When Davids & Goliaths Learn To Work Together
The World Wide Web ushered in sweeping changes from business, economics to our lives. Some of the changes have been positive while some less so. One of the positive changes is demolition of entry barriers for anyone with an idea to transform it into a profitable business proposition. This shepherded in the era of start-ups globally including India from around 2014-15 triggering a vibrant culture of entrepreneurship in the country.
Indian tech startup ecosystem closed more than 700 deals(until September 2017)across different segments with a record high investment of $9.4 billion, a growth of almost 1.35X when compared to total investment in 2016 (January-December). Investments have been marked by big ticket funding like the $1.4 billion invested in Paytm by Softbank, $1.4 billion in Flipkart by Tencent, Microsoft, eBay, Naspers and $404 million in Ola by Falcon-Capital and SoftBank Group.
However, funding does not automatically mean success nor is it a measure of a startup's achievement. It just shows that there is investor interest and the startup maybe doing something worth while. Not withstanding the fact that market valuation of Indian startups has grown significantly over the past four years, a recent study,“Entrepreneurial India,” by IBM and Oxford Economics found that 90% of these fail within the first five years; the common reason is little focus on business basics. Lack of skilled workforce and funding, inadequate formal mentoring and poor business ethics were also cited as reasons for failure.
This is where the ecosystem of a start-up and large enterprises comes in. There was a time when big organizations where either underestimating the challenge posed by startups or being overwhelmed by the disruptive force of nimble footed start-ups which launched products and services at a blistering pace or at price points that made competition virtually impossible.
While large global enterprises often take too long to transform or take advantage of disruptive technologies, start-ups on the other hand can rapidly leap into the battle with their arsenal of innovative technologies. But they quickly run out of steam as being innovative and running a stable business model require entire different skills.
This has created a new model of start-ups and large established organizations working together complementing each other. Large organization is using the innovative culture of start-ups to support them in co-developing new solutions and providing them access to markets. Start-ups on the other hand gain from the mentoring from the bigger organization to create processes and systems to become sustainable enterprises. This has become a win-win model.
While large global enterprises often take too long to transform or take advantage of disruptive technologies, start-ups on the other hand can rapidly leap into the battle with their arsenal of innovative technologies
According to a McKinsey survey 82% of large corporations see collaboration with startups as "some what important" or more so, with 23% calling these partnerships "mission critical."Both sides realize that they have something the other wants. Rather than waste time and resources fighting, startups and corporations should create mutually beneficial partnerships. Not only will this allow both parties to boost their bottom lines, but it will also turn competitive disadvantages into market opportunities. This will reduce the failure rate of start-ups and help bigger companies to enjoy the advantage of a fleet-footed partner.
However, at the same time large corporations need to be careful not to hobble start-ups with their bureaucracy. Big organizations often achieve success through careful planning and long-term decision-making. But when they work with startups, some of those same habits may cause friction. A small enterprise may not see much value in the processes that are part of a larger company’s way of doing business, and startups may be willing to take risks that their more-established partners find reckless. This is where the maturity of a bigger partner comes into play and mentors need to balance interests without treading on toes.
A large organization needs to carefully select its people who would work with start-ups. They should be empathetic and at the same time appreciative of an unfettered innovative spirit. It is good to have a referee as conflicts are bound to happen while working together. It is always good to acknowledge conflicting priorities and agree on core values. This is the foundation of a win-win relationship between a start-up and a bigger organization and develops a fruitful symbiotic relationship.