29.01.2021

How corporations search and select startups wisely

Companies most often search for startups in accelerators and hackathons. Irina Kalashnikova, co-founder and CEO at Gotech Innovation, tells to RBC when this is useful and what unusual search tools Sberbank, Rostelecom and X5 Retail Group began to use.

Smart approach to classic solutions

In a study by Innopraktika published in October 2020, experts call the current stage ‘a stage of conservative experimentation’: companies investigate the effectiveness of tools and try to build them into corporate governance systems. I only partially agree with this conclusion: a lot depends on the company and the sector; some market participants have advanced in their work further than others.

My work experience shows that corporations can effectively transform a business with the help of startups under the following conditions:

  1. The right tools are chosen based on the goals.
    Hackathons are best suited for finding and hiring technical talent, well-coordinated development teams and product specialists, pitch sessions – for finding ready-to-implement technological solutions, accelerators – for working with early-stage startups.
    Using these tools, corporations receive additional effects: the development of the ecosystem around their services, the strengthening of the brand, the involvement of the company’s employees in the innovation process, and the transformation of the corporate culture.
  2. Motivation for startups has been thought out in order to attract the most promising projects.
    For hackathons, these are cash (and not only) prizes for the best teams, for selections and accelerators – the opportunity for direct communication between startup founders and business customers (representatives of the company and its partners) and the real prospect of joint projects. At the same time, networking, feedback from investors and entrepreneurs, communication with experienced mentors are important for all types of programs. Early-stage startups often lack understanding of how to apply and who might need their technology solution.
  3. Mechanisms of interaction have been created: launching pilot projects, integrating selected solutions.
    Different cultures and speeds of processes of startups and large companies must be adapted to each other using the fast-track system: simplified forms of contracts, accelerated terms of approvals and payments, budget for pilot projects, help with scaling.
  4. There is a systematic approach to scouting new technological solutions.
    Events are held regularly; top management is involved in evaluating and integrating the results.
    Depending on how well the company is prepared to work with startups and how many projects it can “digest”, the frequency of the programs is determined – from quarterly to annual. A number of companies are accepting applications from startups on an ongoing basis through specially created online channels. External participants – accelerators and consulting companies – can provide support for activity and a wide coverage of startups for selection.

The next step is the implementation of solutions that develop business in the following areas:

  • expansion or transformation of interaction channels with customers and clients, suppliers and partners;
  • creation of products and services with significant potential for increasing revenue, complementing the main line;
  • creation of products or services that replace the main ones and allow attracting new categories of customers and/or retaining existing ones;
  • reducing costs and increasing the speed, reliability and other characteristics of internal processes.

Go along with business

A key element of working with innovation is the development of the company’s internal culture and infrastructure. At the same time, it is not enough just to appoint a responsible employee and ask him for the result, as it sometimes happens. The systematic approach implies that:

  • the management understands at the strategic level the need for innovations and why they are needed, translates this vision to all levels of management in the company;
  • the employees responsible for work with innovations are constantly in touch with the divisions that act as internal business customers;
  • innovative managers report directly to the owners of the company or the CEO.

New markets and instruments

In the context of the restructuring of many industries in connection with the pandemic, I recommend expanding the scope of projects as much as possible: more actively seeking projects, expanding the circle of potential participants, and attracting scouting partners. The widespread transition to remote communications due to quarantine restrictions has brought new opportunities – the geography of participants in hackathons, selections and accelerators has expanded. The following new aspects should be paid attention to against the background of the pandemic:

  1. Attract not only Russian, but also foreign startups to your programs.
    This gives you access to a wide range of technologies and solutions for their application. Russian companies have recently begun to take active steps in this direction, and now this approach can provide a tangible advantage. In 2020, Kaspersky Lab, Sberbank, the RITA alliance (includes Beeline, HOFF, X5 Retail Group and M.Video-Eldorado) and a number of others resorted to the search for startups, expanded at the expense of foreign participants.
  2. Consider unusual startup search tools.
    In its research, Innopraktika draws attention to a number of formats that are actively used by foreign companies but have not yet become widespread among Russian players (although there are already examples). This is the creation of spin-off companies (a spin-off is a branch, a subsidiary for a task or product) to enter promising, but not core niches for the corporation; corporate entrepreneurship – generation of ideas by employees and participation in their implementation; temporary project offices and laboratories; joint ventures and partnerships, technology alliances.
  3. Be prepared to conduct mergers and acquisitions (M&A), monitor the market and get in touch with interesting projects.
    The digital transformation has accelerated, and this could lead to increased deals: corporations will be more likely to acquire startups or mature tech companies. In 2020, Rostelecom bought a controlling stake in Big Three, which specializes in waste processing, HeadHunter invested in Zarplata.ru, Sberbank bought a stake in Watchout! AI and Malivar startups (participant of the joint accelerator of Sberbank and 500 Startups 2019), services like “Eapteka”, “Samokat”, 2GIS and other companies.

Technological foresights

Analyze more, research new technologies and trends. Classic examples of what ignoring or underestimating trends can lead to are the stories of Kodak or Nokia, the leaders of their markets, which have suffered a complete fiasco. But there are also less vivid examples of how companies gradually lost their positions. The period of the pandemic is the time to update knowledge and plans.
Daril Plummer, vice president of research company Gartner, noted that the technologies of the future, which will entail a “reset of everything”, have three things in common. They

  • will bring accelerated innovation and increased efficiency in the corporate environment;
  • are more efficient than technologies that replace;
  • will have a transformative impact on society.

Among the key trends for 2021, Gartner names a dramatic progress in remote interaction with customers and customers. According to experts, by 2025, 40% of companies building a business on physical interaction will improve their financial performance and outperform competitors by developing a virtual customer experience using AR/VR and IoT. The consequences of the pandemic have accelerated the trend: the readiness of customers for remote and virtual interaction has grown significantly. Another strong trend is the automation of production and logistics: it is likely that by 2025 end customers will be the first to touch more than 20% of goods produced in the world.

The radical dynamics of 2020 will push market participants to actively and deeper explore the possibilities of applying new technologies in business. Long-term forecasting of scientific, technological and social trends can become the basis for a more ambitious approach of Russian companies to work with innovations.

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