Subscribe to Entrepreneur for $5

How Small Companies Are Keeping Global Giants on Top of Their Game

Increasingly, small companies are becoming the driving force behind innovation, with small, nimble startups providing products or services to larger enterprises,

Opinions expressed by Entrepreneur contributors are their own.

The stratospheric rise of technological growth has created an interesting problem for enterprise companies' R&D departments -- there are just too many directions to grow in. Enterprises just don't have the resources to provide R&D across the spectrum of their needs, leading to two options: stagnation or the delegation of modernization. With early stage startups and disrupting traditional industries at an ever-increasing scale, larger and less agile companies are finding it more difficult to stay ahead of the curve and avoid losing market share to the new encroaching companies.


Related: 11 Startups Taking Advantage of Business Opportunities in Space

The world of finance has traditionally been seen as a behemoth -- slow to change but powerful, impenetrable and often elitist -- but in a press release earlier this month, PwC announced that it forecasts traditional global financial firms could stand to lose almost one-quarter of their revenue to standalone fintech companies in three to five years. Eighty-eight percent of companies that were surveyed saw their new competition as a real threat, but rather than attempting to squeeze the newer fintech companies out of the market, these giants are embracing the challenge. By understanding and providing for the needs of the smaller companies (access to customers, data and funding), larger institutions are implementing the new technological solutions and maintaining their leading edge.

This has led some smart global giants to rethink their strategy, and shift the responsibility of companywide modernization from one single, internally facing department to each sector of the business exploring options for how they can stay on top of their game. This could come in the form of new workflows or changing internal processes, but increasingly, small companies are becoming the driving force behind innovation, with small, nimble startups providing products or services to larger enterprises, and being the differentiating factor central to their business success.

Related: 4 Tips for Success From One of Silicon Beach's Most Creative Companies

For these collaborations to work, there are numerous hurdles to overcome. Small- and medium-sized businesses can often find it difficult to connect with enterprises -- getting in front of the most relevant person, pitching and winning a tender can take years, meanwhile the enterprise is being prospected with hundreds or companies, with only a handful being relevant to their current needs. Once this prospecting process is complete, and the enterprise selects a startup to work with, a "proof-of-concept" (PoC) period is started, which leads to its own challenges on both ends. Startups need to adapt to scale their offering while larger companies have to contend with the new risks of data breaches and contingency planning if the PoC fails.

One company has sprung up to help contend with this growing challenge over the last few years. -based prooV bridges the gap between startups and enterprises by operating as a service platform. Speaking with the CEO, Toby Olshanetsky, he explained, "Enterprises are finding themselves in a situation where their industries are being disrupted by more innovative startups than themselves. They're realizing how crucial it is to keep up with the smaller guys to stay ahead because if they don't, they'll quickly fall behind. Simply put: Innovate or die. So many enterprises are looking to collaborate with smaller startups, because they have the solutions to fill the enterprises innovation needs."

Related: How to Avoid Getting Fooled by Trends

Using a platform like prooV, enterprises are able to "taste" many different startups' technologies at once, running limited and secure trials on their own systems before deciding to purchase the software, or even acquire the company as a whole. This idea of "PoC as a service" has gained credence, with clients including and Web Services.

Whereas in recent years, industry incumbents viewed growing small businesses and startups as competition to be quashed, the mindset is quickly shifting to embrace these new companies as an opportunity to evolve, grow and fill in the gaps from their own R&D departments.

Entrepreneur Editors' Picks