Introduction and innovation
When it comes to signing on the dotted line for a new IT contract, most organisations tend to go with the firms they know or have worked with before. More often than not, they see a large company, equate that with success and blindly do business with them.
But step back from this for a moment and you will soon realise there are other smaller, leaner, newer companies that could be worth considering. While the unknown is precisely that – unknown – it doesn’t mean that it is necessarily a risk. Sometimes the reverse is true; bigger firms can be a big risk and by no means a safe bet.
So can working with a startup be a good thing? Why should you even consider working with one – aren’t the stakes just too high?
High-stakes
Christopher Haley, head of startups and new technology research at Nesta, says that large companies are increasingly working with startups as part of their innovation strategy, precisely because they realise that their own corporate nature makes internal innovation difficult.
“This is especially true in the digital and high-tech sectors. Working as suppliers, startups can be a much faster way to innovate. However, large firms should be exploring more partnering types than just procurement relationships,” he says.
And what should the CIO be aware of when dealing with a startup?
Haley says that there are many cultural, structural, behavioural and process-related barriers that get in the way. But speed really matters to startups – everything has a huge opportunity cost to a small firm, and delays can be fatal.
“To overcome these barriers, a clear positive message from the top of the organisation is vital. It is also important to think about why you are dealing with startups, where the real mutual benefit can be found, and what programme will best suit these objectives.”
Haley says a corporate accelerator, for instance, might be appropriate, but there are many other possible models.
Established infrastructure
Michael Cooper, CTO of Radianz Services at BT, says that for both parties, the ability to de-risk the engagement is advantageous. He says that one way that CIOs can overcome this is to identify startups that are associated with or supported by established infrastructure, platform and service providers – particularly those with a financial markets pedigree and focus.
“For example, BT recently launched an initiative to host FinTech startup solutions in the data centres, or on the growing number of cloud computing services connected to the BT Radianz cloud – which is the world’s largest secure networked financial services cloud community,” he says.
Cooper adds that this sort of thing provides FinTech and startup companies of all sizes with a ready-to-exploit market reach, along with the scale and flexibility to deliver services to major financial institutions.
Potential drawbacks
Eager to please
Norman Fraser, CEO of SoftIron (a startup itself), says that startups are small but very eager to please.
“Tell them what you would really like and they will do everything in their power to give it to you,” he says. “If you like what they’re offering, don’t use your scale and power to beat them up on price and payment terms.”
He adds that a good, mutually beneficial deal will get you what you want and help to establish them, so they’re still around next year to support what you bought from them and well placed to solve your next problem.
If you like each other and sign a contract, the next thing to think about is managing the relationship. Haley says CIOs need to make it easy for startups to work with them.
He says that organisations should create a publicly visible, single access point for startups. Be clear on the process and timings from the start, and simplify and standardise contracts where possible. “Treat startups as partners, not agencies or employees,” he adds.
“As with any collaboration, trust and clear communication are essential. Remind yourself and colleagues that startups are often fragile entities and that speed matters. Pay particular attention to the points when relationships are transferred between teams, as such handovers are where problems often arise,” says Haley.
Fraser advises organisations to manage the relationship with the startup through a suitably empowered point person. “Startups haven’t got the bandwidth to work for your organisation and make sure everyone’s onside,” he says.
He adds that organisations should try to build a good personal relationship between their team and the startup, as startups tend to be much more relational than larger organisations.
Fraser says that decisions need to be made quickly. “Your corporate culture may converge on decisions at a glacial pace, but this will kill your relationship with startups. If you want to benefit from their nimbleness, try to show some of your own.”
Potential drawbacks
It won’t all be plain sailing – CIOs need to be aware of the potential disadvantages too. “By definition startups are unproven, and so the ability to scale might be questionable. But size and maturity can also be challenging meaning their ability to meet the contractual and compliance criteria of large firms can be problematic,” says Cooper.
Haley says that partnering with startups is difficult: just as large corporates struggle to understand startups, many startups don’t understand corporates. “Working with startups may change the risk profile of a firm – replacing the technical risks of internal R&D with partnership risks, for instance. It may require you to challenge your existing structures, processes and corporate culture.”
Fraser adds that not all startups succeed. “If you like what they’re doing, treat them well for a win-win result. Or if you really like what they’re doing, buy them!”
Increasingly an organisation’s competitive advantage is determined by its capacity to establish and maintain successful collaborations. Organisations with the ability and dexterity to cooperate and co-create with startups successfully are much more likely to sustain that competitive advantage.
Source: techradar.com
