A decade ago, it was unimaginable to own refrigerators that would be able to inform us when we are running low on groceries, yet now we are in the era of the ‘Internet of Things’. As technology changes, it becomes more affordable and readily available, making it easier for masses with ideas to build a product that can potentially change the world.
With this constant threat, corporates have been exploring different ways to integrate innovation into the organization. While there have been successful cases like Samsung’s C-Lab innovation program, corporate accelerators dropped to 71 active programs in 2017. Let’s take a look at what led to the downfall of most corporate accelerators.
Challenges of corporate accelerators
Challenge #1 – Misalignment in objective and mindset
One of the most paramount decisions for corporate accelerators is to identify the objective of why the organization is running the accelerator program. This would dictate every aspect of the program, ranging from how it should be conducted, the strategies as well as the type of startups that would be brought in. Most corporates running an accelerator program came in with the intention to run a self-sustaining and profitable accelerator. They expect the startups in the program to function like other business units within the organization and generate revenue from day 1. Audits are conducted annually to evaluate the success and performance of a department or program and they expect to see growth and returns in the reports.
On the other hand, startups need time to validate, prototype and scale before their first taste of success. More often than not, the amount of time startups take to succeed is deemed as too long in corporate terms. For example, Airbnb was conceptualized in 2007, it took two years for them to launch, grow, and raise their seed round, and they only became profitable in the second half of 2016 (after 9 years!).
Without alignment in objective and timeline, corporates are more likely to write off the potential and success of a startup after 1 run which eventually led to premature termination of the program.
Challenge #2 – Corporate mentors lacking in startup experience and commitment
Experience is a valuable asset that cannot be bought, yet it is critical to the success of a business. The insight that startups can learn from books is incomparable to learning from a mentor that has walked the path before. In most corporate accelerators, the organization works with startups that generate solutions for their industry. They would introduce mentors within the organization that are experts in the industry and would be able to equip the startups in the program with domain knowledge.
However, mentors of the corporate accelerators hold a day job within the organization and are not compensated based on the success of the corporate accelerator. It’s no secret that it takes long hours, numerous of trial and error, multiple iterations before a startup can thrive. With little incentives, this makes it harder to find mentors with relevant experience and expertise to commit the excessive hours to mentor the startups in the program.
The amount of dedicated resources and budget that each organization is willing to invest plays an important role in dictating the fate of the corporate accelerator.
Challenge #3 – Lack of corporate-startup collaboration
It is estimated that 90% of startups fail. To mitigate this, startups join corporate accelerator programs to gain access to the corporate’s network, expand their revenue stream as well as for the reputation boost of working with renowned brands in the industry. In return, corporates would be able to leverage on startups creativity, innovative ways of working and new technologies.
While this relationship would often start out positively, having an accelerator program does not necessarily equate to the collaboration working out automatically. Effective collaboration is often hindered by how corporates are structured, the organizational culture and internal processes. For startups, one of the challenges they see in corporate-startup collaboration is the long cycle times and slow decision-making from the corporate team as multiple departments and layers of approval are involved in any decision made. The collision in organizational structure and strategy would cause corporate-startup collaboration to start off on the wrong foot which eventually leads to futile effort and frustrations.
While the future of corporate accelerators might seem bleak, not all is lost. There are still corporate accelerators out there that are thriving and generating stellar startups.
Let’s take a look at what has been done right.
Strategy #1 – Alignment of short term goals with long term decisions
As mentioned earlier in the article, having a unified goal between the corporates and startups is a critical factor to determine the success of the program. Taking time out to align the goals of the corporates and startups as well as getting the buy-in on the monetary and timeline from the various business units within the organization is essential prior to the launch of the program.
Insights from the business units will help to set the direction of growth and change required by the organization and will provide greater clarity on the goals, models and strategies that the corporate accelerator should adopt. Besides setting and aligning the goals, regular check-ins with the various stakeholders to evaluate the progress is necessary. The check-ins allow all parties involved to address their hopes, expectations, iron out frustrations and introduce changes when needed to keep the program moving towards the final goal.
Strategy #2 – Creating opportunities for the community
Besides funding, a key draw for startups to join the corporate accelerator program is the network that corporates bring. To attract high potential startups, corporates should leverage on their connections and bring various stakeholders of the ecosystem together.
To support the growth of early-stage tech startups in India, Airtel launched their corporate accelerator program in 2019. This allows startups in their programs to gain access to opportunities and distribution networks that they would not usually be able to. At the same time, Airtel can value-add their corporate partners by introducing creativity, providing technology and value-adding to the services they provide. Through building up the ecosystem, it brings in product adoption and partnerships opportunities which value-adds all the key players of the ecosystem and strengthens the offer of the corporate accelerator.
Learning from the startups that have been through StartupX’s programs, they would first launch in their home market before scaling to the region. However, they often face challenges trying to navigate through the diverse market, complex policies as well as language barriers. Tapping on the corporate network when expanding into new grounds would increase their chances of success. For instance, the SAP IoT Accelerator, offers startups their customer base and platforms to their startups, allowing the teams to test their ideas while they expand.
At the end of the day, corporate accelerator is not merely a trend. To keep the corporate accelerator model alive, corporates would need to be more proactive and rewrite the rules of the game by focusing on the basic principles of pragmatism, aside from all the hype and buzzwords. In a market where there are limited high potential startups, only by improving the offers, refocusing their budget and resources would ensure the success and continuity of corporate accelerators.
Shih Han Wong is the Program Manager at StartupX. She’s passionate about startups and has always wondered what could be done to make current processes better. Always happy to connect over a good cup of coffee!
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