How to work with startups

When I was a venture capital partner, it was fascinating to see how many startup founders were sitting in large enterprises and had great ideas, but were perhaps afraid to take them to management.

Sounds like somebody else’s company doesn’t it? This is what happens in an organisation – possibly even yours – where there is a rejection of new ideas. The paradox is there is increasing pressure for businesses to digitally transform.

To make this change from the inside-out is, and always will be, both complex and difficult. The alternative for the CIO is to find ways to partner with the external ecosystem and bring innovation into your enterprise.

If we can also tap into the innovation that flows naturally within the company that would actually be a very good thing. We often find that the business-as-usual team struggles to keep up with the demands of various internal stakeholders for change.

As the CIO, your job is to ensure that these needs are met with disenfranchising your own team.

Here are my 7 tips to innovate and work with startups.

1. Start with an innovation self-diagnosis

This might seem to be bad advice but you do have to reflect on where the enterprise is weak and what domains need to be enhanced. Let’s remember this is all about ‘what’ not ‘how’. Start this by doing some analysis where the key pain points are in the current business processes.

Trey Zagante runs an ‘innovation diagnois’ for his company, Venturetec. The real advantage of an independent analysis is that this also allows you to take a more holistic perspective of the problem.

Your alternative is to ask a few new starters to the enterprise to conduct this exercise for you. Again, the danger is that the reactions from other peers to them may be destructive for their own careers.

2. Decide how you want to engage the ecosystem

There are many options of how you can see to bring innovation into your enterprise – think incubators, accelerators, mentoring, and investment funds.

These can be tackled in a logical sequence, depending on your own company status and how aggressive you would like to make progress.

I used to take startups into large corporations like CBA, IAG and Allianz. These startups would be introduced to the board or work with innovation teams inside these organisations.

Such events required many months of pre-work to select appropriate startups that are pitch ready that have an interest in working with such large enterprises.

For the startup, it is a bewildering experience to work with large enterprises with so many stakeholders and bureaucracy to deal with. Like I said many of these founders themselves came from large banks and understood the rigidity that can exist, however there was still surprise how frustrating this can be.

I’ve also worked with fintech hubs such as Stone and Chalk and Tyro Fintech Hub as a mentor where large corporates work with startups in a glasshouse. This can also help to facilitate the engagement and ensure that expectations are matched.

3. Break all the rules but ensure enterprise governance is integrated

Sounds silly right, but if you don’t do this then you risk any innovation running immediately into roadblocks. There is a real need to break all the rules, but be aware that this can have some unexpected adverse results that you need to anticipate.

To have the right processes in-place will allow the innovation to co-exist with your current portfolio. Without this understanding then resources will remain an issue for any innovation to gain traction.

The very heart of innovation is to seek a new repeatable business process. Thus it is imperative that there is some degree of separation and integration. This will sound like a contradiction but to succeed, such paradoxes have to be embraced.

4. Generate new ideas with stakeholders

This is all about stakeholder engagement as it is likely that you have many, too many ideas that have already surfaced. By the way, stakeholders are not just managers, they can be new graduates and others in the business who are frustrated. They may be the founders who work for themselves on the weekend and evenings with their own startups.

That being said, having the CEO as a real sponsor makes a massive difference. When the CEO is not behind these efforts then really you have probably wasting your time. To make a breakthrough around innovation this requires strong and constant support – this is not a sprint and is more of an 800 metre run.

You have to have maintain a good speed and also not rush into things, but when the ‘bell’ sounds, the pace has to pick up. In all our industries, the bell is the threats that come from others that are innovating faster than you.

5. Fund the best ideas

Proceed with a proof-of-concept (POC) and measure success. This needs some money for resources and perhaps more if you make a real investment in the change should this prove to be a reality.

The ‘best’ ideas not the ones that reduce noise or satisfy the crowd. This is not an easy task and this is when you really need a strong coalition of business and technology leadership to drive this new agenda.

If you can formulate an innovation council then this can be a good starting point, however this needs to be with the right execution participation.

6. Rinse and repeat

Take learnings and reward change of behaviours. This sounds simple but actually is hard. First you have to measure success and that is always harder to do with digital innovation initiatives. Secondly, there will be failures and how you as CIO react in this situation is critical, in such cases the learnings will need to be captured and ensured that this is shared.

The ‘rinse’ is also to engage a broader audience and if you like sheep dip them with the news of these changes and what has worked versus not worked. This will bring with this news some support and also detractors. Not sharing these learnings will never pay off. This is all part and parcel of the behaviour change that you are seeking to drive.

7. Grow the startup within an enterprise

This is your end goal ... to re-invent the enterprise. Like a human body, foreign elements are naturally rejected. Your role is to ensure that the team understands that this startup has your unequivocal support.

To grow a startup within the enterprise is a long term project and requires real stamina. Like I said this is an 800 metre run and you while you may adopt an agile approach you can’t do this as a sprint.