Many sectors are teeming with start-ups, using new business models in their attempts to gain a market share or perhaps even overthrow the establishment. The earning models of traditional corporates are coming under pressure, forcing them to change. This is not something to be afraid of, though, but to be embraced. Create a corp-up: a temporary arrangement where corporates and start-ups join forces at a strategic level. This allows them to make optimum use of each other’s potential and so improve the quality and speed of their services.
We foster and facilitate partnerships and provide a platform for operators to seek each other out or meet spontaneously.
Menno van Leeuwen Head of the Innovation Centre Focus Team
Do not be controlled by your fear of disruption
Having been preceded by various sectors, including publishing, telecommunication and energy, the financials are next in line for a big shakeup. Considering all the new challengers, it is not difficult to see why some people are proclaiming that banks will soon become obsolete. Is this true, though? Some products and services certainly have the potential to steal away a large portion of your market; take Bitcoin, for example, and its underlying block chain transaction (Dutch). Yet not every innovation coming out of Silicon Valley or someone’s spare room in Amsterdam is a threat that might render you redundant. Start-ups come in a variety of forms, and many of them offer exciting opportunities for partnership.
Three types of start-up
Of course corporates need to take start-ups seriously and monitor any new developments closely. Learn what you can from them, and make sure that your organisation is ready whenever the situation changes, whether dramatically or only slightly. Start-ups can be broadly divided into three categories:
A few start-ups have the potential to turn a sector completely upside down. They offer an alternative for your services or infrastructure, and by doing so initially pose a threat that you need to take seriously. Yet generally these disruptive innovators do not conquer a market in a single day, and they too need to deal with the rapid pace of developments. The main news last year was about Bitcoin start-ups, now it is all about the strength of block chains. In practice, the upshot is generally a system of hybrid models where corporates and start-ups find a way to work together where they both offer added value. Peer-to-Peer Finance, for example, was for many years regarded as a way to render banks superfluous. Yet now that the platforms are seeking to scale up their operations and need capital to finance their growth, they are turning to the major financial institutions (Dutch). Does this herald the start of a win-win situation, or are banks being taken in by a Trojan horse? My next blog will discuss Peer-to-Peer Finance in greater detail.
These start-ups generally have an ideological foundation and seek to shake up the traditional industries in a big way. They foster new concepts within existing markets, for example by offering crowdfunding as an alternative way to finance start-ups and SMEs. They also want to boost global prosperity by making important services available to as many people as possible. This category is illustrated by the development of banking services using mobile technology, a concept that has become very successful in Third World countries. The social factor alone makes it interesting to look at possibilities for teaming up with these start-ups.
The largest category of start-ups, by some distance, are those that provide niche services aimed at expanding and improving the existing products of corporates. Examples include start-ups that enrich financial data by offering real-time information or adding an element of fun (‘gamified content’) to enhance the user experience. These businesses tend to seek out links with corporates, for example to ask an experienced operator to validate their understanding of the market, to test their innovations on a large scale or to benefit from your name and network.
Learning to speak each other’s language
It requires a great deal of hard work for partnerships between start-ups and corporates to run smoothly. The vastly different cultures and working methods often present major obstacles. Most start-ups have no idea about the processes, structures and systems in place at larger organisations, while corporates are perplexed by the daily sprints, constant user experience optimisation and real-time experiments. Where two businesses that come from different worlds want to achieve something together, they need, at the very least, to speak the same language. This is where an interpreter is vital: a go-between who understands both their worlds and brings them together at the right level.
ABN AMRO plays this role with its Innovation Centre. We foster and facilitate partnership and offer a platform for operators to seek each other out or meet spontaneously. Every month we organise a Startup Friday, where start-ups and corporates can meet and learn from each other.
Moving toward a common goal
Corporates need to embrace change and open up to innovative start-ups. You should create room within your company for this: offer possibilities for experimentation. More than anything else, you can learn a great deal by exploring markets and testing new business models. Make sure, though, that whatever you learn enriches your own organisation, or else your efforts will have very little impact.
Innovation does not offer any certainty, so do not expect concrete results right away. Out of twenty experiments, perhaps two will be successful. Is that then a reason to give up? Of course not! Every partnership with a start-up adds to your experience and helps bring about a change of culture that offers the flexibility and readiness for a corp-up.