How can service providers enable organisations to access the best innovations in service delivery? The answer is effective collaboration with startups. Together they provide a balanced combination of trusted professionality and an agile innovation force. During our research into the organisation-service provider-startup ecosystem, we discovered there is a recipe for successful collaboration.
These days, large service providers aren’t really the major driving force in innovations. Startups have now entered the innovation ecosystem and shown that their ideas can provide real added value to the market. There are abundant concepts, but how exactly can innovation be unlocked when startups haven’t yet reached the maturity required to service large organisations? We wanted to research the question of how service providers and startups can innovate together for organisations. So, for a while now, we’ve been interviewing some key players in the organisation-service provider-startup ecosystem. This blog mainly focuses on the service provider perspective where we have spoken with numerous experts including innovation managers and technology managers from various service providers.
The connection becomes multi-faceted
By embracing the creativity and drive for innovation of startups, service providers are accelerating and deepening their path to innovation in a number of areas, including IT, HR and finance. This significantly changes the association between the service provider and their clientele. The common purpose of service providers is mainly found in the innovations and improvements they can offer their clientele. This is why so many sourcing contracts include innovation clauses: it’s increasingly becoming the cornerstone of such agreements. This connection is now multi-faceted, in which the startup increasingly plays a fully-fledged role, with the service provider providing the economies of scale, proven quality and networks, and the startup the fresh concepts, agility, youth and inventive approach. This combination allows the clientele, the third partner in the triangle, to benefit from the rapid progressive change.
Proof of concept
When startups and service providers collaborate on innovation, this often starts with a small team consisting of members from both organisations developing a proof-of-concept (POC). Together they combine knowledge, skills and creativity. When market opportunities are anticipated or emerge, the collaboration is extended. This has advantages for all parties involved. The service provider keeps its promise of bringing innovation to the organisation. The organisation can trust the startup because of the seal of quality the service provider indirectly provides. And the startup has an entry to the market that would be unthinkable on its own.
For this optimal situation, the triangle, the relationship between the service provider and the startup in particular has to work well. This can be challenging. Our research shows that startups are sometimes held back by the bureaucracy, slowness and opacity of the decision-making process at large service providers. For their part, service providers can be wary of the intrinsic motivation of young startups. Are they looking for a quick sell-off or do they want to build a sustainable business model? And how capable are they of thriving in a different business culture and working in line with the necessary governance? This requires flexibility, from both parties. The service providers need to let go of their traditional approach to develop innovations, the ‘think tank’ completely focused on coming up with the latest big breakthrough. And startups need to learn how to deal with process-focused organisations.
The best of both worlds
There are really two options for the structure of such collaborations. The startup can be added to the triangle operationally, with the organisation as sub-contractor, or a new form of partnership can be set up, where the organisation collaborates directly with the startup which will be supported by the service provider. A key aspect is the agreements regarding intellectual property. In this respect it is common for the startup to retain ownership of the solution, while the service provider owns the software and methods developed to implement the solution in the user’s environment. What is clear is that startups make the ecosystem much more dynamic and all parties can profit from this. Smart and sustainable collaboration is the key to success. The moment all three parties consider the entire ecosystem, they will all maximise the benefits.