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Why Partnering With Start-ups Could Be Key to Big Corporations’ Survival

Don’t get left behind. The world is rapidly changing, and corporations need to move faster if they want to keep up

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BY Cristina Morales - 14 Sep 2017

startup corporation partnership

PHOTO CREDIT: Getty Images

The life expectancy of a large company is getting shorter and shorter. According to this Inc. article, companies typically stuck around on the S&P 500 for 33 years back in 1965. By 1990, this shrunk to 20 years, and this figure is expected to shrink to 14 years by 2026.

It’s not hard to see why this is happening—more players are entering the market, and in the last 15 or so years, technological disruption has made competition fiercer than ever. Partnering with start-ups could be the key to big companies’ survival, according to the speakers at a panel discussion at Geeks on a Beach 2017. Here’s what they had to say about the matter.

1. The larger your company is, the more difficult it is to adapt

Established companies have an image to protect, which is why many of them find it difficult to try new things. This is especially true in the financial sector, where trust in the brand is key to a company’s success.

COO/CTO of Dragonpay Corporation Robertson Chiang discovered this after working with a large bank in the Philippines. “They were basically saying that a bank of their size couldn’t afford to just try out a new product or service in the market because if it falls flat on its face, that’s a big dent on their brand,” he says. “So they have a lot of things to consider, which makes it very difficult for them to just move on and change.”

2. Start-ups, on the other hand, are designed to pivot

Digital transformation just doesn’t happen naturally in a traditional company. A start-up, on the other hand, can afford to be more flexible and try new things. “Enterprises are built for scaling, not changing,” says panel moderator Arup Maity, president of BlastAsia and Xamun Inc. “A start-up is the one designed to pivot every two weeks and that’s fine.”

Maity entered the start-up scene in the late 90s, which he describes as a time “when people started realizing that you could use technology in how business is done.” While digital transformation involves changing a business from the inside out, start-ups can disrupt and change the way business is done from the outside in.

3. Collaboration is beneficial for both start-ups and large companies

In an exclusive interview with Inc. Southeast Asia, Ehon Chan of the Malaysian Global Innovation & Creativity Center (MaGIC) talked about how MaGIC helps both start-ups and corporations by fostering collaboration. Partnerships between corporations and start-ups, he says, accomplishes two important things:

  • Start-ups help corporations innovate
  • Corporations help start-ups scale

4. Automation is NOT transformation

Many companies think that digital transformation simply entails digitizing processes that were previously done manually, with paper. “If what you are trying to do is remove the paperwork and convert it to a digital form, but everything is basically working on the same premise, there is really not much efficiency that you will squeeze out of it,” says Chiang.

Chan says that a huge part of what MaGIC does to help corporations understand what start-ups have to bring to the table is educating them on value chain innovation. For example, they could work with a major port that is looking to find new technology to help it run more efficiently and sustainably. MaGIC then looks for a start-up that offers a solution that could achieve that, whether it’s machine learning, automation, or something that could help them reduce their carbon emission.

Digital transformation, in other words, isn’t just about digitizing your process, but is about transforming the way you do your business.

 5. Corporations sometimes need to hurt themselves to thrive

Large companies are now at the crossroads: should they protect their existing business or risk cannibalizing their business to survive? Butch Meily of Ideaspace Foundation and QBO Innovation Hub learned the hard way that playing it safe can be a costly mistake.

Meily has been working with Philippine telecom giant PLDT since 2000 and says that they had the opportunity to buy a huge stake in what is now one of the most popular instant messaging apps used today. “But we passed on it, because we said, ‘Why should we buy a business that would cannibalize our telecoms business?’” he says. “And that was a mistake.”

The market will change and your product may not always be relevant. Whether or not you adapt to the change can make or break your company’s future. Which brings us to our last point…

6. Transform or get left behind

After working closely with banks and traditional financial institutions in the Philippines and getting impatient with how slowly it took them to change their business processes, Miguel Warren jumped at the chance to join fintech start-up Payoneer.

“You have to move faster,” Warren says. “Here are these fintechs that do exactly the same thing that you’re doing but they’re making it easier and more convenient for your customers. And in 5-10 years, they are going to be competing with you head to head.”

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