Eager to please
Norman Fraser, CEO of SoftIron (a startup itself), says that startups are small but very eager to please.
"Tell them what you would really like and they will do everything in their power to give it to you," he says. "If you like what they're offering, don't use your scale and power to beat them up on price and payment terms."
He adds that a good, mutually beneficial deal will get you what you want and help to establish them, so they're still around next year to support what you bought from them and well placed to solve your next problem.
If you like each other and sign a contract, the next thing to think about is managing the relationship. Haley says CIOs need to make it easy for startups to work with them.
He says that organisations should create a publicly visible, single access point for startups. Be clear on the process and timings from the start, and simplify and standardise contracts where possible. "Treat startups as partners, not agencies or employees," he adds.
"As with any collaboration, trust and clear communication are essential. Remind yourself and colleagues that startups are often fragile entities and that speed matters. Pay particular attention to the points when relationships are transferred between teams, as such handovers are where problems often arise," says Haley.
Fraser advises organisations to manage the relationship with the startup through a suitably empowered point person. "Startups haven't got the bandwidth to work for your organisation and make sure everyone's onside," he says.
He adds that organisations should try to build a good personal relationship between their team and the startup, as startups tend to be much more relational than larger organisations.
Fraser says that decisions need to be made quickly. "Your corporate culture may converge on decisions at a glacial pace, but this will kill your relationship with startups. If you want to benefit from their nimbleness, try to show some of your own."
Potential drawbacks
It won't all be plain sailing – CIOs need to be aware of the potential disadvantages too. "By definition startups are unproven, and so the ability to scale might be questionable. But size and maturity can also be challenging meaning their ability to meet the contractual and compliance criteria of large firms can be problematic," says Cooper.
Haley says that partnering with startups is difficult: just as large corporates struggle to understand startups, many startups don't understand corporates. "Working with startups may change the risk profile of a firm – replacing the technical risks of internal R&D with partnership risks, for instance. It may require you to challenge your existing structures, processes and corporate culture."
Fraser adds that not all startups succeed. "If you like what they're doing, treat them well for a win-win result. Or if you really like what they're doing, buy them!"
Increasingly an organisation's competitive advantage is determined by its capacity to establish and maintain successful collaborations. Organisations with the ability and dexterity to cooperate and co-create with startups successfully are much more likely to sustain that competitive advantage.
