Monday, March 28, 2016

Has it got easier for start-ups and large firms to partner?


In 2006, we started publishing the results of our research on how to make ‘asymmetric’ partnerships work. Our work was focused on the asymmetry of company size, age, and technical and commercial maturity between two organisations seeking to work together on an innovation project, i.e. a situation exemplified by technology-based start-ups seeking to work with large, long-established firms.  This research had been kick-started by first-hand observations of the challenges faced by technology start-ups within the Cambridge high-tech cluster that were seeking to partner with large, mature firms.  We took an engaged scholarship approach [1] to the work, and the results were disseminated via academic conference papers [2-4] and journal articles [5, 6], and a series of events and other practitioner-focused outputs [7-9].  

Nearly 10 years on, it is interesting to observe whether things have changed.  Firstly, there has been the diffusion, maturing and refinement of open innovation as a concept [10-15], and widespread recognition by larger firms of the implementation challenges that need to be overcome. When we began our work, many multinationals viewed working with start-ups as a novelty, and approached such collaborations with (what they admitted themselves) was a pretty high level of naivety. It seemed so simple:  big companies were being driven to – or were choosing to – open up their innovation activities and draw upon a wider range of sources of innovative ideas; start-ups with innovative ideas were lacking the resources they needed for commercialisation, and so collaboration seemed like an obvious and effective strategy. Our research showed the implementation of such an approach to be much more complex and risky for both parties than anticipated [6].  Today, there seems to be a greater level of awareness on the part of larger firms of the challenges of making such asymmetric partnerships work.  Attitudes to working with start-ups seem to have followed the shape of a hype cycle[i]: huge enthusiasm coupled with unrealistic and then unmet expectations, re-thinking, leading to a more balanced set of exploration (i.e. looking for new ideas) and exploitation (i.e. creating and capturing value from current ideas) activities.  Organisationally and operationally, the set-up and management of these partnerships has moved from being a predominantly corporate venturing-focused activity (and thus affected the ups and downs of senior management enthusiasm that mirrors the wider venture capital investment cycle) to something more integrated with R&D, procurement, legal, and dedicated open innovation teams.  As a somewhat peripheral issue, it has also been interesting to observe the affect how the increased digitization and servitization of technologies seems to have enabled partnerships:  smaller firms providing various digital technologies (especially mobile apps) to add more customer benefit based around the core technology.

Secondly, have start-up firms become more proficient than their predecessors at setting up and managing partnerships with larger firms? This is very hard to judge, but given that their potential partners now seem to have more sophisticated mechanisms for engaging with them, it could be expected that more start-ups will be forming such partnerships and consequently refining their own partnership skills.  Emerging concepts in entrepreneurship  - –such as the Lean Start-up methodology [16] – may also being playing a role  (though the complexity and slowness of setting up partnerships may be in conflict with the minimal viable product / pivot mindset).   There may also be differences in partnership activities between start-ups focused on the commercialisation of a physical product, as opposed to those based on software. The partnership challenges facing a start-up focused on the commercialisation, for example, of advanced materials [17, 18] compared to one focused on app development [19] are both significant, share some similarities but also have some major differences.

Thirdly, there is the evolving role of clusters. Research on this topic shows that the location of the start-up may also impact their partnership capabilities [20, 21].  For a region such as Cambridge, the steady influx of large companies may have encouraged and made such partnerships more visible.  Having large firms locally whose staff are actively engaged with the networking activities reduces at least some of the transaction costs of partnership formation and management.   This is linked to another issue; that of the ability of the start-up to recruit talent from large companies and the willingness of experienced managers to join start-ups. This is in turn is underpinned by a range of factors, including both the actual and perceived impact that start-ups can have on changing industrial structures (e.g. everyone wants to join the next Uber).

Finally, there is the role of open innovation intermediary activities and actors that has become more common in the past ten years.   These range from platforms for matching ideas and needs (e.g. Innocentive, NineSigma, et al.) through to consultancy services targeted specifically at supporting open innovation [22]

These four issues highlight the changing context within which 'asymmetric' partnerships are formed and may be leading to more firms developing the capability to establish and manage these types of partnerships. 

2.         Minshall, T.H.W., et al. Development of a management guide for partnerships between technology-based start-ups and established firms. in International Association for the Management of Technology (IAMOT) EuroMOT Conference 2006, September 10 - 12. 2006. Aston Business School, Aston University, Birmingham, U.K.
3.         Minshall, T.H.W., L. Mortara, and J.J. Napp. Implementing Open Innovation: Challenges in Linking Strategic and Operational Factors for HTSFs Working with Large Firms. in 15th High Tech Small Firms Conference, 14-15 June 2007. 2007. Manchester Business School, Manchester, UK.
4.         Minshall, T.H.W., L. Mortara, and J.J. Napp, Open innovation: Linking strategic and operational factors, in R&D Management Conference 2007, 4-6th July 2007. 2007: Bremen, Germany.
5.         Minshall, T.H.W., et al., Development of practitioner guidelines for partnerships between start-ups and large firms   Journal of Manufacturing Technology Management, 2008. 19 (3): p. 391 - 406.
6.         Minshall, T.H.W., et al., Making 'asymmetric' partnerships work. Research Technology Management, 2010. May-June: p. 53-63.
7.         Minshall, T.H.W., Big Fish, Small Fish, in Catalyst. 2006.
8.         Minshall, T.H.W., Partnerships between Technology-based Start-ups and Established Firms: Making them Work, in IfM Briefing. 2006.
9.         Oughton, D., L. Mortara, and T. Minshall, Managing asymmetric relationships in open innovation: lessons from multinational companies and SMEs, in Open innovation in the food and beverage industry, M.G. Martinez, Editor. 2013, Woodhead Publishing: Cambridge, UK.
10.       Chesbrough, H., The era of open innovation. Sloan Management Review, 2003. Spring 2003: p. 35-41.
11.       Chesbrough, H., Open Innovation: The New Imperative for Creating and Profiting from Technology. 2003, Boston: Harvard Business School Press.
12.       Chesbrough, H., Open Business Models. 2006, Cambridge MA: Harvard Business School Press.
13.       Chesbrough, H. and K. Schwartz, Innovating Business Models with Co-Development Partnerships. Research Technology Management, 2007. 50(1): p. 55-59.
14.       Gassmann, O., E. Enkel, and H.W. Chesbrough, The future of open innovation. R & D Management, 2010. 40(3): p. 213-221.
15.       Mortara, L. and T. Minshall, Patterns of implementation of open innovation in multinational corporations in New Frontiers in Open Innovation, H. Chesbrough, W. Vanhaverbeke, and J. West, Editors. 2014, Oxford University Press.
16.       Ries, E., The Lean Startup: How constant innovation creates radically successful businesses. 2011, Penguin.
17.        Lubik, S. and E.W. Garnsey, Commercializing nanotechnology innovations from university spin-out companies. Nanotechnology Perceptions, 2008. 4: p. 225-238.
18.       Maine, E. and E.W. Garnsey, Commercializing generic technology: The case of advanced materials. Research Policy, 2006. 35: p. 375-393.
19.       Bharadwaj, A., et al., DIGITAL BUSINESS STRATEGY: TOWARD A NEXT GENERATION OF INSIGHTS. MIS Quarterly, 2013. 37(2): p. 471-482.
20.       Weiss, D. and T. Minshall, New perspectives on Open Innovation: The role of relative proximity on open innovation implementation in UK high-tech SMEs, in 26th International Conference on Manufacturing Research, 11-13 September 2012. 2012: Aston Business School, Birmingham, UK.
21.       Weiss, D. and T.H.W. Minshall, Negative effects of relative proximity and absolute geography on open innovation practices in high-tech SMEs in the UK, in 7th IEEE International Conference on the Management of Innovation and Technology (ICMIT 2014) 23-25 September. 2014, Received 'Best Paper Award': Singapore.
22.       Mortara, L., Getting help with open innovation. 2010, Institute for Manufacturing - University of Cambridge, 978-1-902546-91-9, http://www.ifm.eng.cam.ac.uk/service/books/form_intermediaries.html.: Cambridge, UK.




[i] http://www.gartner.com/technology/research/methodologies/hype-cycle.jsp