Startups, an accelerator for your digital transformation

Victor Arfi, Apr 2020

The time is long gone when the large companies saw startups as a fashion trend that would disappear from the market once consumers had grown tired of them. Faced with the disruptive innovations that have led to the disruption of many sectors and the disappearance of traditional barriers to entry, large companies have had to face the fact: startups will somehow change the market that has been theirs until now. So, once this was established, large companies had two options: to see startups as a threat, or an opportunity. For so long the first option seemed to be the right one, today collaborations are more and more frequent, with a beneficial learning effect for both parts.

Startups are now playing a key role in the development and innovation of the large companies that are facing a digital transformation compared to the Industrial Revolution, and a radical change in consumer habits as well as in the expectations of new employees. Faced with these major changes, many large companies have decided to turn to these new and increasingly varied players to find new opportunities for fast transformation.

Historically, large companies are entities of significant size, with established processes, a geographical breakdown of teams, a decision-making subject to multiple validations or even a silo approach that is in total opposition to the operating methods of startups whose agility is equalled only by their rapid evolution. Thus, collaborating with a small innovative organization will allow the traditional company to achieve gains in agility, to discover different operating modes, to implement new uses and to carry out competitive intelligence, and to generate an interesting  impact on the brand image. 

Considering the benefits for the organisation, the relationship with startups has progressively started to be prioritized and codified: development of the notion of Open Innovation, multiplication of initiatives to bring together external players, acquisition of startups, training for top management, development of tools to measure innovation, implementation of intrapreneurship modules, etc. Large companies have become aware that their sustainability depends on the ability to develop their original business and find new growth drivers, through closer relationships with innovative players who will be able to challenge assets that are difficult to develop internally. 

Startups have also had to evolve in the widespread conception of developing links with traditional structures. Sometimes considered too dependent and asymmetrical, synergies with large companies can, in addition to being a significant potential financial resource, be just as beneficial for the startup in its growth and structuring. In addition to the not insignificant financial part, the opportunities to change scale by accessing globalized market, are facilitated by collaboration with large companies. These strategic partnerships are therefore based on a financial logic, but can and must go much further: gaining experience, developing the network and reputation, meeting new investors, new distribution channels and geographical locations…

The potential benefits for the startup are extremely broad and depend on the willingness of the parties to establish a long-term relationship of trust that will be “win-win”. The large companies – startups relationship is often seen through the financial prism, whereas the large companies are rich in experience, contacts and know-how that can enable a small structure in a growth phase to reduce errors and grow with more stability.

While collaborations between startups and large companies are developing and tending to become more democratic, there are still many challenges to be overcome in order to make these partnerships as prolific as possible and ensure their sustainability. 

Different sizes, different priorities, different time frames, different financial stakes, by nature the differences between these structures are very wide and can be damaging to the success of the associations. Extended payment terms, the size of contracts, legal and organizational burdens, lengthy discussions and decision-making processes, the constraints that accompany the entire life cycle of the startups / large companies relationship remain numerous and must evolve so that they no longer represent an obstacle to these synergies.

Startups are expected to play an increasingly important role in the innovation and development strategies of large companies, and strengthening these links will require both parties to adapt to maximize the benefits of this collaboration. Thus, the Human being remains above all the foundation of the installation in the duration of these relations, and it is through the establishment of the notion of trust between individuals that entities, however distinct they may be, will be able to build in the long term.