Publication date: 23.08.23

Reading time: 5 minutes

In today's fast-paced and highly competitive business landscape, innovation is critical for companies to stay ahead of the curve and drive growth. With a desire to enrich the digital ecosystem, accelerate business processes and capture new niches, corporations are increasingly adopting open innovation to bridge the technology gap.

BUY VS BUILD

Working with innovation, corporations are faced with the so-called "buy VS build" dilemma.

-> BUY

Buying a ready-made startup solution or the startup itself is often the easiest way: there is no need to develop technologies, test hypotheses, or attract a large number of talents, experts, and brains. A corporation buys a packaged solution or product and integrates it into its ecosystem. Of course, this method is not without its drawbacks:

Integrating a startup's technology and a corporation's ecosystem is not an easy process. If it's a banking company, there could be cybersecurity concerns. For industrial companies, the startup's solution may be too technologically advanced for their current generation of the equipment. Additionally, legal issues can arise during integration, particularly when the corporation and startup are from different countries with different laws.

According to Innotechnics analytics, corporations often face these challenges and may reject promising startup solutions due to integration complexities. Unfortunately, the impossibility of integration is often discovered during the implementation phase.

! Therefore, it is crucial to consider legal and security issues during the negotiation stage of any deal. Innotechnics can help with scouting the most relevant startups for any technology request.

-> BUILD

Building innovation for a corporation means developing a new technology or product from scratch or almost from scratch, using piloted and tested startups or developing internal entrepreneurship.

The "build" approach is pretty expensive, because it takes a lot of resources and time to develop a new product. Therefore, the success of the "build" approach lies in the full availability of financial and operational resources, as well as a structured and systematic plan for technology development and implementation.

->> Accelerator

The basic technique of introducing innovations according to the “build” approach is to conduct a corporate accelerator. Acceleration programs can help startups learn the skills they need, test their technologies, and improve their products to meet the corporation's standards. After doing research, we found that only the major players like Disney, Google, Microsoft, BMW, Amazon and similar largest companies conduct permanent accelerator programs. The reason for this is that these companies have access to all the necessary resources. Smaller companies are now running acceleration programs less and less, because the ratio of resource costs and conversion to pilot projects/scaling with "quality startups" in them is decreasing.

Walmart recently launched an accelerator program for Web 3 startups. Participants can work with mentors and experts to develop CJM, learn how to pitch and attract potential investors. Why is Walmart doing this? Well, it's a smart PR move for one thing. But more importantly, the company will be able to get startups that are experienced and trained with the features of the retailer's ecosystem to help it develop new retail technologies. Specifically, it’s interested in things like virtual reality, drone delivery, and personalized shopping.

->> Venture Lab/Builder/Studio

Corporations have the option to create their own venture studios and labs where they can collaborate with startups to develop new products and technologies. This approach can involve starting from scratch or building upon existing ideas. However, it requires significant investment from the company to provide startups with the necessary resources and equipment.Venture studios and builders are considered an expensive tool - it takes $5-10M+ to set up a startup studio. It is also very difficult to attract experienced funders and experts to build startups. Some studios even pay them salaries, but that doesn't help much.

Despite this, venture labs are places where the most unique and innovative products can be created. In addition, startups coming out of studios go from zero to seed round in 10 months, and from seed round to A round in 15 months. This speed also allows them to raise investment quickly. It takes a traditional startup about three years to reach a seed round.

In 2023, UP.Partners launched UP.Labs, a venture lab that works with corporate partners who set the tech requirements for startups to be created. When the startups mature in the lab and prove their market fit, the corporate partners can acquire them, enriching their technology culture. The lab's first partner is Porsche.

! Engaging partners such as industry peers or development funds and institutions is a great option for corporations, as it allows them to reallocate resources to create innovations and share experiences with each other.

->> Internal entrepreneurship programs

The gaining popularity approach to innovation is internal entrepreneurship programs. Instead of seeking out technological solutions from external sources, corporations are helping their employees to create these solutions. These programs involve providing guidance and support to employees who have their own ideas for a corporate project, modeled after the startup concept.

In this way, newly minted corporate entrepreneurs improve the corporation's technological environment and increase its innovation culture. Big companies like BASF Chemovator and Deutsche Telekom's UQBATE program are actively developing their own internal entrepreneurship programs.

An excellent example of internal entrepreneurship is Airbus' Crowdcraft program. By tapping into the creative potential of its own employees, Airbus has managed to reduce costs by 61% and cut down development time by 59%, compared to traditional methods.

! It is important to combat the isolated thinking of employees, promote the exchange of ideas between employees and departments, and increase employees' knowledge of trends, business and technology in order to develop internal entrepreneurship. This can start with simple weekly trend digests and training consultations with experts from different fields. Innotechnics can help you with digests to foster an innovative and tech-savvy employee culture.

There are many more different techniques for introducing startups' innovative solutions into the corporate environment. If you want to find relevant startups by technology query, try Innotechnics - the most complete and detailed database of startups for corporate innovation.