By Gabriel Onyango
Everyone loves a David vs Goliath story, a small startup fighting against all odds to beat a big player at its own game. However, at times collaboration between startups and big businesses is much better than competition.
The smaller startups benefit from expertise, resources, data and networks of the big corporates, while big businesses gain from the innovativeness, flexibility and out-of-box-thinking that comes with startups.
Why large businesses find it hard to innovate
- Rigid Structures
Most often large businesses have been in existence for a while, hundreds of years for some. This experience comes with established ways of doing things, structures and procedures for about everything in the company. Since by nature innovation involves change: it faces a lot of resistance from these structures.
- Existing culture and status quo
Innovation flourishes in a culture of flexibility and freedom of thought. People need to be empowered to be able to try new things, embrace change, be unusual and willingly embrace failure. As a result, innovation will be hampered if there is a decade old culture that encourages the opposite; uniformity, intolerance for mistakes or experiments etc.
- Long chain of command
Large companies often have several departments and elaborate power structures, from the department level all the way to the top. For decisions to be made, they have to go through several chains of command no matter how urgent or simple they are. Such an environment isn’t the best for cooking up innovations that requires quick action and fast adaptation, hence the need for collaboration with startups who most often have very short command chains.
Examples of successful big businesses and startups collaborations
Merck is a pharmaceutical company established in 1668 but to date is still on top of its game, expanding their product offering to other areas –Merck is also one of the largest producers of liquid crystals used in computer screens.
In 2016, Merck’s revenue stood at $15 billion and the company invested a significant portion ($2 billion) in research and development. Why? Innovation is at the front of Merck’s dominance and survival and the company has developed a model of working with startups across a variety of fields to bolster innovation.
“Merck looks at startups as possible solutions to existing problems through partnership. Through Merck Innovation Center we have created a community consisting of innovators to enhance innovation within the company,” said Herve Kubwimwana, Head of Accelerator Africa – Merck Innovation Center.
Through the innovation center, Merck managed to solve a problem that had plagued them for some time, traceability of drugs. Sometimes Merck would donate medicine, and the drugs would be held up in some warehouse somewhere that nobody knows about; spoilt.
Other times they would release new batches of drugs when stock is still plentiful in the target destination. Through a partnership with a startup in their innovation center, Merck can now track medicine throughout the value chain.
Locally, Safaricom also has a history of collaboration with startups from Little Cab to Mpesa. For instance, the Lipa na Mpesa service that has transformed how SME’s receive payments, is a collaboration between Kopokopo and Safaricom.
Kenya Commercial Bank (KCB), whose banking app-KCB mobile, won Kocela (the collaborating startup) best payment and transfers solutions in Africa during the 2017 Africa Fintech Awards. The collaboration has allowed KCB to innovate in an area that is not their specialty and enabled them remain ahead of banking trends.
The MasterCard Foundation, through its innovation labs spread out across the world is also championing, the David and Goliath narrative. Bringing together all stakeholders (young innovators included) to solve some of the biggest problems facing the world; financial inclusion, farmers profitability in the agricultural value chain etc.
Overall, there are great opportunities for working together using individual strengths of startups, and big corporates to create competitive advantages that dominate industries for years.
