Guest Blog by ELP Student Nahiyan Bakr – Interdisciplinary Physics – Literature, Science, and the Arts – Class of 2018
Dear Startup Founder, Large Corporation Executive, and Everyone in Between:
I had the unfortunate incident of dropping my iPhone and shattering its front screen a few weeks ago — like we all haven’t done that sometime in our lives. So I ended up going to the famous Apple store in Union Square, San Francisco, to get it fixed. During my seemingly never-ending six hour wait, I explored the store and made a discovery that caught me very much off-guard. This is my attempt at articulating said “discovery” and the subsequent research I conducted.
As I let my curiosity run free within the confines of the Apple Store, I came across a shelf filled with non-Apple products. These products were all of different categories, ranging from sporting goods such as the Adidas miCoach Smart Ball to healthcare devices like Kinsa Smart Ear Thermometers. Why are these products in the Apple Store? And how did a startup like Kinsa manage to get their product on these shelves?
I did some research after this. What I found made sense and shocked me at the lack of talk/exposure* about these types of business partnerships.
Disclaimer – Note that this is purely my opinion on why there has been a lack of partnership between large corporations and start-ups, and why they should change this ASAP.
Distinction between Large Corporations and Startups
I know, I know — we don’t need to be reminded of all the differences. Thus, I’ve added a table which points to the 3/4 main distinctions. Gloss over it at your will. I do highly recommend watching this video as well to get an even better understanding.
Fear – Risk vs Reward
“I can’t deal with their long drawn affair of decision making and action” — startup about the large corporations.
“What do they know?”- rebuttals the seasoned executive of the large corporation.
With the recent emergence of startups, most people have a common, understanding of what they bring to the table, and, more importantly, what the corporations do and do not. So let’s break this down —
- Startups are in the high risk – high reward game. They feed off the unknown, and the ones that make it are the ones that thrive in it. To them, the only way to make it is to take the chances which others have failed to push into. With all the competition around vying for people’s attention, success in these risks determines their longevity. There is no script, they make it up as they go along, and they like it that way.
- Large corporations, on the other hand, are in the low-risk business, in which they aim to attain the highest reward possible. The baseline is to match the profits of the previous month, quarter, or year, and then build on it. Too much risk makes them nervous. Dealing with too many unknowns does not ensure the required minimum bar set. There is a script, and they follow it to a tee to attain the baseline.
An extensive network of checks and balances in the large mammoths have been put in place. Decades of experience ensures their longevity, keeping shareholders and board members happy with incoming profits. The argument arises that such intricacies have made most organizations of such size lose sight of the real goal — to innovate for the people. While the old guards contest these charges by creating “innovation departments,” most of the time this seems more like a PR move, more to project the intent of disruption than the actual execution.
Recent studies have shown millennials wanting to work at smaller, more nimble organizations. This is rising due to the feeling of drowning in the bureaucratic mess they claim is prevalent in large organizations. Startups seem to avoid working with the large corporations for fear of their goals and aspirations will drown in risk averse environments.
Large corporations reinforce this belief from the other end of the business spectrum. The fail-safes are there for reasons they claim, to optimize the grown of the firm and its profits. The risk with which startups make decisions on a daily basis is too high to make sense. This is why most startups fail; in their eyes, too much risk. And this is why they mostly avoid working with them.
“What’s in it for us?”- thought/said everybody ever
Now let’s get into answering the most important question — “What’s in it for us?”
With all their differences and the reasons they don’t want to work together, what benefits could these organizations derive from joining forces that may consider them to override the neys?
Here’s what I think –
To my beloved Startups,
Listen, guys, you’re awesome! You’re going to help make a shift in the way people think and use products or services in their lives; you are going to make a difference! You know it! But here’s the catch, the rest of the world doesn’t. A handful of people really know of you, and that handful is probably the early adopters who tune into Tech Crunch disrupt or an obscure convention you had a booth at. The bell curve won’t know you until you get out there.
Also, keep in mind that the startup life is a constant ticking clock — you might have built a unique product now, but in a few days someone out there, including large competing corporations with their massive amounts of resources, will either emulate your idea or come up with something better.
Working together with a large corporation may actually help you get there. Pushing past their fail-safes and regulations, a unique partnership of mutual benefits can arise —
- Exposure — Let’s be honest for a second, Apple is one of the most influential and recognizable brands in the world next to Facebook and Amazon. This makes Apple Stores one of the most visited stores in the world. Now wouldn’t it be great to have your product, which you recently came to market with, on a shelf in the Apple stores? Apple aficionados can take notice when walking through? Yes, yes it would be great. That’s exposing yourself to the bell curve!
- Distribution — It’s one thing to be on the Apple Store shelves, it’s another to have inside access to their channels:
It will open up a world to you which you would’ve taken at least 5 to 10 years to get even close to. That’s distributing yourself to the bell curve!
- Funding — Getting out there though takes money. All of the extreme execution, the speed and agility of you and your startup will mean nothing if you do not have the money to advertise and distribute your product on a large scale. If exposure or distribution is something you cannot get out of these large corporate behemoths, try to provide a unique service to them, one which you can do better, faster, and at a cost lower than it would take them to do it on their own? That’s funding you can use to get yourself to bell curve!
To the executives at these large companies,
You have the brand, the channels and connections, and the money. What could these minions possibly provide you in return? Let me tell you a few —
- Absorption of niche markets. It all adds up — startups are small and have potential, the revenue and profits are a fraction of yours. These come to you in return for your existing channels and costs. And the catch is this – startups may help you tap into niche markets, markets in which they operate and markets in which you never even thought of. So, hypothetically, if you partner with ~12 startups, your share of their profits could increase yours overall by a significant amount with little cost incurred.
- Add-ons to existing product (added value) — Let’s take my initial example of Kinsa products in an Apple Store. Kinsa and many other startups using Apple platforms to launch products and services with the intention to render older technology obsolete. Smart products and services like this are considered as added value for Apple users. With the added value, comes added branding and an image which can brew a sense of loyalty in existing customers as well as draw new customers towards the brand.
- Nimble detached innovation — We’ve all discussed the long-drawn affairs of innovation, testing, and deployment of new products by large companies. It takes years to get past fail-safe hurdles in place, aimed to minimize risk and in turn stifle innovation. From getting the idea approved by countless departments, to creating a team for creating and testing, to building a department for the product, if all else goes well etc etc… In the same discussion, many a times the nimbleness with which start-ups deploy their creation, innovation, and testing of products is brought up. Use this established team of very capable individuals, who do not have bureaucratic hurdles to deal with, to work on these projects? The infrastructure is there, so only the cost of the startup team’s time is at stake, which is a lot cheaper than the infrastructure the large company would need to build internally. This helps minimize risk. The large company stands to lose little in return for a fast, efficient, and fearless team who will deliver in a fraction of the time expected. Sounds like a heck of a deal to me!
The world is changing. Startups are springing up with their fearless teams, innovative ideas, and nimble execution. Yet they lack the presence and resources to make large strides forward. The old-guard, large corporations, have brand presence and resources. They are also bogged down by bureaucracy, with a slow deployment of resources, and a crippling avoidance of risk. See how these two have the opposite problems? It would be great to stop focusing on each other’s weaknesses and work together to amplify the other’s strengths.
The above-illustrated points are my thoughts. Varying opinions are out there on whether the current shifts within industries warrant changes such as these. Do let me know your thoughts — if you agree, disagree, or have a different version. I’d love to explore this idea more so the more opinions the better. Shoot me an email at firstname.lastname@example.org.
I am an international student from Bangladesh at the University of Michigan — Ann Arbor, studying Interdisciplinary Physics. As of Summer 2017, I’ve been working as sales and marketing intern for a San Francisco startup. To connect, contact me on LinkedIn, Twitter, and/or follow my journey on my SoundCloud channel.