Corporate Incubation

When corporates meet startups

As a quick follow-up on my first two articles on corporate innovation (part 1 and part 2), I’ll be presenting a keynote on the relation between startups and corporations in Europe, for companies in the mobility market.

The key focus may be a tad concerning if you are a startup that doesn’t know anything about multinationals. Despite all the current hype on how this should be a match made in heaven, you actually have nothing in common. Zero. Nada. Niente. So if you think that a multinational has to be a key asset for your growth, you may want to think again.

This is not about technology

This is not about buying technology - merkapt

First and foremost, when corporates meet startups they often thing they’re going to eventually buy a new technology out of them. Given the global horrendous track record on this one, this is pretty absurd.

Any given multinational will pretty much halt any agile tech development by throwing resources at the startup. What was a fast, iterative process of prototyping and getting things done, will refocus on: who’s accountable of what? What shareholders will think? How legal can cope with that? Etc. Then someone key in a well-fed business unit will start to see the project appearing on its radar. Disruption you say? Other my dead body! Why would we cannibalize what we currently have going on with customers?

If you consider the recent deal between Microsoft and Linkedin, this will probably be another Yammer scenario. The best case scenario of startups and corporations working together is precisely when it’s not about technology, or acquiring a community of customers.

Although, Apple investing in Didi could be another story. If Apple undubiously want to smooth out political tension with the Chinese governments by broadcasting their “love” of local innovation, don’t be mistaken, the key thing is that they expect to learn a thing or two on mobility in a massive economy. This is a key investment in learning, unobtainable in another way for Apple.

Life cycles are incompatibles

Life cycles are incompatibles - merkapt

Secondly, when startups and corporations have engaged a relationship, they soon realize that their internal clock is not running at the same frequency. This could be explained in many ways. Some of them are quite obvious, such as factoring the number of people necessary to take a decision in a culture or the other.

But there’s maybe something that you may have overlooked. Startups and multinationals don’t process market informations in the same way.

In that regard, picture the best startups as carnivorous big cats: they pounce on a key information, digest it quickly, and build what is sometime a narrow-minded vision, but also an extremely focused one. Their approach to innovation is a radical one, filtering out a lot of market information, biasing facts if need be, but feeding their own narrative and their challenger culture. Creating a reality distorsion field is not a scientific technique.

On the contrary multinationals strive for a comprehensive approach to market information, by making sense of the markets in a consensual way. They are heavy herbivores, grinding information at a slow pace, sending it back and forth the internal pipes several times, before it’s finally metabolized through committees, competitive clusters and various Gartner’s reports. They cannot catch the weak signals, the burgeoning trends, and any fast-paced markets at all because their cognitive process lag behind.

In that way, a typical multinational will be well aware of Google and Facebook, will fear Uber without having formed an opinion about it, and will have no clue on Didi Chuxing. The fact that Didi has been operating in more than 400 cities in China, and was valued as one of the few unicorns on the planet did not register yet.

You must admit that it’s quite a challenge to build a fast-paced approach to the market when your vision lags five, to ten years behind. Can you imagine getting all your emails as a single document at the end of the month when searching for a new job? This is what we are talking about.

There is no digital transformation

There is no digital transformation - merkapt

The last key problem is directly fed by the unprecedented level of hype around the “digital transformation”. We are talking Y2K bug level of bullshit here. The last I checked it seemed that 80% of the consulting firms where selling snake-oil solutions to become a digital organization. The fun part is actually that most of the “old economy” multinationals are pretty decent at digital, if not the real leaders on the playfield.

I realize that saying that is probably nowadays the ultimate provocation.

Now think about. For instance, we can agree that automotive manufacturers really suck at being socially connected to their market. In that regard they haven’t done their digital revolution. Nonetheless, a run-of-the-mill modern car harbours more line of code than Facebook’s infrastructure. What do you make if this? In my book, we’re talking hardcore digital technology here. That doesn’t mean that our old car manufacturers are not going to be disrupted by Apple, Tesla or Google, but don’t put that on digital incompetence. It’s more about being an industrial platform born in the early 19th century or in the late 20th.

3 Keys to debug the relationship

How to debug corporates and startups relationship - merkapt

This all may sound dreadful. It’s not.

I believe that it’s part of the pack if you’re a startup trying to deal with a multinational, or a leading corporation trying to connect with challengers on a mission to disrupt you.

If you manage to drop the pink goggles, and cut through all the crap that is sold to you there are many reasons for corporates to meet startups and build cooperation:

Startup are a fantastic (if not the best) vehicle to explore risks that a typical multinational cannot afford to face. If you know how to deal with a strategic portfolio of risk explorers scouting the edges of your market, you’re building strong awareness and resiliency around your core business.

If your life cycles are truly incompatible, it doesn’t mean you cannot have strategic touchpoints through specific business interfaces. You don’t get this jargon? Think design studio, prototyping hub, pop-up stores, junior brand, etc.

Lastly, and this is key, as a multinational build your startup strategy around one key revenue: new business models (possible, but unlikely — this is the mother of all hype); harvesting knowledge on future markets (think Apple); or rebooting your innovator’s culture.

In conclusion you may want to follow the white rabbit through to La-La Land. I’m not saying you shouldn’t. I’m saying you should know why you would do it and have a sound strategy about it.

Corporate Incubation

Writing your corporate incubation playbook – Part 2

To follow up on our last article on your corporate incubation playbook, we’ll explore further the ROI architecture of such a program, starting with the “business” revenue. 

Corporate Incubation

Writing your corporate incubation playbook – Part 1

After years of strain and pressure from new digital opportunities that passed by, multinational corporations seem to have found  their innovation mojo back. Their idea has been incredibly simple after all: let’s embrace the strategies that created Uber-like challengers out of nowhere. By creating your own disruption engine — and keep it under control — you will finally outrun all these puny startups, and find new business models of your own.  And after that, ramping up new businesses should be simple enough given your scale: even unicorns in the billion-dollar valuation club can’t really beat you at that game.

Corporate Incubation

Car manufacturers are the new Nokia

For anyone seriously involved in innovation, it’s stunning to realize that the industry learned nothing from early 2000’s Nokia. Regarding the car industry, people still think of it as a hardware business. It’s all about the car, the engine, the brakes, the dashboard, the performance, the security, the comfort. We barely register that vehicles are now being hacked into, that accidents happen because of dozens of millions of lines of code that make a modern suburban vehicle today, or that mapping, geolocalization, and communications are now indispensable.

Now consider the autonomous vehicle market and cut through the wishful thinking debates: it’s not a new market growing in a new envelope. It’s a replacement market, trying to push in a shrinking envelope. It’s probably the key reason why the autonomous car is currently thought as the CD was, for the magnetic tape. It seems only to be a pretense to make current customers renew what they already have, pay more for it, and become even more locked in with the industry.

The slight problem that no-one wants to look in the eye is that the autonomous car brings nothing to customers. Not even more eco-friendliness and probably not security in the foreseeable future (and by the way let’s see how the first thousands of kilometers outside of the gentle, sunny and dry Californian weather work out).

When mobile phones appeared, they were pretty much in the same spot. They were thought at first to be an upgrade from land lines, managed as a premium product by the telecom operators, and were not bringing any tremendous added value to anyone outside of key executives circles.

Then many things happened, and slowly the market started to appear.

Eventually, this market hit critical mass, and network effects transformed it into a wildfire, and here we are today spending a significant part of our life plugged to our mobile.

But during all this time, every phone manufacturer was stuck in a hardware paradigm: how do we make the sexiest phone? How do we offer the most functionalities, the cheapest mobile, the most elegant one, etc.? The best player at that game was Nokia, introducing every six months ground-breaking technical innovation, such as the first camera on a phone, the first data connection, then lo and behold, the first mobile internet connection.

They died a shameful death being number one at selling mobiles on the planet, not making money, and being ignored everywhere except in Africa and India as sturdy commodity products.

The now well-understood drama of Nokia was to be the best at what wasn’t that important for the market: the product itself, missing the key element: the underlying platform that operates the product, connects people together and opens up the market to exponential growth.

With the autonomous car, history repeats itself perfectly, and car manufacturers are the new Nokia.

As it is a car is everything but just a piece of hardware. For what it’s worth as a comparable, there are more lines of codes in a modern car than in Facebook backend:

This will probably double or triple in just a few years from now…

It’s early 2016, and the car is already under a perfect storm of network effects, meshing together communications, mapping, weather, photos, video, music, payment, shopping, social experience and more. There is no shadow of a doubt that the one building the most pervasive platform will own this market.

How many car manufacturers are working on the underlying transportation platform? Or to be fair, how many of them have a real platform culture and corresponding key assets?

The thing also is that such a platform may or may not be for consumers first.

Dream all you want, but it’s doubtful that by 2020 laws and regulations will bend to adapt the autonomous vehicle for Main Street. Among the many problems that will stop that, there are probably two that will predominate:

  • Fatal accidents caused by the irreducible 0.001% blind sight of autonomous vehicles would be much less socially acceptable than drivers killing themselves or each other. As bad as they are, we are used to the latter. And in a culture that thinks that total security can be achieved we won’t react like the proverbial Homo Economicus: even if the road death toll falls 50%, we’ll reject “the horror” of machines killing people. And then who are we going to blame? The car manufacturer? The non-driver using the car? The city?
  • Even before we get there, we won’t switch off overnight the car as we know it. What will happen when we have 20% of autonomous vehicles on the street? Who’s going to give them way when they have priority, knowing that no matter what they will let you pass for security sake? How bad will be the impact of autonomous cars driving around in cities, while the rest of the traffic will react in oh-so-slightly different ways?

So in all probability, if you want to predict the future of the autonomous vehicle, you should probably look more into trucks isolated on dedicated highways lanes. We were promised video games with our kids while the family drives around all by itself, we’ll get freight convoys reinventing train logistics with dirt cheap infrastructure and real-time supply chain management.

Then ask the question again: who’s working on that?

Just like with Nokia all other again, it’s not a Toyota, GM or BMW that will lead this market. And if we were still in the early 2000s, it could have been an IBM or a SAP stealing away the autonomous vehicle market.

But we’re now in 2016, and there’s a huge difference: the platforms are already there, powerful, sitting on mountains of cash and very active.

In 2011, when NOKIA’s CEO, Stephen ELOP, addressed his teams in the now famous “burning platform” memo, he wrote:

The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.

If you’re now on the board of any car manufacturer, you could probably change iPhone for Tesla, Android to… Google car, and resend the memo Monday morning to your teams.

Except that, hey, you don’t even have a platform yet.

Corporate Incubation

It’s not Uber, it’s you!

Not many corporations believe that someone will just “walk in”, and steal their market away from them overnight. Playing at getting scared hits a weird, but clear, pleasure zone in our brain. Once the horror movie is finished playing, we consider our boring everyday life with a kind of new appreciation. Except that, many of these corporations don’t get what kind of trouble they are facing. And I can mostly agree that no, there’s no Uber-like bogeyman in the cards for them. If they fail, it won’t be under the attacks of a small, psychotic killer rabbit. They’ll die because they suck.