A Match Made in (Business) Heaven: Why Startups and Corporations Need Cooperation
Entrepreneur's New Year’s Guide
Competition breeds excellence, innovation, success -- right? Well, not always, especially in the modern landscape of business. Technology has democratized the playing field and it is not always big corporations that come out with the multimillion-dollar ideas. Startups are becoming increasingly successful in launching, marketing and building brands that become the corporations of tomorrow. This shift then sees the best and brightest graduates more frequently opt to work for the little guy rather than the corporate giant -- and the corporate giants are beginning to take note.
Startups and corporations may seem like natural competitors, but in reality they need each other. Why? Because, interestingly, they both lack where the other excels. Startups have flexibility and the "can-do" attitude, while corporations contain the wealth of knowledge that it takes to make a large, successful enterprise. With the right perspective, each side of the equation could significantly assist in shaping the future direction of their respective business. Corporations are starting to take startups more seriously. According to a study on the State of Startup/Corporate Collaboration 2016 by Imaginatik and Mass Challenge, 82 percent of big companies surveyed said collaboration with startups is "somewhat important" or more, with 23 percent calling such partnerships "mission critical."
This is because corporations are losing talent and fresh ideas due to the rise of startups, while startups often struggle to turn their million-dollar idea into a million-dollar company. It could be from the fresh perspective of the little guy, or the sage wisdom from the big business. Perhaps if both could forget any differences or competitiveness they could provide unique, useful ideas to one another. So, why don't the two stop fighting and join forces?
The business world is changing. Career pathways used to be much more simple: business school, multinational corporation, 30 years, retirement. But, something different is starting to take place. People from the world's top business schools are going to work in startups. This is because of the level playing field which technology has provided, as One Drop founder and chief executive officer Jeff Dachis accurately points out: "As technology costs drop dramatically, and the tools of self-expression and communication are democratized, the opportunities for small companies to run hard and capture market share become even greater."
This cultural shift is leading to a brain-drain away from big companies to smaller, agile, exciting startups. Corporations are attending startup events. They want to pretend they are like a startup and use buzzwords like "dynamic" and "flexible"; they want to feel connected to the startup culture; they want to be close to the next Facebook -- but they aren't. And the employees know it. Company structures of yesterday simply aren't as appealing as they once were. Oftentimes companies of 50,000 employees can take years to settle on a decision. Meanwhile, younger workers aren't as tied down to the perception of a "job for life." As such, the top minds in any given field are no longer certain to go to the top corporations, but rather outfits that truly offer the flexibility and dynamic work environment that corporations advertise.
A startup solution?
Startups have the opposite problem. The appeal is there for workers but often they lack the capital -- financial and human -- to achieve their lofty ambitions. There is no denying that startups fail and fail often. Many have the million-dollar idea but do not have the million-dollar capital, or other times simply don't work out. The ones that make it to the next level are the culmination of thousands of hours of trial and error.
However, startups are where new jobs are being created. According to research by the Kauffman Foundation, in the last 30 years all net new job creation in the U.S. has come from new businesses less than a year old. Each year, these businesses create an average of 3 million new jobs. In contrast, existing businesses of any age, typ or size, on aggregate, lose a net annual average of around 1 million jobs. These businesses often provide the launch pad for the business leaders of the future.
Startups are usually skilled in one field or profession: They may be great in that area of expertise, but also need the structure of marketing, legal, human resources, accounting and tech. They need to scale, and not only in capital. To truly scale they need to act and think more like a business, and assistance from like-minded business is one way to make this happen. So, why can't these two ends of the business world come together for their greater good?
Synergy for all
Startups miss business experience and skill sets, while corporations lack flexibility and out-of-the-box thinking. Imagine a perfect world where instead of competition there is cooporation. Well, such a notion doesn't need to be fantasy -- the possibility is there. It is about creating a common ground for startups and corporations where they enter a program of sharing resources for a limited time.
Startups could get structured knowledge and corporations fresh ideas. It's about motivation, especially since corporations already put considerable investment toward employee training. Couldn't a resource swap provide the same thing, but at a fraction of the cost? The involved outfits don't even need to be businesses from the same industries: Inspiration can come from the strangest of places, and it could even take the form of an automotive company assisting in the customer service for a startup in the hotel industry, or vice versa.
And the thing is we already know this will work. Some of the world's biggest companies, like Facebook, Google and Apple, are corporations with a startup culture. They encourage an intrapreneurial mindset, adopt lean startup techniques, focus on the user and take risks while welcoming failure -- all the while earning some of the largest profits in human history.
A way forward
There needs to be a bridge between startups and corporations. Startups require skills they might not have, corporations are full of workers craving a little more excitement. Further to this, shared perceptions from both sides can work to create a better whole. While nine ideas out of 10 might miss the mark, that one idea from either the startup or corporation to their other half may be the lightning bolt they were waiting for. This is not competition, it is an attempt at synergy to improve both halves.