How a Startup Ecosystem Works

The Power of the Open Innovation Trinity: Getting Enterprises, Ecosystems, and Startups Working Together 

The “startup ecosystem” is an intricate concept. In a larger sense, it comprises big companies, founders, startups, venture capitalists, and other organizations that encompass what startups do. To look at the phrase in a smaller sense, ecosystems could also indicate startup communities like universities and accelerators. Every party within the large ecosystem has its expertise, and collaboration across the board is the key to a success-prone open innovation program. For corporate innovation teams, effective outreach and communication with its main stakeholders, ecosystems, and startups, can lead to mutually beneficial outcomes. 

Understanding the Motivators of Ecosystem Partners to Create Alignment

One of the first and critical steps of corporate open innovation is identifying partners. In the scouting process, innovation teams usually start by looking for innovation capabilities from outside that match with their innovation needs inside. When that priority is fulfilled, innovation teams tend to rush through the pipeline and start to negotiate a partnership. Those enterprise-startup partnerships often fail as one or both partners realize that there is not a good culture fit, or the “personalities” of the entities do not work well together.   

A need-capability alignment is not enough in an open innovation partnership. To avoid wasting time and energy, enterprises, ecosystems, and startups need to identify and confirm at the beginning that their potential partners have a similar vision and goal as them.

The main goal of most ecosystems in forming partnerships with enterprises is to help the startups in their community, but they have different incentives in doing so. For example, the goal could be to pay the next month’s rent of the co-working space, to attract investment, to create more value for their share, or simply for goodness. By understanding the motivations of ecosystems, corporations would have better judgment when deciding whether or not to connect with startups. Some ecosystems are likely to turn down an enterprise at the beginning because they have their own networks of enterprises who are paying to be affiliated with that ecosystem and get startup referrals. Another example would be universities that are more interested in selling licenses and patents of their technologies rather than promoting the startups that have created the technologies. Through motivation analysis, innovation teams would identify signals for potential “Yes” and “No.” 

Following the initial screening comes ecosystem management. Ecosystems can provide exclusive resources and internal perspectives of their startups, which can help enterprises to further identify the ideal startup partners. However, conventional communication channels come short when dealing with constant information sharing in diverse forms. To fully benefit from ecosystems’ expertise, enterprises should take a platform approach that facilitates resource exchange and frequent interactions. SwitchPitch has recognized the need in the market and is launching a new Ecosystem module in June 2021 to help ecosystems, corporations, and startups connect and collaborate. When ecosystems own an online space to curate one-of-a-kind profiles of their startups and customize startup lists for their enterprise connections, the open-innovation triangle is complete and much stronger. 

In addition, innovation teams have to understand the motivation of startups themselves. Some startups could be in the very early stages of the startup life cycle or want to keep their capability to themselves. For such startups, partnerships with enterprises are simply unfitting at the moment. Vice versa, startups benefit from knowing the motivations of the enterprises. Is the enterprise planning on taking a new product to the market? Using startup technology in production? Is their ultimate goal acquisition? Determining the potential partner’s motivation in forming a partnership is the key question for everyone in the ecosystem.

Advertise Your Cause in the Innovation Ecosystem to Attract Partners

The “reverse pitch” method means large companies pitch innovation needs to an audience of startups to form partnerships. This method is tested and proved to work efficiently on SwitchPitch, a Startup Relationship Management (SRM) platform comprising a proprietary startup database and providing features for enterprises to scout startups, pipeline relationships, engage in pilot projects, and get deals done. 

Ecosystems play an irreplaceable role in the reverse pitch process because they have close connections with their startup communities. Enterprises should brief their ecosystem partners to get additional exposure for their open-innovation projects. Ecosystem partners will also benefit and boost startups’ growth by promoting corporate needs.

The reverse pitch is structured to recruit startups to work on the business use case. Enterprises provide a short summary of the business challenge which can be circulated to startups through a sourcing channel such as SwitchPitch. Enterprises can have just one or dozens of reverse pitch searches playing out at any one time, maximizing returns with minimal effort. Startups registered with sourcing channels like SwitchPitch will receive the reverse pitch with the business use case background. Then, startups will self-select if they can help the corporation and apply to the reverse pitch. Since the reverse pitch is connected to a current need, the business is aligned and willing to discuss potential solutions, allowing enterprises and startups to move quickly to implement a proof of concept or even larger scale test. 

The founder of SwitchPitch, Michael Goldstein, suggests corporate clients come up with one-pagers about the benefits for startups in working with their companies. In the one-pager, the enterprise could introduce its highly engaged innovation team, the value of being affiliated with its brand name, its past startup pilots and worth in monetary terms, and its current goal for open-innovation partnership. Chick-fil-A is one of SwitchPitch’s clients who has done so to promote its innovation programs to startups and ecosystems. It proactively showed its innovation background, expertise, and determination in working with startups. 

Collaborate Within the Company and Across Teams

Innovation teams are like internal consultants for the business units of the company. Business units need to see case studies of successes to evaluate the innovation team’s capability in generating results. Then, they can distribute the budget and resources accordingly. Reporting internally every step along the way of open innovation can keep everyone informed of the innovation KPI and progress. While successful results would cheer up the team and showcase all employees about the company’s seriousness in innovation, failures are just as valuable for learning purposes. 

AB InBev, a multinational drink and brewing company based in Leuven, Belgium, is an active user of SwitchPitch. Its tech innovation lab, Beer Garage, is constantly looking for startup partners to help scale its existing capabilities in AI & ML, IoT, Cloud & Data Analytics, Automation & Robotics, and explore emerging technologies such as Blockchain, AR & VR, and others to meet customers’ and consumers’ needs.

Before joining SwitchPitch, the internal communication and collaboration at Beer Garage were ineffective. “Every time a team is cycled through, we basically lose all the relationships, all the history, all accountability, and all the partnerships we developed throughout generations of Beer Garage teams,” said Rafael Metzger Gandra, the global innovation manager of Beer Garage. Moreover, each team member at Beer Garage had their way of organizing and tracking startups in different apps such as Excel. The team soon realized that they needed a digital tool to record and register all the interactions and history they had with different startups, and be able to share data and information across teams and people.

Using a digital platform has increased efficiency as all its stakeholders can just go on to the platform to see all up-to-date information and interactions without having to attend update calls and exchange multiple emails. Using the platform has also allowed Beer Garage’s growing global teams to work together as a whole. 

Beer Garage is excited about the potentials and opportunities that the platform will bring. Gandra expressed that in a year or two, the team will be able to look back and have metrics on what types of relationships or interactions worked and what did not, and make data-driven decisions about open innovation. He also looks forward to using SwitchPitch as a tool to join forces with other enterprises that have similar innovative initiatives to compete with technology behemoths. 

The Future of Ecosystems

Goldstein and Gandra both believe that corporate innovation projects would increase in the future because the pandemic has made enterprises appreciate more of startups’ agility, risk-taking culture, and creative solutions. Moreover, enterprises would rely more on integrated digital platforms for information sharing and relationship building with startups and ecosystems as big events and accelerator demo day became virtual. Gandra also predicts that the future trend for corporate innovation teams would be building models and even algorithms to help make innovation decisions and automate a lot of the leads and deal flows. 

As we look into the future, let’s not forget the one change happening right now in the open-innovation world: Ecosystems are growing their presences online and their roles are more important than ever. More and more startups, enterprises, and online platforms like SwitchPitch have identified the capabilities of ecosystems. SwitchPitch specifically developed a new module to encourage ecosystems to be more proactive and more accessible by enterprises. With the concept of “getting internal and external stakeholders to work on the same page” in mind, open-innovation teams can start forming their own “open-innovation trinity” today.

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