IS THE OLD ECONOMY READY FOR STARTUPS?
More and more corporations are trying to work closer together with startups or even become a little like them. Innovative, fast-moving, flexible. But are the big firms ready for startups and their innovative solutions? What are the obstacles when it comes to a corporate – startup cooperation? Continue reading and find the answers.
Startups: some numbers and figures
The German Startup Monitor recently published its report for 2016. To get a better impression on how startups are doing I would like to take a look at some of the key figures.
- 70% of the startups are working together with established companies. What they are trying to gain with these cooperations is better access to the market and the customers, as well as reputation and expertise.
- More than 80% of the startups plan a (further) international expansion. The biggest hurdles that come with this step are differences in the legislation as well as the tax system.
- Flat hierarchies are definitely a distinguishing feature when it comes to how startups are organized. 33,9% of them only have one hierarchy level. 95,3% have a maximum of three hierarchy levels.
- On average 23% of the founders fall back on external financial resources.
Corporations: some facts and figures
To also get a bit of an insight on the motives of big firms, I picked out three facts:
- More and more corporations are in a phase of transition, taking one step at a time to digitization. 70% of the German chief executives are sure that the digital transformation is going to be the biggest challenge in the next 3 years.
- Medium-sized as well as big firms attempt to establish contact with the startup sector.
- 1/3 of the DAX companies started their own incubator or accelerator.
What do startups entail
Startups are reputed to consist of a bunch of young people in hoodies, playing table-top football and drinking hipster lemonades. But of course that’s not even half of the story. Yes, it is mostly young people who found a startup. Yes, they tend to hire people approximately their own age. But that is also exactly one of the very positive attributes startups entail. Established companies often admire the great commitment young startup employees show every day.
Startups are also known for their ability of rapid change as well as flat hierarchies within their organization. Fast processes and rapid change often contradict the way corporations work. Also the flat hierarchies and the relationships on a very friendly basis are common with the young entrepreneurs.
Established companies often admire the great commitment young startup employees show every day.
One of the biggest aspects when it comes to startups is their knowledge in the field of state-of-the-art technology and digitization. It is what they are known for, it is what they are good at. Which is definitely why big corporations can only learn from the young entrepreneurs when it comes to optimizing and digitizing processes or implementing technology into their organizations.
Breaking points with corporations
I already addressed some of the breaking points when it comes to differences between startups and corporations. But let’s take a little closer look on some of the difficulties. In general two different mindsets and working modes collide. Big companies plan a lot of their work in advance, which makes short term cooperations pretty much impossible. Also they normally have more decision-makers involved in one project which makes the decision process itself quite long sometimes. For startups a long decision cycle can be fatal though. If the expected revenue for a project holds off because the decision-making process is taking too long the startup can run into financial difficulties. That’s why sometimes startups would like to give the corporations a little push.
A successful startup cooperation needs …
… some basic rules.
A cooperation between a startup and a big corporation provides a great opportunity for both sides. As already mentioned the established companies often admire the spirit and commitment of startups, whereas startups can learn a thing or two when it comes to taking responsibility or making decisions. Both sides can benefit from each other. But first it is important to establish a few basic rules. Each party needs to have a certain understanding for the working methods and company processes of the other party. Then they might need to reach a compromise when it comes to the time needed for the decision-making. When both sides know what they are in for, there’s no reason why two very different organizations shouldn’t cooperate.
As a startup that has already worked with corporations we’ve learned a thing or two in the process.
First of all it is very important to build up trust. When it comes to working closely with startups some corporations might be a bit cautious or even scared. None of them really want to be the first one to take this step towards a startup cooperation. To take away this fear it is important for startups to have great partners and references. Making their success stories visible on the website for example is one way of showing cautious corporations who already put their trust into the startup. That form of social proof can be just the right thing to convince others that they also want to be part of the future.
What is your take on the cooperations of startups and big enterprises? Do you think both sides can benefit from each other? You have an idea to improve the article? Don’t hesitate to reach out to us or leave a comment! Via Facebook, Twitter or simply via [email protected]!