One important role of business is as a catalyst of innovation. Alok Sharma, President-Designate of COP26, has noted that “to tackle the climate crisis, and reach net zero, we need the innovation, the influence and the energy of the private sector on our side”.
However, this is easier said than done because for innovation to be effective, often two factors are important – the agility to come up with creative solutions and the scale to execute for widespread impact – and, in reality, most companies are strong in one of these two attributes, not both.
Typically, smaller startups have agility and large corporations the scale. What this means, then, is that corporate-startup partnering (witness the collaboration between Pfizer and BioNTech) – which I refer to as “dancing with gorillas” – is key for innovation.
My research for over a decade-and-a-half on this topic began in Scotland, which offered a wonderful laboratory to study these disparate sets of organizations coming together.
My PhD advisor, Prof Stephen Young – after whom a new institute at Strathclyde University is to be named – and his long-time collaborator, Prof Neil Hood, who was closely involved with Scottish Development International (SDI), studied large multinationals. Others of us, under Prof Young’s guidance, studied how smaller entrepreneurial firms internationalized.
After graduating with my PhD from Strathclyde University in 2005, I started studying how both these sets of companies might work together. As I observed large multinationals with a presence in Scotland (eg IBM) begin to talk to innovative local startups, I noticed that the very differences that made it attractive for these companies to work together also made it difficult to do so.
As I describe in my new book, Gorillas can Dance, there are three ways in which corporations can help to create the conditions for startups to engage with them effectively. First, the mutual benefits should be clearly specified. I refer to this as clarifying the synergy. While this may seem blindingly obvious, in reality startups are often not very clear about the exact nature of the so-called “win-win” being offered by the large corporation. It is important to make clear whether the large corporation is offering the opportunity for a startup to build new offerings using its building blocks (say, its underlying platform technology) or solving pain points for which it has insufficient expertise of its (such as digital marketing solutions).
Second, a clearly identifiable first port of call should be provided. I refer to this as creating an interface. Entities like BMW Startup Garage, Microsoft for Startups and Unilever Foundry provide visible mechanisms that bring startups together for a joint program (for instance, within a corporate accelerator) or innovation challenges to select suitable startups partners. In some contexts, honest brokers – such as Scottish Enterprise or SDI – could play an important role as a third party that offers an interface connecting these firms.
Third, it helps greatly when there are observable success stories of partnering. I refer to this as cultivating exemplars. When both managers within large companies and entrepreneurs of startups can see clear examples of partnerships that work, they are better able to judge which partners to pursue and where to prioritize their scarce managerial attention.
In a recent discussion with Impact Hub Shanghai, a non-profit that is well-placed to link corporations with social enterprises, an exemplar described to me was the collaboration between Budweiser China and a climate change-oriented startup, Mi Terro, focused on turning beer waste into eco-plastic. Making proactive efforts to ensure that a few successful partnerships emerge is important.
In sum, corporate-startup partnering offers a promising way to innovate for climate change and the other SDGs – as evident from examples such as Glasgow-based software startup arbnco partnering with Centrica to develop a Digital Energy Efficiency Platform for SMEs. Also, Scottish green hydrogen startups are likely well placed to collaborate with big emitters such as large metal companies.
And markets like China offer a natural laboratory in which to deploy and refine these technologies, perhaps in collaboration with innovative local companies.
COP26 provides a valuable wake up call to businesses around the world, big and small, to get their act together and join forces to their mutual benefit, and that of the planet we inhabit.
Shameen Prashantham is Professor of International Business & Strategy, and Associate Dean (MBA), at China Europe International Business School, and author of Gorillas can Dance.