By Michael Heald
In the healthcare industry, leading pharmaceutical companies collaborate with biotech startups in drug discovery. In the financial sector, incumbent firms partner with FinTech entrants for access to blockchain and other cutting-edge technologies.
Indeed, established organizations have been striking deals with innovative startups in one market after another. The potential business opportunities are immense: an estimated $1.5 trillion, according to “Harnessing the Power of Entrepreneurs to Open Innovation.”
The simple fact is that, in today’s increasingly interconnected business environment, organizations compete within large ecosystems and collaborate with a variety of firms—from the tiniest startups to the largest global conglomerates. These collaborations might range from technology partnerships to outright acquisitions. The bottom line is that no organization can be an island, and success in any market requires that organizations learn to co-create value with other firms.
All too often, though, business collaborations flounder badly, especially those between large organizations and small startups. Of course, every David-Goliath collaboration is unique, but often a major cause of these failures is a mismatch in organizational culture.
One organization might operate under a hierarchical command-and-control structure, for instance, while its partner prefers a more egalitarian environment. But when David-Goliath culture gaps are managed properly, organizations can bridge the divide, learn from each another, and drive benefits well beyond the initial technological and market gains.
To be sure, large organizations and startups differ culturally in a number of important ways. For one thing, startups tend to place more value on agility, rapid action and risk taking. Yet, at the same time, the cultural commonalities between large organizations and startups can be far deeper than many people might assume, with similarities touching on the core values of the organization.
“Accenture Strategy: Startups vs. Large Organizations Culture Study,” based on a survey across seven countries, found that startups and large organizations share a focus on entrepreneurship (67 percent versus 66 percent of employees “agreeing” or “strongly agreeing”); innovation at all levels of the organization (69 percent versus 65 percent); and customer centricity (76 percent versus 73 percent). These fundamental similarities can help form an “axis of collaboration,” which can be used to help bridge any cultural gaps.
The Foundation for a Successful Collaboration
Making David-Goliath collaborations succeed over the long term requires skillful management and continual monitoring. The first step is for you to identify David-Goliath cultural similarities that could become the foundation for a successful collaboration. Do the two organizations, for example, share the common value of customer centricity? It’s also important to identify the inevitable cultural differences so that workarounds can be developed to mitigate them. I
In some cases, however, the similarities might be too few and the differences insurmountable. For those situations, you might be better off looking for a different partner.
For any collaboration that you choose to pursue, be sure to identify parts of the startup’s culture, including desired behaviors and employee mindsets, that you want to adopt to increase your organization’s competitiveness. To become more innovative, for instance, consider redefining roles, increasing transparency and autonomy, and rewarding creativity and risk taking. Often, these efforts at cultural change must start at the top.
Over the longer term, leaders must monitor the progress of the initiative to ensure that any potential synergy between the two cultures is being realized. In many cases, the larger organization eventually subsumes the startup without obtaining any benefits from the latter’s culture. This is typically because the immune system of the larger organization kicks in, and “antibodies” resist and thwart any changes to the status quo, as discussed in Salim Ismail’s book Exponential Organizations: Why New Organizations Are Ten Times Better, Faster, and Cheaper than Yours (and What to Do About It).
To avoid that situation, the partnership or acquisition might best proceed gradually to allow time for leaders to implement measures that will prevent any antibodies from becoming major obstacles.
Collaborations with nimble startups can help large organizations become more agile and drive profitable growth over the long term. But managing such David-Goliath collaborations is easier said than done. In particular, organizational culture should not be overlooked. In fact, managing any cultural gaps properly is perhaps the most important task for leaders.
As Tony Hsieh, founder and CEO of Zappos, and author of Delivering Happiness: A Path to Profits, Passion, and Purpose, once stated: “If you get the culture right, most of the other stuff—like great customer service, or building a great long-term brand, or passionate employees and customers—will happen naturally on its own.”[
Michael Heald is managing director of Accenture Strategy, Global Lead Software/Platforms.