. BMW Startup Garage) helps deliver more predictable outcomes whereas the former (e.g. Microsoft Accelerators) may lead to serendipitous outcomes such as unexpected partnerships.
The third is the asymmetry of attention. Managers in corporations can’t easily tell which startup partners are worthy of their scarce attention. Entrepreneurs in startups struggle to attract the attention of relevant corporate decision-makers. By cultivating exemplars among its startup partnerships, the corporation can help both parties understand what success looks like. This helps attract more high-quality startup partners and to assuage any concerns on the part of business unit managers who must ultimately be willing to partner with startups (which can seem risky) if there is to be meaningful collaboration.
What’s your top advice for corporates and startups who are looking to partner?
It is important for both large corporations and startups to view partnering as a process rather than as a one-shot affair. For the corporation this means learning to initiate, expand, and systematize startup partnering. Getting started often involves entrepreneurial bottom-up efforts and may mean asking for forgiveness rather than permission, as BMW Startup Garage co-founder Gregor Gimmy suggested was the case with some of his early initiatives.
Expanding the initial efforts and ensuring they are repeatable requires gaining buy-in from key internal stakeholders. Sheelpa Patel, Head of Nissan’s Infiniti Lab, gained support from internal champions (senior leaders), opportunity generators (business unit managers), and roving ambassadors (various colleagues willing to serve as mentors). Finally, systematizing startup partnering entails aligning such activity with the corporation’s strategic and cultural transformations.
From the startup’s perspective, this means being adept at forming, consolidating and extending relationships with a large corporation. In all three steps they need to combine optimism and proactiveness with caution. 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.
Should corporates consider partnering with startups in emerging markets?
For multinationals operating in multiple markets including emerging markets, it makes eminent sense to engage with local startups. This can help the corporation to better localize its offering–and it may also offer access to novel technologies that can be leveraged in other markets. For example, Walmart China collaborated with a local startup that used image recognition AI technology to address a pain point associated with buying loose vegetables or fruit. Walmart saw possibilities to use this technology in supermarkets back in the US for other pain points such as in-store theft.
Working in emerging markets creates both opportunities and challenges. There is a lot of appetite for entrepreneurship and digitalization in countries like China and India, but their entrepreneurial ecosystems are relatively immature, with many first-time entrepreneurs (in comparison to settings like Silicon Valley or Israel). Corporations may have to adapt their partnering practices to compensate for deficiencies or work with insiders who have better understanding of the local environment. However they should also demonstrate commitment by prioritizing emerging markets and actively leverage novel ideas. For instance, one of the early examples of startup partnering I came across was Qualcomm’s collaboration with a startup in Bangalore called Mango that had software expertise relevant to Qualcomm’s Asian and African markets.
You argue that corporate-startup partnerships can be a powerful lever for reaching the UN’s sustainable development goals. Tell us more about that.
The launch of the Microsoft Global Social Entrepreneurship Program in 2020 underlines how partnerships between a corporation and its startup partners can yield valuable social impact. When corporate-startup partnerships contribute to the Sustainable Development Goals (SDGs), it’s a win-win-win for the corporation, the startup, and society. I saw a lot of examples of that during my research in Africa: the German healthcare company Bayer partnered with Bisa, a Ghana-based telemedicine startup, through its G4A accelerator program in Berlin, which enabled the startup to develop its competences and scale. When Covid-19 struck Bisa was in a position to help worried customers get relevant information and advice. DHL partnered with South African startup Kusini, which makes water treatment systems built from macadamia nut shells, to support installations of Kusini’s water filters and tanks in areas near its depots, thus contributing to SDG 6 (clean water and sanitation). Another Covid-related illustration (this time from India) is the partnership between Cisco Launchpad and Bangalore-based Cloud Physician that provided much-needed remote services to intensive care units in hospitals, especially in smaller cities and towns. Indeed, corporate-startup partnering is arguably a valuable component of SDG 17 – partnerships for the goals. 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.”