A deep dive into how companies can partner with disrupting startups ahead of their times.
Do you remember Nokia? The once-popular mobile phone brand is sadly nowhere to be seen. Now, let’s look at Apple; a company that started with making personal computers but had a vision of creating user experience with phones, truly believed that touchscreen is the future and invested to make the world’s best touch screen phone. Apple disrupted many existing companies and finally, even the mighty Blackberry fell.
Steve Jobs’ vision single-handedly disrupted industries, user behaviour and consumption patterns around the world. There are several case studies of companies that have missed some of the greatest disruptions and paid the price.
Yahoo is another classic example:
1998: Yahoo received an offer from a young startup wanting to sell their company to Yahoo for $ 1 million — Yahoo refused to buy. 2000: Yahoo became the most valuable company in the world. 2002: Yahoo realized the mistake and offered $3 billion (3000 times more than what it would’ve cost 4 years ago), the same young startup company expected $5 billion. Yahoo walked away. 2006: Yahoo got an opportunity to buy a different startup; a college student network — for about $1.1 million. Yahoo offered $800 million & the young startup founder turned it down.
Yahoo has been sold off. The most valuable company of 2000 saw its downfall. The startup that Yahoo was trying to buy in 1998 & 2002 is now a 25-year young company, known & used across the world, and is one of the world’s most valued businesses. That startup is Google. The founder of the startup that Yahoo was trying to buy in 2006, is today the worlds 4th richest man and is used by almost everyone. The second startup was Facebook.
In 2000, Yahoo was the largest search engine, the most valuable company in the world but it became obsolete. When Google came up with its simple user interface and highly efficient & relevant search results, other startups began innovating at a speed yahoo couldn’t, it lost the market leader position.
How could your organization partner with disruptive startups to stay ahead: Co-creating solutions with startups
Your organization may not always be able to create solutions to address the various opportunities or have a dedicated R&D team. This is where startups play a role. Your organization could crowdsource a solution by creating a challenge for startups to participate in.
This will allow you to partner with multiple startups to jointly create solutions for different problems that you aim to address, thereby giving you a very scalable model. For the startups, this translates into business opportunities. The jointly created product will drive their revenues while your organization could help cross-sell /upsell their services
2. Corporate accelerator:
For organizations with a large customer base, a corporate accelerator program is recommended for engaging with startups. This aims to help scale the startup’s growth by introducing the startup to select customers where there is a strategic fit.
Your organization can monetize the opportunity through a revenue-share arrangement or take a minority stake in the startup (for long term benefits) which will bring value as the startup scales
3. Investing in startups:
Large organizations with free cash flows can look at investing in startups that are innovating for the future that the organization can later leverage. Like, in the 2-wheeler industry, we have seen large corporates like TVS Motors, Bajaj, Forge motors, etc invest in electric vehicle startups, thereby future-proofing themselves.
Acquiring startups kills 2 birds with one stone. It helps the organization expand & grow its presence, product offering, customer base etc. while at the same time, brings in a culture of innovation in the organization by hiring the startup’s founders & the entire team as well. This helps organizations build entrepreneurial teams.
So, how does your organization stay ahead of the race and be future-ready to capture new opportunities in this constantly evolving ecosystem? Create a culture of innovation or collaborate with those who are using any of the above approaches.
(The author, Lakshmi Potluri is a business transformation strategist. The author has had an illustrious career being the present CEO, DCF Ventures; Cofounder, Jabong, Ex-Goldman Sachs and Columbia Business School alumni.)