1 December 2016
On October 6 big and small businesses, from tech start-ups and multinational financial institutions had the opportunity to meet and discuss the future of business. The discussions focussed on the ability to innovate. Innovation was identified as one of the major challenges for companies whatever their size might be. In the following paragraphs we summarize the key findings.
Starting from a very stereotypical statement that big companies are unable to innovate and deliver the service their clients need (e.g. big financial institutions do not add value for the clients who ask for experience) but are in a better position to be successful because of the cost of due diligence and bidding muscle.
Small companies are described as innovative through their structure and their ability to attract highly motivated talent but seen as “high risk” by big companies (2 out of 10 projects fail) and therefore are often unable to get the necessary funding. The collaborative structure allows these start-ups to stay innovative, to empower employees, to stay agile and for founders to keep in touch (often also facilitated through small office space). The small company success is built on high personal accountability, a customer focussed culture and the ability to build meaningful relationships (customer acquisition is key especially in financial services: “people prefer to die than change their bank”).
The discussion moving forward, representatives from big companies gave examples of how they make innovation happen. Most of them acquire external innovative structures and integrate them into their business – with variable success: the fledgling company often kills the innovative culture. Often the founders of the small structure leave, feeling that they weren’t valued. The collaborative structure of the start-up couldn’t be maintained in the larger structure.
Another method was to create structures alongside the main stream business like incubators or accelerators. These structures (e.g The Innovation Lab at Cisco placed in an accelerator at Camden Interchange) allow teams to interact with start-ups in a safe environment and give them the flexibility for experimentations. Furthermore their system to assess suitability for future partners allows small companies to compete.
Finally big companies also have systems in place to evaluate new ideas through established processes. Since it is difficult for big companies to spot talent (innovation is going too fast) they try to foster a creative mind set amongst internal staff. Attendees suggested to give these people more time (work less) or try to change the organisation from within (CiTi group model).
Small companies have trouble reaching out to big companies in their quest for funding. Very often, they “don’t know where to start”. The existing regulatory framework doesn’t help. It encourages more governance (to prevent bad behaviour) which triggers more fear and less risk appetite from big companies. They prefer buying from big companies than from start-ups without references. Especially in the finance sector, regulations make it very difficult for new entrants in the market. What is the solution: shall policy makers encourage cooperation or can they prompt big companies to work with small ones through new laws?
One round table discussed the cultural anchors for innovation and saw the goal of UK entrepreneurs to be bought whereas US entrepreneurs want to grow their company. Also, the tension between stopping or continuing to invest more is difficult to assess for all companies.
To summarize, interaction between small and big companies to learn from each other is very difficult and the relationships between the two are initiated by big companies reaching out to small ones. Only specific structures within big companies (accelerators, incubators, Innovation Labs) provide a counter balance to the weight of big companies and create the environment to work together. The restrictive legal framework has been identified as one of the reasons for the lack of investment in small companies.