What do corporations look for and what kind of expectations do they have when they consider startup partnerships? To get some insight on how corporations approach startup collaboration and open innovation, we talked to Moises Noreña, Director of Strategic Innovation at Allstate and former Global Director of Innovation at Whirlpool.
What are your feelings about innovation in general? And about corporations working with startups?
I have a couple of thoughts. One of them is that companies should be much more open to bringing in things in from the outside. There is an explosion of technologies and services that could improve the capability to bring innovation to large companies and integrating them into the innovation process should be taken more seriously. I think the hype of open innovation has come down and I see that this has shifted to the venture trend. You’ve heard a lot about open innovation and if you’re operating from the outside you have to have access to collaborate and I think it’s still true but the emphasis is more on the venture inside—right now that topic seems very hot and the open innovation space is more in tune with that. It’s a question that in the future there’s going to be some kind of realization that there might not be as much value in this venture world. There are a few success stories about these types of ventures but the reality is that the successes are very few and I would say that corporations should be cautioned about over investing in these.
So what you’re saying is that overall companies should be more open to the idea of working with external partners but they should also be weary of their success rate?
Yes, exactly. Building their portfolio, establishing their strategy about what companies they want to look at—having that to your definition is very important to the success of the venture world in general.
In terms of working with startups and external experts, what do you look for?
One of the things that’s really important, there’s so much out there and so little time to get an initial interaction so I think when startups make their pitches, it’s very important that they know who they’re talking to and they make their presentation relevant. So every time [their presentation] might be a little bit different if they think there might be a fit, so they [should] tailor their presentation to match the needs of their corporate partner. The other thing is to make sure they’re talking to the right people. In large companies people don’t always communicate as they could or should and [the startup] might be talking to somebody who doesn’t have the influence to bring them in or establish the right connections within the company, so having a better understanding of who you are talking to and where is the right place to be is an important element for startups to know; not any person who approaches them from a corporate partner is going to be the right person.
What do you expect the startup to have accomplished by the time you meet with them?
It’s important that they have a viable product and a proof of concept. Companies of large scale will likely not look at companies at angel investor level, they’ll want to look at companies that are a bit more established; they might not have been scaled but they would have a viable product in the market.
With the startups that you’ve worked with, how have you discovered them?
That’s a good question. We’ve been thinking of establishing a better way to do this in a consistent manner. We’ve worked with a few incubators which give us a lot of access, also through conferences like Chicago Venture Summit and things like. Some others are presented to us—they come through a contact or someone who thinks we can be a fit. There are some other companies we have worked with in the venture capital space. So these are some of the ways. When I ask people how they do it, they say, any way I can. The ones I’ve mentioned are the most typical ones.
For the startups that you meet and you have decided to partner with, what particularly drew you to them?
The offering they’re bringing and how it solves a problem we currently have. Sometimes the company might be thinking about a certain new business model or technology and we’ve (the company) been exploring it and prototyping it and sometimes something shows up in the market that is already doing what we’re trying to do so that’s really when you find that there’s a connection. Also, the articulation of the area of interest can really make the difference. And sometimes it can be a blurry line; sometimes you can see something and it can have a huge implication and then it may not be anything and that’s why having a good method of assessment is a good practice to have so you can do it in a molecular way. Otherwise—I’ve always found that in big companies that do this and don’t have a systematic way—what you’re going to find is, ok, now I have to go to ten people to find out if it’s a good idea and that really makes this very difficult. So having a group that does this that can make a difference.
What is your advice to startups looking to develop partnerships with corporations?
Make sure you’re talking to the right people; establishing as quickly as possible how they can benefit the company is very important. This is a very difficult line to drive: being selective and aggressive in asking the organizations to be responsive. I say this is difficult because working with large companies for startups can be really beneficial because it can bring them a lot of scale and resources but they can also waste their time and I’ve seen that a lot—taking a long time to make decisions and in the end, nothing happens. Maybe thinking about finding somebody in their staff that can navigate the corporate waters in an effective way—some kind of business development person from the corporate world—can be really beneficial because they can focus on what they have to do and not waste time that the corporations take in doing all these things.