Gorillas Can Dance

Lessons from Microsoft and Other Corporations on Partnering with Startups

Shameen Prashantham

• Publisher: Wiley
• Year: 2021
• ISBN:
  9781119823599
• Edition: 1
• Topic: Business
• Subtopic: Imprenditoria
• Index: Business

Achieve exceptional results with your organization's next partnership for corporate innovation

In Gorillas Can Dance, distinguished international business strategy professor and expert Dr. Shameen Prashantham delivers a proven roadmap for large corporations collaborating with startups. Drawing on over a decade of international research, Dr. Prashantham explains the "why, " "how, " and "where" of corporate-startup partnering.

In this book, you'll learn:

• How to focus on the three pillars of synergy, interface, and exemplar to achieve outstanding results in your partnership
• Why the very thing that attracts large corporations to startups—their significant differences—also makes it difficult to work together
• Where in the world to find your ideal startup partnerships and how to use them as a force for good

Perfect for C-suite executives, managers, business unit heads, and corporate innovation managers, Gorillas Can Dance is a must-have resource for business leaders seeking strategic guidance on partnering and collaborating with startups.

PART ONE
WHY

Chapter 1 Why Entrepreneurship Matters for Large Corporations

• Managers versus Entrepreneurs
• Managers as Entrepreneurs
• Managers with Entrepreneurs

Chapter 2 Why Partnering with Startups Isn't Easy

• Goal Asymmetry
• Structure Asymmetry
• Attention Asymmetry

CHAPTER ONE
WHY ENTREPRENEURSHIP MATTERS FOR LARGE CORPORATIONS

When large companies started to work with startups, people initially thought this whole startup thing was “just a trend.” I don't think it's a trend at all. It's a fundamental transformation in the way that business innovation occurs.

– Dave Drach, Vice President–Innovation Sales, Techstars¹

WHY PARTNER WITH STARTUPS

In the mid-2000s, during the early stages of my research on “dancing with gorillas” – startups partnering with large corporations – I was hard-pressed to find examples of active efforts to make this work. Within a decade, however, things had changed dramatically, with numerous corporations actually having managers with the word “startup” in their job title. The gorillas, it would appear, have been learning to dance.

My research, over 15 years, has involved over 400 interviews with corporate managers, startup entrepreneurs, and other individuals involved in corporate-startup partnering (see “About the Research”). My field interviews have taken me to the Tel Aviv Stock Exchange, where a company called The Floor connects fintech startups, to Zurich, where the stock exchange there is similarly connecting startups with large corporations, and to London, where I met a Silicon Valley–based fintech startup called Crowdz in the Barclays accelerator that is seeking to transform supply chain finance for SMEs, as well as to Munich offices of BMW Startup Garage and Nissan's Infiniti Labs in Hong Kong, where startups are helping these automotive giants to adopt new technologies while at the same time exploring ways to scale their own innovations by dancing with gorillas. I've also conducted many research interviews in emerging markets in Asia, notably China and India, as well as Africa.

Consistent with my observation through field interviews that there was growing interest from large corporations in engaging with entrepreneurship, one BCG study showed that by 2015, nearly half (44%) of the top 30 companies in seven industries had incubators or accelerators, up from 2% in 2010.² Such engagement was only expected to grow. Unilever's State of Innovation white paper reported that 80% of corporates believe that engaging with external startups can have a positive impact on corporate innovation, and predicted that by 2025 corporations and startups will be working under the same roof.³

There has been an upsurge in efforts by large corporations to partner with startups. In many cases, corporations are specifically seeking to work with startups possessing some form of digital capability. This is true of both information technology (IT) corporations and ones in more traditional sectors. Some corporations – notably some IT companies – started their journey of startup partnering earlier than others. These include companies like Microsoft, IBM, Intel, and SAP, many of which were traditionally not seen as natural allies for startups. Non-IT companies such as Bayer, Nissan, Unilever, and Walmart have, subsequently, come to engage with digital startups. There has been a dramatic rise in managers in corporations and entrepreneurs in startups talking to each other.

Why has this happened? There are three points worth making. First, often the starting point for engaging with startups is in fact a perceived threat from these very organizations – managers in large corporations may be disrupted by startups' entrepreneurs. Second, when considering how to respond to disruption, some managers in large corporations seek to become entrepreneurial themselves, exhibiting proactive, innovative, and risk-taking behaviors. Third, one way that managers manifest their entrepreneurial orientation is by partnering with external startups. Consistent with the notion that innovation can be more open, drawing upon external actors in its ecosystem, large corporations increasingly see the potential for a division of entrepreneurial laborwith startups, since they are good at exploiting existing capabilities while startups are adept at exploring new capabilities.

In sum, while entrepreneurs can be a source of disruption for managers in large corporations, when managers behave entrepreneurially and engage with the wider ecosystem, startups can be a source of co-innovation. To get a fuller picture of how managers have come to reach out to entrepreneurs, this chapter considers three aspects of how their paths have collided (see Figure 1.1).

Figure 1.1 Managers and Entrepreneurs

MANAGERS VERSUS ENTREPRENEURS: THE CHALLENGE OF DISRUPTION

The starting point is consistent with the late Harvard Business School professor Clayton Christensen's argument that entrepreneurs' startups can be a source of disruption for managers in large corporations; some startups' success may come at the expense of incumbents, that is, existing established corporations.⁴ Today's large companies that were once entrepreneurial (when they were young) are now being disrupted by startups pursuing new opportunities. By developing new business models, often predicated on digital technologies such as cloud computing, big data, the Internet of Things, and artificial intelligence, the startup can change the rules of the game and adversely affect the incumbent corporation's economic performance. Famously, Amazon disrupted booksellers like Barnes & Noble, Netflix disrupted Blockbuster, Airbnb disrupted hotel chains like Hilton and Marriott, fintech startups are disrupting traditional banks – the list is virtually endless. Thus, in a sense, startups' entrepreneurs have become the nemesis of corporations' managers.

The disruptive effects of startups follow from the opportunities they pursue. Professor Howard Stevenson of Harvard Business School, who introduced the Entrepreneurial Management course for the first time in the 1980s, offered a simple but powerful insight: entrepreneurs differ from managers in that their starting point is an opportunity, not resources.⁵ Whereas the more traditional “administrative” management of professional managers in corporations is attuned to optimally using resources that are already controlled, entrepreneurial management involves the pursuit of the identified opportunity. In so doing, the “work” of the entrepreneur is, to a large extent, assembling relevant resources such as people and money.

Even more so in the era of digital innovation, startups' entrepreneurial opportunities cause disruption because they result in business model innovation. At the turn of the century, the dot-com boom reached its peak and then receded – dramatically. But whatever we learned about the risks of irrational exuberance, it was clear that the Internet had changed the world forever. Companies like Amazon were redefining the way that commonplace products like books were sold to buyers of books. The difference was that there could now be new business models – the “how” connecting the “what” (the product) with the “who” (the market). The role of digitalization has continued to grow in leaps and bounds over the past couple of decades, and industries have had to contend with new trends.

Even before Covid-19, many managers were anxious because of disruption – much of it driven by digitalization. Industries from automotive to banking and retail are being disrupted by startups that pursue new opportunities, with a nimble organizational culture, and pursuing business model innovation that are changing the rules of the game in their industry. According to one McKinsey study, 84% of executives believed that innovation was critical to business success – and at the same time, 80% thought their companies' business models were at risk.⁶

Addressing digital disruption has become one of the defining strategic imperatives of contemporary corporations. There is a growing recognition among corporate managers that business as usual is not good enough to cope with disruption that most industries are facing, especially due to the rise of digitalization. One implication of the prospective adversarial relationship between entrepreneurs (startups) and managers (corporations)...