{"id":42622,"date":"2023-10-20T15:22:33","date_gmt":"2023-10-20T15:22:33","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/dont-be-so-disruptive-benefits-of-partnering-with-a-corporation-startupsmart\/"},"modified":"2023-10-20T15:22:33","modified_gmt":"2023-10-20T15:22:33","slug":"dont-be-so-disruptive-benefits-of-partnering-with-a-corporation-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/dont-be-so-disruptive-benefits-of-partnering-with-a-corporation-startupsmart\/","title":{"rendered":"Don\u2019t be so disruptive: Benefits of partnering with a corporation – StartupSmart"},"content":{"rendered":"
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Today\u2019s tech media loves to romanticise the notion of the startup challenger disrupting big cashed-up corporat<\/p>\n

es. Entire conferences like Disrupt explore, encourage and promote the disruption of incumbents.<\/p>\n

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Disruption at play<\/b><\/h2>\n

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The notion of startups taking on large enterprises and winning isn\u2019t new. The 20th<\/sup> century is littered with examples of fallen incumbents who were too slow to identify and respond to disruptive upstarts embracing new technologies. Think of plastics disrupting metals, personal computers disrupting mainframes, digital photography disrupting film and so on.<\/p>\n

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Airbnb disrupting the hotel economy, Uber disrupting taxi services and Netflix disrupting home entertainment are just three of a multitude of recent entrants disrupting traditional mainstays across various industries.<\/p>\n

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The rate of disruption is increasing<\/b><\/h2>\n

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The rate at which large incumbents are being disrupted is increasing, with the barriers to entry for new ventures now lower than ever thanks to access to fast internet connections, cloud and mobile technologies and the adoption of emergent strategy and lean product development methodologies \u2013 ever heard of the lean startup?<\/p>\n

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According to innovation consultancy Innosight, at the current churn rate, 75% of S&P 500 companies will have dropped off the index by 2027 as the average lifespan of a company decreases from 90 years in 1935 to just 18 years today and 12 years by 2027.<\/p>\n

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But romantic notions of the little guy taking on the big guy and winning aside \u2013 is this the best approach forward? Should young, hungry startups be looking to disrupt those big, bad suit-wearing, bureaucratic corporates, or should they be looking to partner with them?<\/p>\n

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Why corporates aren\u2019t innovating by themselves<\/b><\/h2>\n

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Large organizations are bound by processes and values which, according to Steve Blank, have been designed to help them execute on a repeatable and scalable business model. Corporate executives have also been trained to mitigate risk and avoid failure, which hinders their ability to explore potentially disruptive innovations.<\/p>\n

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Clayton M. Christensen, Harvard Business School professor and author of The Innovator\u2019s Dilemma<\/i>, argued that because large companies allocate resources based on the size of the market, they don\u2019t invest in disruptive innovations because that market size, at least initially, is insignificant.<\/p>\n

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Christensen said that players that enter the market early within two years of a disruptive innovation first appearing are six times more likely to succeed than later entrants. Early entrants establish cost and operational efficiencies, distribution channel relationships and brand awareness that provide them with better margins and an advantage over large players that come late to market.<\/p>\n

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How can corporates innovate?<\/b><\/h2>\n

There are a number of paths that corporates can take to innovate. One option is to redesign internal processes and values to support disruptive innovation \u2013 although this comes at the risk of compromising business as usual and core revenues.<\/p>\n

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Alternatively, corporates can create autonomous organisations, with their own processes and values, for the sole purpose of exploring potentially disruptive innovations, such as GE\u2019s FastWorks.<\/p>\n

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Corporates can also acquire, invest in or partner with startups to innovate.<\/p>\n

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What large organisations do have is a wealth of resources at their disposal \u2013 people, customers, suppliers, distributors, partners, brand awareness, office space and cold hard cash. Resources that startups need.<\/p>\n

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According to Blank, startups are built to search for a repeatable and scalable business model and they\u2019re usually cash-strapped. Deloitte, reports that only 8% of Silicon Valley startups grow into successful companies. This tends to be because startups run out of resources before they\u2019ve managed to find right product\/market fit.<\/p>\n

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Startups therefore can choose to disrupt but may be much better advised to pursue corporate partnerships.<\/p>\n

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A classic case of a startup being propelled into the stratosphere on the back of partnering with an industry incumbent is Microsoft\u2019s partnership with Big Blue, aka IBM.<\/p>\n

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Benefits of corporate partnership for startups<\/b><\/h2>\n

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There\u2019s no doubt that large companies are increasingly seeing the value in partnering with startups.<\/p>\n

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Startups partnering with corporates can gain:<\/p>\n