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Three barriers to clear for open innovation between startups and major corporations

Go Tokushige, Principal of the Corporate Innovation Consulting Department

Dec. 22, 2016

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Creating innovation through collaboration between startups and major corporations. This is something that has gained quite a bit of attention in recent years, but without much visible success. What kind of barriers do we need to clear to succeed in such an endeavor?

A matchmaking trend

In a business landscape that has grown rather stagnant in recent years, companies have begun focusing their attention on startups. Collaboration with startups that have the resources the corporation lacks, or that have certain technologies and expertise that are difficult to develop, has driven the hope for innovation.
In the past few years, large-scale events meant to bring startups and major corporations together have become more frequent. There seems to be somewhat of a matchmaking trend.

Three barriers in the way of collaboration

In reality, however, a collaboration is more difficult than it seems, and there have not been very many cases of success. What causes this difficulty? Go Tokushige, who provides support for collaborating with startups, says there are three barriers that must be cleared for a major corporation to have success collaborating with a startup.

“The first barrier is whether or not the corporation even wants to collaborate with a startup. The decision should be discussed within the company, and the company should make sure employees are in agreement before moving forward with the decision. The second barrier is what kind of startup to work with. In other words, how do you find a startup that will help the company move in the direction it wants to go? And the third barrier is the practical hurdle—how to handle intellectual property, system coordination, etc.”

Differentiating between “want” and “need”

“The first barrier is very important, and yet a lot of major corporations don’t really think about it,” says Tokushige.
“In the past, collaboration between startups and major corporations was said not to work because of their differences in terms of scale and speed. But with the recent trend of matchmaking, there’s more understanding about how to overcome these differences.
The fundamental problem that most major corporations have is that they move towards collaboration without figuring out why they’re collaborating with a startup, or even what kind of startup they should be working with.”

A common scenario is that the head of a new office or division for new business development participates in a matchmaking event, goes around to speak to representatives of multiple startups. There is lively conversation and a sense of anticipation, but the plans fall through and nothing ends up happening.

“There needs to be more discussion. What kind of things do we want to be doing in ten years, and in what business area? What kind of resources, technologies, or data do we need to do that? Do we have these things within the company? If not, can we develop them on our own? Only then can we start realizing that we can’t do this part on our own, so we should work with Startup A. It’s better if the executives and directors of the company are part of this discussion as well, but at the very least these decisions should be well-integrated into the mid-term management plan.”

The need for people who can discern value

Tokushige goes on to say that in the future, in order for collaboration with a startup to be successful, major corporations must be able to assign people capable of discerning the value of these startups.

“Once, I received a request from a major corporation, and introduced them to a startup that was engaged in very cutting-edge work. I thought the corporation would be exhilarated about the work the startup was doing, but their reaction was almost nonexistent. Their words were: ‘How exactly are we supposed to evaluate this startup?’ That was when I realized that there are people in major corporations who have lost their ability to sense the value in things like trends and innovation. I do think there are people who are suited to working with innovation, and people who aren’t. For a major corporation to work with a startup, people who can sense the value in innovation are absolutely indispensable. That’s why, in the future, I think corporations should put more focus on human resources as well.”

Tokushige has had experience creating a new business within a major corporation, as well as experience in quitting a company to establish a startup. Six years ago, he began using his knowledge of both sides to provide support for matchmaking between startups and corporations, as well as for their collaboration.

“Because I understand both perspectives, my goal is to bring startups and corporations together at an equal standing. It’s my hope that establishing the foundation for this kind of collaboration will stimulate and energize Japanese society.”

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Nomura Research Institute, Ltd.
Corporate Communications Department