Startups Are Friends, Not Food: How Large Companies Can Innovate For Themselves

Once you drill down far enough, the base function of any large organization is to scale its existing business. All of its infrastructures, resources, capabilities, and intellectual capital revolve around making tomorrow look a lot like today.

But with such a tunnel-visioned focus, it can be difficult to close the innovation gap and keep bringing fresh, new ideas to the table — which is key to staying relevant in today’s marketplace.

While R&D could go a long way to help these efforts, most large organizations have taken on a different strategy: acquiring smaller companies that already do the work they wish to incorporate. Google acquired DocVerse to improve its Google Docs platform, Apple acquired LearnSprout to improve iPad’s capabilities, and Yahoo acquired ClarityRay to improve its ad security. The list goes on and on.

Not that there’s anything wrong with acquisitions, but could there be a better — and ultimately cheaper — way?

The 2-Pronged Approach to Innovation

Instead of gobbling up startups and hoping that innovative policies seep out, a number of companies are now finding different tactics to bring the innovation of a startup into their processes.

For one, internal employees will build a new company from scratch and use startup methodologies to identify and execute on growth — all with the support and backing of the parent company’s resources.

The second approach is to start a new form of investment, establishing relationships with startups to gain access to the people or technologies that can stimulate growth on both sides. These larger companies then take the best practices from the startup world and apply them to their own organizations.

I’ve seen firsthand how both of these approaches can enrich and expand the services that a larger organization has to offer. Having worked with the likes of News Corp, the Royal Bank of Scotland, and Mondelez, I’ve witnessed them identify and engage entrepreneurs who wouldn’t normally work in a big company — all to stimulate a startup approach from the inside out.

The process of creating this standalone entity provides insight into how to do things differently within the original organization. These intrapreneurial projects still have access to the main company’s expertise and assets but aren’t tethered to the organizational rigors that can waylay innovation.

Applying the ‘Little Guy’ Mindset to Big Business

If you’re unable to start a new business, there are still ways to develop your own teams and processes to foster innovation. The following are just a few of them:

1. Connect beyond the handshake. Few companies establish initiatives to develop real, meaningful relationships with entrepreneurs. Instead, they relegate most interactions to demo days or corporate parties. And after a bit of socializing, they feel that startups will just fork over all the answers with nothing in return. But what’s in it for them?

Take LEGO, for example. We worked with the toy company to identify potential venture partnerships, facilitating mutually beneficial relationships with startups doing things in spaces where LEGO hoped to innovate. By partnering with these smaller ventures, LEGO gained the opportunity to learn from what these startups were doing in similar industries — from new business models to augmented reality and design.

If you want to learn the tricks of the trade, spend time with entrepreneurs. Host dinners, go to events, and make yourself available to those in the startup space. Then, determine how you could work with a new business — and how that business could work with you.

2. Innovate your approach to innovation. Reading a book about startups and then trying to apply it to an existing business rarely works. Organizational structures often create barriers between theory and application. Take a long, hard look at how you do things to find better ways to innovate within that framework.

And because structures define outcomes, rethink both the product and how you create it. If you change how you do something, it will change the end result. It may require you to set up a new entity or allocate a new portion of your budget, but the outcome will be different.

After all, the workplace is evolving, so it stands to reason that how you go about doing things will no longer be the same. Embrace change, and find ways to add flexibility to teams and structures in the workplace.

3. Look outside your core offering. Companies often look at innovation in a very direct line with their core business. They focus on the innovators disrupting their categories. While making your existing business better may provide incremental growth, the real growth opportunities often sit beside you in your periphery.

BarkBox, another of my ventures, doesn’t consider itself a company that just develops treats and toys for dogs. It’s an entertainment company that creates new forms of engagement between people and their four-legged friends. It competes with other ways people spend time and money. Rather than focus on the vertical of dog food and toys, it takes a horizontal view to expand its horizons.

Look to the side of your core to find new ways of developing and providing a product or service. Get out of that utility mindset, and determine what other adjacent business you can create around your core product or service. What would your user group also find of value? And how can you give it to them?

The culture of a startup may give it the edge on innovation, but established organizations can still adopt the processes that support it as well. It just takes aligning your company with the right startup, learning how to do things differently, and looking outside your core business to find those nuggets of innovation waiting to be mined.