Market leaders have learned to complement and balance out the strengths and weaknesses between startups and large corporations.
Some big companies are afraid to fall behind in the technology race, investing in R&D internally to keep pace. Others are focused on acquiring promising startups. But what about collaborating with startups to find new ways to look at your business?
In their recent study, Dell Technologies and the research company Vanson Bourne interviewed 4,000 managers of medium-to-large-sized enterprises in 12 industries and 16 countries. The results show that big companies on average do not understand how to collaborate with startups. 78% of managers see startups as a threat and 45% of managers are afraid to lose their share to startups in the upcoming 3-5 years.
Multinational enterprises are often perceived to be big and slow, and void of innovation. Startups, on the other hand, are perceived as fresh, new, lively, and reality changing. Corporations, however, often have the more stable and reliable structure, and they carry the responsibility for many customers, provide jobs to thousands of employees, and deliver value to many countries. Startups, for all their coolness factor and perceived benefits, often turn out to be unstable and overvalued.
Both entities tend to fear each other, perhaps due to the lack of shared vocabulary, vision and values. But I truly believe there is no reason for a rift between startups and corporates. One cannot survive without the other, and a startup that doesn’t dream to become a corporation is not a viable startup.
The Market Needs Collaboration
Being a singular technological leader is impossible in today’s world, because as soon as you create a new innovation and consider how to monetize it, someone is probably already realizing it in their own way. Today’s market conditions therefore favor companies that collaborate, and startups and corporations are predestined as partners in this endeavor. With all of the pressures of the market you are operating in, it’s virtually impossible to avoid collaboration. It is important to not only be the technological leader, but also the innovative one – and there’s a difference.
The idea of business lies in communication, collaboration, and business models. SAP collaborates with companies and communities in the development of its solutions. Firstly, all the products are created together with our customers. Secondly, we work with universities and scientists. Furthermore, we constantly communicate with partners that specialize on technology implementation, and we collaborate with different professional communities. Finally, we work with external developers, including startups.
For example, there is Sapphire Ventures – a venture fund created by SAP, but operating independently. It is mostly focused on Silicon Valley and Western Europe and invests in startups on the last stage (10 million dollars return and more). Additionally, SAP has an early investments fund, SAP.io, that is just starting its operations. It is also located in Silicon Valley and is oriented around local startups. Main collaboration of the company is in the sphere of software and IT, suggesting technological platform and consulting.
The capital of a company lies in the knowledge and skills of its employees. A corporation can help a startup when it lacks either the knowledge and skills, or the financing for infrastructure. We are looking for startups that we can support with our knowledge and technologies to build innovative solutions.
SAP is the producer of patented software, and it is important for us to separate intellectual property rights and investments – ours and our partners. We created a platform which is our intellectual property. When a software development startup wants to realize its product on our platform, they get access to our infrastructure and we help them with education, consulting, etc. SAP, in turn, gets a share of the revenue generated by sales.
For example, BigPoint, a German computer games producer, created their own software for analyzing player behavior based on our SAP HANA Platform. An algorithm analyzes players’ actions without collecting personal data to protect data privacy. The algorithm calculates under which conditions a player would be ready to buy a game item to help advance to the next level. The player is then offered the needed weapon or protection at the appropriate time. This is the principal of real-time business. The same system leads to the transaction. Today there are hundreds of solutions created on the SAP HANA platform, and many of them are not recognizable as solutions built on SAP’s platform. These can be games, sport solutions, healthcare solutions, analytics, and many more.
In another example, this time from the Russian market, we created a solution for companies in the oil and gas industry together with the startup “ASUproject.” The startup contacted us with the plan of their solution development, and SAP Co-Innovation Lab at SAP Labs CIS provided their team access to our platform through our servers. The solution passed our quality check, including productivity, safety, and functionality, and became the first Russian product in SAP’s price list. It gave us the opportunity to showcase our technology to customers around the world, and the startup got a chance to realize their plan.
Today we have several promising collaborations with startups, in the areas of IoT, security and logistics. For example, we started collaboration with a Saint-Petersburg project VeeRoute, developing solutions in logistics. The company came to us with an understanding how to earn money, but it needed help on the technological side. Now we are already integrating VeeRoute’s solution into our transportation management system. The most important thing for startups that come to corporations is to understand which benefits they are getting from the technologies that a corporation owns.
In the end, companies that learn to benefit from collaboration win. Many of the market leaders have learned to complement and balance out the strengths and weaknesses between startups and corporations.
Corporations have are generally highly stabile and exhibit responsibility for their customers. Corporations can also invest in R&D and develop projects with high resources requirements. Adapting to new technological paradigms is driven by both scientific and corporate communities, and is a difficult long-term task. Startups, on the other hand, are mobile, adaptable, and can adjust to new innovations much faster to create innovative solutions. The synergies are clear and the win-win result is there for the taking.
Andrej Bievetski is managing director of SAP Labs CIS | @ABievetski.
This story originally appeared in Forbes Russia.