How Big Companies and Startups Use Co-Creation to Innovate

The latest research says “co-creation” is an untapped opportunity for innovation. Here’s how to do it.

When I ran the internal strategy consulting group at HP, we constantly asked ourselves, “how can we get our $40 billion global behemoth operating more like a startup?”  That’s because like most big companies, we struggled with risk-taking and moving fast.

Startups have different issues. Many upstarts struggle for funding. Everything is scrappy. And gaining access to customers willing to pilot an untried product from an unknown company is a huge early hurdle.

Finding the Middle Between Big and Small

On the surface, it seems like big companies and startups are worlds apart. Startups want to disrupt existing markets. Established organizations want to squelch the competition. But in reality, the big company-startup marriage may actually be the secret to sustainable innovation.

It used to be that a key success factor of business partnerships was cultural fit. If the companies were too different, thing would fall apart. In today’s world where disruptive innovation is the name of the game, you want to embrace differences of all kinds – in organizational culture, technology, business models, and anything else that will advance the business.

Co-Create to Drive Disruption

Recent research from Innovation Leader defines co-creation as a “product development approach that brings multiple entities together to come up with solutions or new concepts.”  Innovation Leader conducted a survey of top companies and discovered that 61% of big companies regularly team-up with suppliers, distributors, partners and franchisees to innovate with 58% working directly with customers and end-users to “co-create” new products and services. Surprisingly, just 45% of big companies reported regularly rolling up their sleeves with startups.

While more and more “innovation networks” have popped up the past decade to accelerate startups and connect them with established players that want access to technology, the collaboration model is still in its early days. Organizations like Techstars and Plug and Play describe themselves as innovation “networks” or “platforms” whereby startups, VC’s, and corporate innovation teams – like Target, Panasonic, Coca-Cola, Allianz, and Honeywell – connect to discover and co-create the next big thing.

According to Bill O’Connor who runs the Vault Innovation Academy, or VIA, at The Vault, a San Francisco based organization empowering startups and corporations under a single innovation ecosystem, “large organizations can now tap into networks of entrepreneurs, technology, and disruptive business models faster and more effectively than ever before.” There are currently over 40 startups calling The Vault their home and using its various resources in order to reach their next stages of growth.

Working at the Speed of a Startup

It can be a tough balancing act getting a big company to work at the speed of a startup. To get the most out of a collaboration, it’s important to:

1. Get clear on the business strategy and how co-creation can support it
2. Define specific customer problems to address
3. Identify startups with technologies and solutions that can address problems
4. Define a “proof of concept” (POC) project with the startup with clear deliverables and timeframes
5. Ensure executive sponsorship exists with clearly defined next steps if the POC achieves specified results

Innovation Leader’s research study highlights many great examples of co-creation like Johnson & Johnson’s “JLABS” incubators that sit within its global R&D centers in Boston, San Francisco, London, and Shanghai. JLABS has rented space to over 450 startups and has invested in about 25% of them. The goal isn’t just about investing in startups but primarily “co-creating” solutions. For example, according to the report, “one of J&J’s investments is in a startup that makes customized 3D-printed implants for patients with gaps between bones due to trauma or surgery. In the past, some of these patients might have lost limbs, but the implant acts as a substrate, allowing the bones to grow together and heal an otherwise tragic fracture.”

Navigating the Corporate Petting Zoo

For startups with limited resources and funding, finding the right big-company partner can make or break the business. Too many startups get strung along in what Michael Olmstead, Chief Revenue Officer of Plug and Play describes as the “corporate petting zoo.”  According to Olmstead: “Startups can get excited by the prospect of working with a big brand, but they need to determine if it’s a serious opportunity or just a big company exploring options. Startups that get caught up being paraded around from one group to another in a risk-averse corporate culture can get sidetracked and miss out on other opportunities.”

To get the most out of a corporate collaboration, startups need to:

1. Clearly understand how any proof of concept (POC) project will help drive the bigger visions and scalable market opportunity
2. Define the success factors and expectations around the role of the big company in implementing the POC
3. Ask for a service agreement from the corporation to fund the POC
4. Confirm the expected next steps when the POC achieves the defined deliverables

Whether you’re a big company looking or the next big thing, or a startup looking for the next big opportunity, co-creation is the name of game. Business isn’t a one-sided model. Co-creation provides both parties with a way to contribute something unique that makes one plus one truly equal three.

Want to learn more about how our tools can help your business behave more like a startup? Check out what we’re building at upBOARD, the web’s largest library of business process apps and templates.

Image credit: Zmorph

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Soren Kaplan is the bestselling and award-winning author of Leapfrogging and The Invisible Advantage, an affiliated professor at USC’s Center for Effective Organizations, a former corporate executive, and a co-founder of UpBOARD. He has been recognized by the Thinkers50 as one of the world’s top keynote speakers and thought leaders in business strategy and innovation.