Key takeaways from our recent panel with Clare Jones, COO of geo-mapping start-up what3words (Daimler recently took a 10% stake), Jackson Bond, co-founder of IIoT platform relayr (bought by Munich Re for $300m in 2018), Parminder Kohli, Shell’s Global Head of Marketing & Operations for Fleet, and Benjamin Lickfett, Diageo’s Head of Technology & Innovation, Europe. Moderated by our own Ezra Konvitz.

By Ana Sofia Almagro

Corporates have vast customer bases, phenomenal sales and marketing resources, and strong brands, but they lack the speed, agility, ideas, tech and talent of the best start-ups. When those synergies map onto real business problems it’s a huge win-win — an example: Shell Fleet does 400m transactions globally and fraud is a significant problem; now they route all transactions through a start-up applying AI to deliver real-time fraud alerts.

The good news? Partnerships have become increasingly popular innovation vehicles with an estimated 13% of corporates in a recent survey having dedicated partnership units. But 100 corporates surveyed by VC and accelerator 500 Startups see <25% of their start-up pilots scale into solutions that can be taken to market.

What goes wrong? Mismatched expectations around timetables, different understandings of risk, and a structural inability to grow when partnerships are driven by tech gimmickry rather than business strategy.

Conducting a high-volume of pilots with start-ups can yield a great return on knowledge and open up the company to a “test & learn” mentality — and that’s an important cultural shift — but ultimately that’s a poor ROI for both parties, and doesn’t equate to real innovation.

We’re interested in how to effect real change at scale — so what are the key ways to win?

1. Clear strategy and a real mandate

Start with a strategy rooted in commercial reality. Innovation for the sake of innovation (or hitting the innovation team’s targets) is not the answer. Rather, there needs to be real clarity around the why and the objective of using a partnership in the abstract, and of the specific partnership in practice.

Shell started by tackling the search for new business models by identifying their strategy and the business levers to unlock this strategy, chose the levers to utilise, and aligned innovation areas to fit the strategy and the business levers.

Start-ups including relayr hold off on deploying their technology until they have a clear business objective defined with their partner, who has P&L responsibility for the area covered — otherwise they can’t prove the kind of value that will be meaningful and result in scale.

Similarly, Diageo drives each partnership with commercial lens, anchoring to a longer term strategy and objective and translating technology solutions into business challenges when communicating the value of start-up products to the rest of the business.

And it’s not just corporates who need a clear strategy: start-ups often mis-sell their solutions by focusing too much on the tech (and its potential applicability to many problems) — whereas the partnership needs to be framed around the business goals of the individual team being pitched to: each team needs its own specialised tool, rather than a Swiss Army Knife that almost works for everyone.

2. Aggressive corporate innovators

Getting partnerships off the ground ultimately boils down to finding the right people within the corporate: ambitious or aggressive innovators who will be champions for the partnership. Successful start-up partnership stories often rely on passionate innovators at the corporate who have the capacity to think and act more like they’re in a start-up — and they work incredibly hard to make it happen.

It is becoming increasingly easy for start-ups to identify those potential facilitators via corporates’ innovation functions — and they can be hugely effective, but these functions need to be plugged in directly enough that they’re networked and have currency with the business units who will ultimately implement the partnership.

Start-ups should focus on those corporates who have invested the time and thinking into finding ways to make these partnerships work — and corporates who haven’t yet defined relevant approaches to working with start-ups need to think about how to find and encourage internal un-blockers, both on the human front and in policy (e.g. procurement processes and timelines designed for multinationals). Given time is not on start-ups’ side — and speed is a key benefit to such partnerships — it’s a lot easier to quickly make an impact where the path to partnering has been set and cleared.

3. Start small, plan big

Hoping for scale is different from planning for it — and that means start-ups need to work with corporates as they are, not how they’d like them to be. Key areas to consider are corporate structure, the scale of the organisation, and funding terms.

Corporate structure: Start-ups need to understand how their potential corporate partner is organised in order to scale — are its operations organised separately by country or is it a centralised multinational? The end result could be the need to pitch country by country- business unit by business unit- rather than achieve the global scale that partnering with a huge multinational might have promised originally. This can make or break scaling, and taking it into account when planning pilots will help prevent unfortunate surprises later on.

Organisations’ scale: It’s also important for start-ups to hedge against churn: relying on a single point of contact or champion means the partnership will likely last as long as that individual stays at the company (or has that role). A key recommendation from innovation leaders at corporates is for start-ups to spread their network across the business.

Funding: Using project milestones to unlock payments and additional scale keeps incentives aligned, while providing clarity and reducing risk for all parties. One contracting method that worked well for relayr was negotiating five-year contracts with corporates with clearly defined exit clauses for both, driving commitment based on a clear vision that enabled both parties to invest in the relationship.

Stronger together

Good corporate / start-up partnerships aren’t about culture, inspiration, goodwill or PR — and they’re not a cause in-and-of themselves. It’s a business arrangement between two players where synergies exist but it’s not a typical client relationship, and power is more evenly balanced than is popularly thought: corporates’ scale does not necessarily mean they get to call the shots on partnerships — as start-ups get smarter and more in demand corporates will have to compete for partnerships and deliver on scale.

Success is unlikely to come from a zero-sum approach and the seismic differences between these types of companies means that both parties need new ways of thinking and fit-for-purpose processes, as well as people who can serve as translators and go-betweens to set the partnerships up for success and see them through to scale.