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Why it sometimes pays for David and Goliath to join forces

As the rate of change accelerates, collaboration between large organisations and startups is increasingly common. These partnerships, if successful, will create experiences that make sense to customers. But pulling together what can be two mismatched cultures isn't always easy. So how do you collaborate successfully? And what's in it for start-ups?

In today's increasingly interconnected and rapidly changing business environment, no company can be an island.

Success, whether you're the tiniest startup or a large enterprise, requires learning to co-create value with other firms, with collaborations ranging from technology partnerships to outright acquisitions.

Established companies and innovative startups have been collaborating together across a range of markets for some time now. In the healthcare industry, leading pharmaceutical companies have regularly collaborated in drug discovery with biotech startups. In the financial sector, incumbent firms have been partnering with FinTech entrants for access to blockchain and other cutting edge technologies.

Locally, Air New Zealand partnered with online travel site Expedia, giving customers access to Expedia’s selection of hotels at discounted rates when they book their flight and room together on the airline’s website.

ASB's Clever Kash digital moneybox was produced through collaboration with Kiwi companies. Vodafone, meanwhile, launched its xone accelerator programme with a view to nurturing startups to help create new offerings for its own customers – and potential new revenue for the telco; while electricity and gas provider Vector gains access to new technology and potential partnerships through its involvement with Energy Excelerator.

Through collaboration, both startups and enterprises can create an eco-system build around the needs of people. As a single entity, rather than try and build everything and stretch resources so the customer experience is below par, it makes sense to partner with others who deliver the best possible experience.

One of the key aspects of an eco-system is liquid boundaries, ie boundaries that are no longer relevant. What matters is designing daily experiences that add value and warmth to people’s lives. If you partner with others who have the same vision as you, you are halfway there, whether you are a small outfit or global enterprise.

A collaboration can result in significant growth opportunities, with each party bringing their own set of skills to the table.

While startups, unencumbered by legacy systems and infrastructure and long ingrained processes, can often be more nimble and revolutionary in their thinking, larger companies have the scale – and finance – to take a solution from proof of concept and scale it up – skills that aren't necessarily the same as the creativity required to create the solution in the first place.

When managed properly, collaborations between startups and enterprises can bridge the divide, with both parties learning from each other and driving benefits well beyond the initial technology and market gains.

All too often though, business collaborations flounder – especially those between large corporations and small startups, and often a major cause of failure is the mismatch in organisational culture.

One company might operate under a hierarchical command and control structure, for instance, while the start-up may tend towards a more egalitarian environment. Similarly, a fiscally conservative mindset might clash with a more aggressive appetite for risk-taking.

However, while it's easy to think that large organisations won't share a startup's culture, the cultural commonalities between large organisations and startups can actually run far deeper than many might assume, with similarities touching upon the core values of the organisation.

An Accenture survey found startups and large organisations share a focus on entrepreneurship (62 percent versus 66 percent); innovation at all organisational levels (77 versus 70 percent) and collaboration in an ecosystem (72 versus 74 percent). These fundamental similarities – which we believe are mirrored in New Zealand – can help form an 'axis of collaboration', which can then be used to help bridge identified culture gaps.

Interestingly, staffers at large companies can be aligned more with startup employees, than with senior management within their own companies. For instance, staff at both types of organisations tend to share a disdain for internal bureaucracies.

Tips for a successful David-Goliath collaboration:

  • Define your common ground – Identify cultural similarities, such as a common value of customer centricity, that could become the foundation for a successful collaboration. Then, when the inevitable cultural differences arise, workarounds can be developed to mitigate them. In some cases, the similarities might be too few, and the differences insurmountable, in which case you might be better off looking for a different partner.
  • Know yourself – Leaders may initiate the collaboration, but it's your staff who need to make it work. Closer alignment between the leaders and staff within your organisation strengthens the chances of success when partnering.
  • Be prepared to change your DNA – Identify parts of the other company's DNA, including desired behaviours and employee mindsets, that you would like to adopt to increase your organisation's competitiveness.

Collaborations with large companies can help drive profitable growth for startups and tackling cultural and alignment issues early on can ensure you capitalise on the strengths of both teams – and help reduce the weaknesses on both sides.

Ben Morgan leads Accenture Interactive in New Zealand.