Further to my last post on “Rewriting the Startup Playbook” I received a lot of views and some structured feedback regarding the challenges of using strategic partnerships.
In the context of Lean Startup, the question of timing and validity of a partner replacing a team of startup founders makes sense. You want to reach the Corporate customers with all your direct energy and product capabilities.
Do a Demo, Lose a Sale
In the context of Open Innovation, you are better to be stripped of the zealousness of the team and the focus on the product sale. As Ash Maurya says, “Love the problem, Not your Solution!”
Most Corporate customers are in no position to effectively validate your product. If you get a meeting, it has to be in the boardroom as a trusted advisor and not another vendor in the hallway waiting to pitch to the IT guys.
If a Corporate Team has an internal innovation program like an incubator/ accelerator they may have a program focus, have identified what relationships they want and who the participants they wish to engage with are.
The Chicken and Egg, The High Bar and The Winner Takes All in one Simple Conundrum
If they do have such a program, you had better be sharp to the point of being vetted and PoC ready for their environment, ready to scale and be venture backed.
There are other iterative models that are better than a purely internal CVC or Accelerator. Some use sponsored Hackathons, Open Calls or Broad reaching Symposiums to source new innovative products and services.
The Game Show approach where there is a contest, pitch day or showcase can be good to build awareness and build communities.
However, the problem still persists in that 90% of efforts as startups fail when they suffer these systemic break points of not matching up with customers in an efficient manner.
The Sandbox as a Service
Matching Corporate Problems with Startup Savvy requires both parties to change their respective lenses to allow the two to develop a proposition that enables a process to formulate organically.
Closing the value creation/ capture gap requires some playground rules as well as a neutral clearing house- “The Sandbox” to allow for objective process flow in support of an agreed upon outcome.
If the startup can get access to all of the problems, specific outcomes and rules of engagement, they have a chance at getting a PSF/ PMF home run in record time. The customer gets measurable value and a product roadmap that they can bet on.
Startups typically do not have the resources or the requisite “finished product”, commercially ready service capability or funding to become a preferred vendor at this stage.
If the startup were to be engaged based on capability and insights- technical and marketing, prior to locking down their product specs, they could actually provide a better PoC on behalf of both parties!
Opening the Bridge to Traffic
Back to the subject of using strategic partners, if we had a partner with 80% of the delivery and SLA capabilities to get over the hurdles of scale, support and venture backing, would that matter to the Corporate clients? (Yes)
The Strategic Partner can provide core technologies, tools and support and even capital at certain stages to get the unique value of the startup into motion.
So the glue to effectively enable this is not the partner alone, since they may not be the only or most appropriate partner to either the Startup or the Corporate. The Open Innovation process is best to provide facilitation of these complex designs.
The trick is to use the portfolio approach to manage the IP of the startup. By managing the capabilities we could use an appropriate partner to provide the Sandbox and PoC support.
The customer would gladly pay for “work to be done” at a fraction of in house, custom R+D Lab, consulting studies or outsource development.
In this model, the startup has several options to get funding, scale and acquire more customers. VC’s would see a clear path to revenue vs. “go get more customers”.
Developing these opportunities and desired outcomes is made available by starting with Corporate Output Driven Innovation and allowing intermediaries to facilitate it.
Before you leap out of the building and start cold calling Corporate customers, consider teaming up with partners to better position your capabilities and assets as much as your product or entrepreneurial aspirations.