How Corporates Can Avoid Startup-Pilot Pain

The world’s largest companies are increasingly partnering with startups to adopt new technology, co-create new propositions and innovate their business model. Proof of concepts and pilots are often the first step to test out and de-risk the relationship before committing to a long term commercial partnership.

Over the past two years I have overseen 10 pilots between startups and large corporates. Many of which have been incredible successes, leading to massive commercial contracts for the startups, joint ventures being forged and the launch of new products.

Others were not so successful. And while they provided valuable learning, they did not reach commercial implementation. Sometimes this was for the best. Not all partnerships are meant to be, and the pilot helped everyone realize this before getting too far along. However, in other cases it came down to preventable internal issues.

So, here are seven things I have observed that corporates can do to increase the likelihood of success when piloting with startups.

ALIGN THE PILOT TO ORGANIZATIONAL PRIORITIES

This may seem like a no-brainer; however, far too often I see corporates engaging with startups for the sake of "being innovative" or simply wanting to show initiative. It is far more likely to achieve buy-in and support from the wider business if the pilot can be tied directly to strategic priorities set by the CEO or board. These priorities are often announced at quarterly meetings, executive offsites or vision setting announcement and range from things such as developing new capabilities, lowering operating costs or entering new markets.

DESIGNATE A SPONSOR

Ensure that there is a strong sponsor from the business unit that will be working directly with the startup. Someone that can champion the startup internally and help them to navigate various stakeholders. This person should ideally be tasked full time during the duration of the pilot and will have some political capital riding on the outcome to incentivize them to make it a success. This sponsor should be adept at navigating the corporate culture, as well as have enough influence to grease the wheels should roadblocks come up. 

INCENTIVIZE EMPLOYEES TO SUPPORT

Just as the champion must be incentivized to ensure the success of the pilot, everyone else that has a hand in the process along the way should be as well. There are often situations when employees are involved in a pilot, be it for user testing, pulling data, or providing information. Without the right culture and adequate incentives in place, assisting with a pilot can sometimes be viewed by employees as a distraction from their primary duties or seen as extra work.

One company I worked with issued a memo from the CEO explaining the importance of supporting innovation programs and that employee participation would be taken into account during annual performance reviews. 

SET ASIDE BUDGET

One of the common hindrances to pilots taking off is access to budget. While pilots usually cost no more than $10-20k, it can be difficult for a business unit to access resources if it has not been pre-allocated. 

Some companies have decided that collaboration with startups is of such strategic importance that they provide budget directly from the group level. Nestle created a central pool of funds that was available to any business unit or P/L owners that wanted to run pilots.

CREATE WIN-WIN SITUATIONS

Not every pilot needs to be paid for, but if it is free, then there must be clear upside for the startup. As opposed to approaching it like a typical vendor relationship with the mentality that the startup must "prove" themselves, look for ways to add value regardless of if a pilot continues to commercial implementation. Not only does this way of thinking create better relationships, but also produces more creative solutions.

In one pilot project that I facilitated, the startup waived the proposed pilot fees when the corporate offered to provide a public announcement of their collaboration in exchange. In another, most of the normal fees and legal roadblocks were removed because the corporate agreed that it would not seek exclusivity, meaning that a successful outcome would open up an entirely new market for the startup

AVOID MOU'S AND LOI'S

This piece of advice receives a fair amount of contention, and honestly I am not sure that it always applies. But, from my experience, it is ideal to avoid these types of documents. While memorandums of understanding and letters of intent are fairly standard practice, non-binding and difficult to enforce, introducing them can completely change the nature of the relationship with the startup. As soon as lawyers are involved or there is anything that feels like a legal commitment, people tend to close themselves off and the process gets dragged out. In my experience, boilerplate NDA's are often all that is required.

Ideally you should build enough trust in the design of the pilot, and align everyone's interests by creating a win-win situation. This way no one feels that contracts are necessary for mitigating their risk.

KEEP THE DURATION TO LESS THAN THREE MONTHS

This is not intended to be a hard and fast rule, but is intended as an aspiration. You want to wrap up the pilot program in a reasonable amount of time, and there needs to be an end in sight so that it’s clear when to make a decision. On the other hand, if you don’t give enough time, then you may not have enough data to make a decision. I have found that pilots which take longer than three months to complete often do not come to successful conclusions, so I have begun to use three months as an aspirational timeframe. 

Timelines and schedules are great for keeping everyone focused and moving quickly, but the reality is that adjustments will need to be made as new learnings emerge. If milestones are not being reached because people are not doing their job, then that is unacceptable; however, if changes are in response to new learning, then iteration and adjustment should be supported.

By Colin Allison

Manager at Rainmaking

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