Unbundling Corporate-Startup Collaboration Final 21-02-2018 PDF

UNBUNDLING
STARTUP-CORPORATE
INNOVATION & COLLABORATION
Yushan Ventures 2017/18 Corporate Innovation Report
February 2018
1
TABLE OF
Introduction 2
CONTENTS
Key Findings 3
Collaboration Objectives 4
Collaboration Challenges 6
Collaboration Engagement Initiatives 8
Collaboration Engagement Initiatives (Limited Success) 11
Factors That Determine Success (Best Practices) 12
Factors That Determine Failure 13
Common Barriers 14
Overcoming Barriers - Best Practices 15
Corporate Assessment 16
Business Unit Push-back 17
Best Practices - Push-back From Internal BUs 18
Best Practices - Innovation 21
Guiding Skill Set - Startup Scout 23
Guiding Skill Set - Startup Integrator 25
General Advice - Successful Startup Collaboration 27
Summary - Successful Startup Collaboration 28
Methodology & Survey Partners 30
Demographics 31
INTRODUCTION Startup-corporate collaboration has become a cornerstone of modern innovation.

Corporations are sourcing innovation from startups while startups seek affiliation with established
corporations - both are doing so at an increasingly rapid clip. The fit is extremely complementary, and
in successful partnerships, both the startup and the corporation garner tremendous benefits from
collaboration.
Although many startups and corporations seek partnering, related collaboration often fails.
This study, “UNBUNDLING STARTUP-CORPORATE COLLABORATION” was initiated to understand

the barriers that stem from or inhibit collaboration and how to effectively overcome these obstacles.
The study reveals the importan ce of anticipating and addressing barriers to secure a higher rate of
success for a higher return on innovation expenditures. The underlying research efforts gathered both
quantitative and qualitative data from many firms’ innovation activities and related opinions as
expressed.
Quantitative activities are compared with qualitative answers in the study to highlight best practices in
terms of startup collaboration.
Yushan Ventures, a t echnology advisory and investment firm, h as driven startup-corporate engagement
for many years across firms and geographies. Yushan Ventures views collaboration as key to enhancing
success for both startups and corporations.
“UNBUNDLING STARTUP-CORPORATE COLLABORATION” was conducted in affiliation with the

Universities of Twente, Bayreuth and Stanford University, and with the support of Asia-Pacific
The majority of Economic Cooperation (APEC).
startups and
corporations seek
collaboration but
most fail.
2
1. Obstacles between Startups and Corporations are extant even before both parties
have begun interactions. The study reveals that collaboration frequently fails due to internal
resistance from corporate Business Units (BUs) wherein psychological factors such as job security
and NIH (Not Invented Here) account for the majority of resistance.
KEY FINDINGS
2. Sandboxes - Independent Innovation Environments and related Incentives - Initiating
collaboration in a discret e environment (a so-called “sandbox”) increases the likelihood of successful
engagements. However, incentives must be in place to motivate employees properly.
3. The Right Talent Is Not In Place - Existing corporate employees differ radically from startup
entrepreneurs. Communication is often challenging between collaborators from different vocational
and corporate cultures. Corporate Employees are from Mars; Startup Entrepreneurs are from Venus.
4. Startup-Corporate Collaboration Without A “Use Case” Will Not Succeed - Entering into
collaboration with a startup without a specific use case will severely limit the outcome of the
engagement and in many cases stall collaboration.
3
The main reason cited for startup The study suggests it is not enough to only find
engagement is to discover new technologies new technologies and business models if
(75.6%). It is critical for companies to know and companies cannot apply them to real use cases
understand what disruptive t echnologies are with defined objectives. Even if the use cases
emerging and how to adapt and integrate them are outside of core areas - 51.2% of the
into their corporate operations. surveyed companies are engaging with startups
to complement them in non-core areas to
The second most-cited reason is the discovery develop business outside of their core area.
COLLABORATION of new business models (62.2%). Companies are
faced with the challenge of digitizing their
OBJECTIVES businesses and, as a result, need to find new
ways of generating revenues as part of such
modernization efforts.
Surprisingly, closing the company’s innovation
61%
gap was only cited as the 3rd most pressing
priority (61%). This illustrates that over half of the
companies surveyed are reaching out to startups
with concrete ch allenges that they hope to off the companies
address with collaboration. This is an important surveyed are
point to consider as one of the key findings of reaching out to
the study argues that engagement fail due to no startups with a
“use cases”. concrete challenge
that needs to be
addressed.
4
MOTIVATIONAL
FACTORS
Figure 1
Companies responded in terms of
which motivational factors were
most important for startup-
corporate collaboration
5
Key challenges were identified during corporate engagement with startups:
Surveyed corporations cited the internal readiness (or lack thereof) of the company as the biggest
challenge to a successful collaboration with startups.
Evidence shows that many of the decision-makers across various departments of corporations lack the
fundamental understanding of what startups are and how to engage with entrepreneurs. To maximize the
impact of corporate startup engagement one industry expert interviewed overcame the challenge by
positioning startups as Market L eaders who happen to be young companies with a higher level of R&D
spending in absolute terms. "The goal is to innovate and to work with market leaders in the various
innovation fields. Re-position what a startup is (a market leader, not a new firm) and re-stat e the goal (not
COLLABORATION to work with startups, but to innovate whereby working with market leaders is a critical success factor)."
CHALLENGES It is important to understand that a key part of the lack of readiness in companies is due to internal push-
back from the BUs which are in charge of driving the actual collaboration with startups. This will be
analyzed more in-depth later in the study in the “Business Unit Push-back Section”.
Other challenges worth highlighting include integration of startups, the readiness of the startups,
strategic fit, IP rights and cultural differences.
Figure 2
Companies
responded in
terms of various
challenges
encountered when
collaborating with
startups.
6
IP RIGHTS
INTEGRATION INCLUDING COLLABORATION
INTERNAL PUSH- OBJECTIVES
NDA
BACK FROM BUs
Figure 3
Illustrates the various
READINESS OF THE challenges
INTERNAL PUSH-
CORPORATION READINESS OF THE corporations face
BACK
STARTUP when collaborating
FROM SENIOR with startups. The
MANAGEMENT bigger the bubble, the
bigger the challenge
for the corporation.
REGISTRATION CULTURAL
OF STARTUP DIFFERENCES STRATEGIC
AS SUPPLIER FIT
7
Companies cited different collaboration approaches Projects can easily get stalled as a result
that yield positive results. thereof. By the time the project/collaboration is
approved, the opportunity may have passed.
Approaching the collaboration from a client-supplier
perspective has benefited some of the companies by Interviewees suggest to engage the board in
limiting the resources needed for collaboration to “Pizza Parties” where selected board-
focus solely on the results. members can meet the startups, discuss ideas
and ask questions. The ben efit of Pizza Parties
Engaging with a startup in a Joint Venture (JV) is is that answers are received immediat ely which
another way to limit resources taken away from the is of critical importance to either move the
core business. Corporate employees focusing on the project forward or initiate new ones.
JV will solely focus on the JV and not have to balance
the startup engagement against previous Providing BUs with an autonomous budget to
commitments to the core business. Engagement with engage with startups has also shown to be
startups requires resources which cannot from one effective to initiate projects that otherwise
day to another be allocated away from the core would have been stalled du e to complex
COLLABORATION business. approval processes.
ENGAGEMENT
Engaging board members and getting C-level buy-in
INITIATIVES makes it easi er to get a response whether the project
can proceed or not. It is not recommended to engage
with gatekeepers at a lower level as they normally “Engineers cannot
have to seek approval from executives further up in speak until they drink”
the organization. – Multinational
Internet Content and
Service Provider
8
Companies can attempt to partner with external Innovation teams should not only reside at the
incubators/accelerators to get access to deal flow corporate headquart ers but also being deployed
and “supplement-in” areas of limited internal in key markets to avoid innovation blind spots
expertise or capability. The downside is that and white spaces. Our survey results
corporations are limited to the deal flow of the demonstrate that innovation teams often
incubator/accelerator and its strategy may not struggle to achieve their objective and face COLLABORATION
completely align with corporate vision or mandat e. pushback from BUs, spend significant time and
Strong founding teams often do not want to give up effort to gain legitimacy within their organization ENGAGEMENT
8-10% equity to enroll in an incubator and therefore and lack funding to successfully engage with the INITIATIVES
corporations who solely rely on deal flow through “right” startups. Startups often avoid innovation
external incubators miss out on sourcing the most teams that lack internal network and legitimacy
suitable and hottest startups. and are unable to facilitate quick access and an PLATFORMS FOR
actionable approach. Innovation champions COLLABORATION
Internal incubators are often educational vehicles should come from within the company (because
rather than driving mission-critical initiatives for the
WITH STARTUPS
they are deeply connected to the different
company. Employee trust is a key prerequisite for departments) - but it is equally important to hire
any intrapreneurship program to be successful, experi enced external talents with strong
including being empowered by immediat e and connections with the startup ecosystem.
upper management, rewards for success AND
failure, and provisioning of budget and resources to Corporate Venture Capital (CVC) is another
take an idea from concept to prototype. Without vehicle that most of the respondents cited as a
these elements in place, intrapreneurship initiatives key instrument to drive successful engagement
will ultimately fail. with startups. CVC provides various benefits
such as alignment with the corporate strategy
Innovation outposts/teams are tasked with driving which is not necessarily achieved when working
an innovative culture internally and they serve as the with external Venture Capital firms and external
point of entry for startups. Respondents stat ed that accelerators. Other benefits of CVC include
corporations must establish an independent establishing an investment committee (IC) and “Be sure to structure a deal
department that is culturally different from the rest by default a team that is dedicat ed to startup that aligns incentives of both
of the company with different processes, employee scouting. the startup and the
compensation and KPIs – to su ccessfully drive corporation”
innovation and refrain from victimization by - Innovation Executive from
standardized processes and internal politics. 9 electronics manufacturer
conglomerate
Innovation often cannot be successful if it not endorsed by senior leadership. The corporate CEO must
be convinced that collaboration with startups is a bona fide strategy to achieve success. Innovation has
to be part of a company’s culture in order to have an impact on the company’s achievements.
COLLABORATION The first step is to define a clear business case for collaborating with startups. Once the objectives and
R&D fields are approved, corporations need to deploy internal resources and ensure readiness of the
ENGAGEMENT organization, starting by creating an agile environment and facilitating BU involvement.
INITIATIVES
It is important that employees understand startup culture and that high level executives also become
acquainted with startups. Employees in corporations should have the opportunity to “get out of the
PATH TO building” to develop their “inner entrepreneur” as well. Several companies that Yushan Ventures
SUCCESSFUL interviewed have impl emented programs to place employees temporarily in co-working spaces and
arranged intrapreneurship programs that stimulate a culture of innovation. Incentives such as innovation
COLLABORATION awards ensure that employees will be granted funding to take the idea further.
A few interviewees expressed the concern that if dedicated innovation teams are responsible for
innovation, regular employees in BUs may not contribute given its not part of their job description.
Innovation champions can only be successful if the innovation team is empowered to be the first
touchpoint for external startups and entrepreneurs because st artups prefer to speak directly with the
respective BUs to speed up the decision making process.
Furthermore KPIs and procedures (e.g., technology and management team assessment) need to be
established to evaluate a given startup and compare with its peers.
To improve interactions with startups, corporations should alter their internal processes to enable more
agile interaction. Key processes to adapt are procurement (onboard st artups as suppliers), l egal and
financial to be faster than with incumbent vendors.
10
Companies that tested a cross-functional approach to driving innovation cited that this approach only
had limited success as cross-functional teams still prioritized their primary KPIs over collaboration with
other departments. COLLABORATION
Hiring the right innovation talents with the right skill set is key. However, this approach will only yield
ENGAGEMENT
limited success if a company’s internal policies are not set up to foster and enabl e innovation and INITIATIVES
engage with startups with custom tailored procedures such as faster procurement.
Respondents suggest that startups should not always be subject to man agement regulations and LIMITED
tedious processes that could hinder the innovative process. Corporations should adopt an appropriate
corporate-startup cooperation model and give entrepreneurs freedom and resources to innovate.
SUCCESS
Creating internal innovation teams with existing employees will limit the team to keep thinking in terms
of day-to-day routines. They lack new perspectives due to the lack of ext ernal experience and will be
extant and egregious.
Companies cited that incubation efforts driven from within the company are perceived as too slow.
They rather rely on outsourcing ideation to universities via which entrepreneurs and startups can work
on collaborative projects.
Innovation “colonies” (dedicated incubation space outside headquarters) are designed for innovation
and startup engagement but perceived by most respondents to only produce limited results. In fact, the
reasons that speak against an innovation colony may very well outweigh the reasons for it. It is
imperative that the innovation teams work closely with R&D teams and relevant BUs. Innovation
colonies that are separate from R&D departments make the collaboration efforts challenging.
11
A philosophy of “fail fast” is absolutely critical to The KPIs should be clearly defined from the
innovation and success in general but also critical get-go, and companies should share reporting
to the true garnering of long-term benefits from with the startup and within the corporation
collaborating with startups. through regular communication. Establishing
FACTORS THAT flexible KPIs that support the various types of
DETERMINE It is important for corporate executives and the startup engagement, prove beneficial to
CEOs of startups to be fully aligned. The capture different values and achieve clearly
SUCCESS corporation is not only investing in technology but defined goals. It is important to set
also in people. Mutual rapport is of critical expectations and desired milestones from the
importance. beginning of the collaboration.
BEST
PRACTICES Set up adapted governance to ensure timely Due-diligence is a must in any collaborative
decision making. Companies should incorporate effort. One respondent highlighted that when
startup friendly processes to avoid daunting initiating collaboration with a startup the back-
communication channels and complex approval end system of the corporation wasn’t ready. As
procedures. The various stakeholders should be a result, the company had spent time and
willing to spend time and resources for the money to prepare for the engagement only to
collaboration to be successful, and direct find out that the collaboration efforts were not
continuous communication channels must be executable. Therefore, ensuring readiness is
established. key for effective startup engagement and
necessary to maintain low overhead costs.
Top management can oversee relationships with
startups when critical mass is achieved - to insure Assigning a senior executive to the
the framework aligns with corporate goals and collaboration insures that the various
receives full management buy-in. departments with which the startup engages
take the collaboration seriously.
12
When BUs lack engagement it is almost always certain that collaboration will suffer. Furthermore, if
different stakeholders have conflicting agendas, it might be impossible to move the project forward.
FACTORS THAT
Once the euphoria of collaborating together diminishes, it is important that focus remains. Corporations DETERMINE
must ensure that the project has been granted the necessary resources in the form of human capital and
funding. People will not - by default - sacrifice working hours from their core job responsibilities and day-
FAILURE
to-day routines to support a collaboration project with startups unless countervailing measures are taken.
Top-down decision making with no input from mid-level man agement will result in bottlenecks.
EXPERIENCE
Inconsistency in corporate leadership can cause confusion and delays. Promoting employees who lack
the skill set and experience of working with startups, to become innovation scouts, should be avoided.
Lack of assessing the readiness of the st artup to engage with a given corporation is also a frequ ently cited
factor that can stall or derail cooperation. Often, corporations need a given st artup to be further developed
to engage in fruitful cooperation.
Respondents have found that engaging with startups that are too far away from their core business
competencies opens a lot of challenges for cooperation and use case scenarios as well.
13
Various barriers to successful collaborations have been cited by the respondents which can roughly be
categorized into tactical, organizational, cultural and process barriers.
COMMON Tactical barriers include the following:

BARRIERS • Internal policies
• Access to the right people within the company
• Unaligned goals, strategies, and expectations
• Invisibility to the startup community
• Wrong timing
Organizational barriers include the following :

• Reluctance to work with startups
• Corporate complicated structures and processes
• Insufficient budget to work with startups
• Lack of the right talent within the company
• Lack of the right processes to engage with startups
Cultural barriers include the following:

• Attitudes from startups and corporations
• Risk-averse vs. risk-taking
• Startups tend to not think globally enough
• The misconception that startups are all green, young and business rookies
• Regional culture and languages
14
Cultural barriers should be addressed first, When executives ask an innovation team to focus
thereafter organizational barriers. If these two on eliminating collaboration barriers, it is important
barriers cannot be resolved, the collaboration may that the right people with the right skill sets are
not move forward in terms of execution. placed in these positions.
Leaders are unaware of their power to change the One company cited attempts to break down the
innovation culture of their companies. Some stigma of startups as “recent graduat es.” The OVERCOMING
corporations even have to transform their culture to company asked the startup to provide a proposal BARRIERS
become accustomed to open innovation. It is a long for a solution and at the same time requested a
but necessary process that can only be successful competing proposal from the internal R&D
with C-level buy-in. Keep exposing employees to department. The party that creat ed the best BEST
startups, and have them attend events and host proposal was chosen to deploy the solution.
startup pitches within the corporation. PRACTICES
Companies that lack exposure to the startup scene
Having stakeholders spend time together and can engage with accelerator programs to create
mutually confirm goals and expectations with an awareness as well.
innovation champion leading the process, can
overcome the majority of cultural barriers.
Recently companies have been opening up their

“The challenge will be to change
innovation processes to more stakeholders and
executives’ mindset about what startups
contributors, both within and outside the
really are, and what corporate venture
organization. The legacy processes that are in place
capital can oﬀer the startup: A top
cannot be ignored or changed overnight.
startup is a market leader who needs
clients — “purchase orders” — not
Companies stated that engaging in sandbox
further investment and, definitively, no
environments enables them to bypass traditional
belittling.”
constraints.
- Head of Innovation Program, Leading
Automaker
15
The study produced evidence that prior to any startup engagement corporations need to evaluate their
readiness for engagement. Areas that should be assessed include strategy, communication, BU
readiness, and resource allocation.
COLLABORATION It is recommended that corporations identify which departments within the corporation will engage with
ASSESSMENT or approve startup collaboration and evaluate accordingly which departments already have
implemented and approved appropriate processes.
The following scenario was cited by companies we interviewed: A company is ready to engage/invest in
a startup and awaits confirmation from Finance, Legal, Accounting and the corporate Investment
Committee. Due to a lack of st artup experience, these departments passed the buck and all avoided
making initial approval.
In the majority of cases, our study has found that various departments usually are not ready for
engagement and as a result, deal-processing time was too long for successful engagement to flourish
or even commence.
Corporations should create a ch ecklist to measure the readiness of various departments that will
engage with startups and build effective agile processes that will enhance the likelihood of a positive
outcome.
It is recommended
to create a checklist
to determine the
corporation’s
readiness for startup
engagement.
16
It is mission critical for BUs to embrace and understand how to work with startups. Despite a
company’s efforts to set innovation goals, many heads of BUs are not familiar with the goals - let alone
how to achieve them. When deep-diving into factors that affect internal push-back from BUs,
psychological factors turn out to account for the majority of internal resistance and BU push-back.
Fear is the main reason. Employees fear losing their jobs, or becoming obsolete. In numerous cases BUSINESS UNIT
BUs have decided not to work with a startup as they could see themselves becoming obsolete. In other PUSH-BACK
scenarios, BUs were required to rearrange the department with new objectives as a result of the
startup’s effect on the BU. Pride is the second key factor that stalls or derails collaboration with
startups.
Other factors worth mentioning are indolence and inadequate resource allocation. Employees try to
avoid collaborating with startups as they have their KPIs which need to be maintained. Spending time
with startups may have a negative impact on their current KPIs. In addition, employees do not have
specific innovation KPI or tools to encourage engagement with startups.
Psychological
factors top the list of
business unit push-
back.
17
PSYCHOLOGICAL FACTORS
• Encourage Innovation through monetary incentives
(Innovation Bonus/Awards).
BEST PRACTICES • Job security - no layoffs as a result of innovation
initiatives.
PUSH-BACK FROM • Intrapreneurship: workshops to educate employees,
INTERNAL BUs stimulate ideation & identify the entrepreneurial
talents.
INNOVATION ENVIRONMENT
• Develop sandbox environments for innovation
testing.
• Allocate Innovation budgets for each BU.
BU INNOVATION CHAMPION
• Assign one (1) champion as the point person for the
innovation team or startups.
• Establish innovation KPIs (e.g. # of startups projects
deployed, # of technologies reviewed).
• Multiple innovation champions are preferred.
USE CASE SCENARIO / CO-INNOVATE WORK WITH
“MARKET LEADER”
• When engaging with startups the BU must have a
relevant use case to apply immediately.
18
Psychological factors:
BEST PRACTICES
It is paramount to overcome fear of innovation initiatives from BUs. It is part of human nature to avoid
fear at all cost. To overcome this barrier some corporations develop policies that protect employees
from being laid-off as a result of engagement with startups. Consequently, a huge burden is taken off PUSH-BACK FROM
employees who fear their department or job might become obsolete. The company can successfully INTERNAL BUs
provide retraining initiatives and offer lateral movement to other departments without laying-off
personnel as well.
There are also benefits to encouraging BUs with monetary incentives. Incentives can be personal, on a
business unit level, or both. By en couraging BU stakeholders, innovation does not become a burdening
task, but rather a task that can result in added personal income. This incentivizes BU employees to
work and integrate with startups. In addition, incentives and st artup collaboration tools can transform
the BU into an innovation-oriented BU and produces more rewards for all BU stakeholders.
Providing innovation workshops and training helps the employees understand how critical innovation is
for the survival of the company and stimulate innovative thinking and overcome fear.
“Technology transfer
pathway into the
organization often
meets up with
internal resistance
- deploy strong,
enthusiastic, internal,
technical champions
who have outward
focus.”
19 - Innovation Manager,
Famous Retail Brand
Innovation Environment
A successful portfolio of innovations always needs to include a balance between incremental and radical
innovations.
BEST PRACTICES
Establishing an environment for innovative thinking will affect how employees engage in innovation
activities. A critical tool is the set-up of a sandbox environment that can test innovative ideas and
PUSH-BACK FROM startup products in a confined area to understand how it can benefit the company.
INTERNAL BUs
In addition, it would be beneficial for the BU to set-aside budget for sandbox testing. This will not only
stimulate learning within the BU but also engage the BU with the startup.
Business Unit Innovation Champion
Innovation activities are not generated naturally within a BU. It is important to assign at least one person
in each BU with the responsibility of preparing the BU for startup collaboration. The champion will be the
stakeholder for internal ideas from the BU and the contact point for startups as well as the expeditor to
ensure the activates are progressing. Survey results show that departments with high HR turnover often
drop startup collaborative projects and reset the ecosystem to z ero. Retaining a given innovation
champion over time will ensure that projects are evaluated regularly and brought to completion.
“Key criteria regarding
appointment of an Existence of a specific use case that is applicable for the collaboration is a key criterion for
internal champion: the successful startup/corporate collaboration. Collaboration attempts without a use case lack budget,
ideal candidate has direction, urgency and support from the corporation. As a result, the collaboration will never be
worked in innovation for prioritized and the needed resources are not rightfully allocated.
a long time and has
very good relationships
throughout the
company, knows the
internal politics”
Telco executive 20
THE RIGHT TALENT IS CRITICAL!

• Creating an innovative company begins with the right talents. BEST
It is important to hire the right talents and develop the PRACTICES
existing human capital.
INNOVATION
HR COMPETENCY TALENTS
• Many HR departments are not equipped with procedures
and tools to identify innovative talents.
• The innovation leaders in the company need to work closely
with HR to identify the right talents.
INNOVATIVE TALENT IDENTIFICATION

• The HR department should implement new procedures to
identify innovation talents.
PERFORMANCE MANAGEMENT
• Ensure that each employee’s KPIs in the BUs include an
innovation aspect and not only focus on the core business.
Training and identifying talents can be done via internal
workshops.
21
The Right Talent Is Critical
Without the right talents in place, corporations will spend significant opportunity costs on educating their
employees instead of enabling a culture of innovation. The key employees who interact with startups
need to understand the DNA of a startup in order to build necessary relationships that will result in
cooperation. Depending on the responsibilities, innovation talents require different skill sets, but at the
same time, these talented st akeholders need to have experi ence with startups and be connected with
the startup ecosystem. The tal ent can be acquired through various vehicles such as acquihiring or
employing former VCs, startups founders, or employees from incubators and accelerators.
HR Competency
BEST
PRACTICES Recruiting the right talent is only one side of the coin. It is critical that HR departments are equipped
with the right tools to identify innovation talent. Throughout our interviews, we have observed that the
HR departments often cannot identify the right skill sets needed.
INNOVATION
As a result, an innovation position is often occupied by a person who fails to deliver, and at the end of
TALENT the day, a new person must be identified for the position. It is important for the HR department to
understand the skills and experience needed to fill the position early in the collaboration process.
Innovation Talent Identification
Establishing specific processes to identify innovation talents is a practice that will yield results. For
example, years of experience or GPAs are not as critical as how the talent thinks, his/her risk threshold
and how he/she approaches opportunities/obstacles. A variegated background can cope with changes
and adjust to uncertain conditions. It is important that the innovation champion has a proven technical
background given that many startup founders are engineers.
“Compensation is a very Performance Management

important factor to attract
and retain entrepreneurial Providing each employee with innovation KPIs is a critical component for transforming the company as a
minded employees.”
whole into an innovative company that embraces startup collaboration and can identify opportunities
- R&D Director, Tier 1
within its own workforce.
Automotive Supplier
22
The below-mentioned skills and assets are guidelines for recruiting the ideal startup scout with a startup
CORE SKILLS
scout being responsible for identifying relevant startups and ecosystem engagement opportunities. FOR
The scout must bring a pre-existing startup network to the company. The scout should know the most
STARTUP SCOUTS
important players in the relevant ecosystem. This, in turn, will enable the scout to source AND obtain
access to the right deal flow (many startups are not keen on working with corporations unless they
“trust” the corporate employee. It is of equal importan ce that the scout has startup experience, is not
afraid to fail and has failed in his/her past career).
Necessary skills that the scout must bring are an open mind, an opportunistic mindset, the ability to
identify deal flow and the acumen to engage quickly when opportunities arise. They must know how to
lead effective communication between st artups and the corporation. In addition, it is important that the
scout can identify technology trends and has both a technical and business background. The scout
should have a 24/7 mentality - given that startups work around the clock and around the globe, and
startup events take place after regular business hours or even on weekends.
Moreover, the corporation must provide the scout with authority within the corporation. The scout must
not be restricted by internal policies that will hinder engagement with startups. Furthermore, the scout
must be able to est ablish or have existing relationships with multiple BUs and be respect ed by BU
leaders.
Incentives are key to motivate the scout to walk the extra mile and to think outside the box. “Incentive plans and profit sharing are
really, really difficult. It’s heavy lifting and
it’s painful. And it includes embracing
failure, which most executives avoid at
all cost - but it’s the way to create
winning teams”
- Corporate Development Executive,
23 Mobile Operator
Assets
Startup Access to
SCOUT Network/reach experience Deal flow
DNA
Skills
Open minded Startup com. Opportunist Identify future
skills Tech/tend
Support
Authority No restriction No Incentives
on work Supervision
24
The following skills and assets are critical when filling the position of the startup liaison/scout/innovation
manager. This person will work closely with the startup to integrate the product/service or startup into CORE SKILLS OF
the corporation.
INTEGRATORS
The integrator should be an internal employee that knows the products/servi ces or departments which
will be affect ed by engagement with the startup. The integrator must also possess deep knowledge of
the company to be able to underst and the strategic fit and provide use cases for startup collaboration. In
addition, the integrator must also have strong relationships with different BUs to facilitate communication
but also know which stakeholders must be involved from other BUs.
Effective internal and external communication are key - as the innovation team will have to juggle
communication between the startup and other relevant BUs. In addition, it is important to bring a track
record of partnership building skills to the table.
The startup liaison/scout/innovation manager must be a problem solver as ad-hoc probl em solving skills
will be required.
The company must provide the integrator with the same freedom as the scout in the areas of authority,
restrictions/supervision and provide monetary incentives.
On the following page, Yushan Ventures presents a checklist for skills and assets an integrator must
bring to the corporation and the collaboration.
25
Assets
Internal Deep company Cross BU
employee knowledge overview
INTEGRATOR
Skills
Com. skills Problem Partnership
solver builder
Support
Authority 24/7 “can-do” No

Incentives
mentality supervision
26
Collaboration Readiness Engagement Collaboration Phase
Activate the right people

View the startup as a long- Pre-approve budgets and
with the right skill set from
term partner pilot projects
the beginning
Establish internal
communication so talent Work only with startups that
Pre-define strategies on
knows what the innovation are willing to partner and
working with startups
department does and what that know your industry
its mission is
Have a “use case” ready for
Go in with the mindset that
collaboration, and know in Prepare different incentive
most collaborations will fail,
advance what kind of schemes
and that is ok
startup you are seeking
Engage current employees Work with startups that have
Eschew arrogance as much as possible and set a clear vision and know how
KPIs for innovation to work with you
SUCCESSFUL
STARTUP
Limit HR turnover in the
departments that will
Avoid setting unrealistic Establish proper processes COLLABORATION
expectations to drive collaboration
engage with startups
Collaborate with external Avoid slow reaction and Do not work with startups QUICK START
parties delayed communication that rely too much on you GUIDE
27
Initiatives For
Initiatives Factors that
Enhancing Factors that Common Addressing
With Limited Determine
Collaboration Drive Failure Barriers Common Barriers
Effects Success
Board Member External/Internal Lack of

Look at Unaligned goals Exposing/training
Pizza Party Incubation/ commitments from
long-term benefits and strategies employees
Accelerators BUs
Workshops
Autonomous Internal complicated Mutually agree on
employee-startup Lack of
budgets Full alignment structures/processes goals, strategies and
– co-working resource allocation
and policies expectations
space
SUCCESSFUL Partnering with 3rd

Innovation Awards
Top-down decision
Reluctance to work
Get to know each
STARTUP parties around
startup activities
Light processes making (bottle neck
creation)
with startups
other and assign an
innovation champion
COLLABORATION
Autonomous Attitudes, risk
Cross-functional
departments driving advice, Provide sandbox
teams Due diligence
KEY FACTORS innovation misconception of
startup
environment
Corporate Venture Bringing in external Country specific Assign an innovation

Readiness of
Capital talent – if policies barriers in culture team to lead the
affected areas
do not support it and language collaboration
Localized innovation Integrating the

Clear Lack of defined Ensure the right people
teams (away from startup into the
communication processes - how to with the right skill sets
HQ) company
channels work with a startup are assigned to the job
Internal innovation
JV, client –supplier Senior executive
team with no
relationships support
external exposure
Flexible KPIs
28
Innovation Standardized Collaborative Collaborative

Other Barriers
Champion Processes Success Factors Failure Factors
Corporate invisible to Clearly defined goals Different stakeholder

Internal and External Technology assessment
startups and milestones views
Corporate missing Access to the
Management Involvement from SUMMARY
skilled people to work different corporate Readiness of the startup
team assessment internal stakeholders
with the startups departments
Inconsistent leadership SUCCESSFUL
Multiple Evaluate what
Budget
Innovation champions each party contributes
Good rapport from corporate and
startup
STARTUP
Be aware that innovation
COLLABORATION
is not only the
Wrong timing Decide collaboration Due diligence – Complex corporate
responsibility of the
“form” technology and team approval systems
innovation champion but
the whole company
Wrong person in the
Identify a single Monitoring progress
Regular communication innovation champion
touchpoint for startups via processes
position
Not limiting the Lack of intensity and

company to only focus when the euphoria
looking at the startup’s wears off
current product
Flexibility Failure of planning
Too far away from the

company’s core
product.
29
Primary Research
METHODOL0GY
Quantitative Data: N = 450
SURVEY Online Field Study
PARTNERS Qualitative: N = 20
Senior corporate executive phone interviews
Region: 3 continents
Europe, North America and Asia
Secondary Research
20 research studies and industry reports
Yushan Ventures 30+ years team experience

Duration January 2017 - August 2017
SMEA
30
Respondents include executives from companies in sectors such as automotive (26.2%), manufacturing SURVEY
(16.7%), telecommunications and IT (16.7%) whereas the remaining (40.2%) are spread across various
sectors such as food and beverage, retail, finance, education, health, etc.
The majority of companies surveyed h ave revenues over US$ 1 billion with 29.8% of surveyed firms PARTICIPANTS
having revenues over US$5 billion.
Annual Revenues
Automotive
26.2%
Manufacturing
Allocation
16.7%
Industry
Telecom/It
16.7%
Other
40.4%
31
Qualitative in-depth interviews with executives from multinational companies were conducted to gauge
best practices and experience in startup-corporate collaboration.
MARKET
DATA
QUALITATIVE
PARTICIPANTS
Multinational
Internet content
and service
provider
32
How Corporations Work

Together
With Startups
The most common vehicle of cooperation between
startups and corporations is to engage in a joint R&D
project. Further engagements are obtained by sourcing,
licensing or buying products/services from the startup.
3.8* 3.2*
Identifying startups: P articipants cited approaching Sourcing
universities, public/private research institutions and Joint R&D Project Buying
partnering with venture capital, business partners and Licensing
consultants as preferred methods. MARKET DATA
Approaches To ID Startups COOPERATION
*The Innovation Index shows how much an

activity is used by the most innovative
companies surveyed. The innovation index
indicates activities going from 0-5 with 5
indicating activities used by highly innovative 58% 50%
companies.
Universities Public/Private Business partners

research institutes Consultants/VCs
33
Business units that are most involved with startup-corporate engagement are the innovation teams
and R&D departments. One of the main goals for collaboration with startups is to discover new
technologies, consequently the innovation teams and R&D departments account for most interactions.
The leading KPI for collaboration is to measure incremental revenues for the company generated by the
collaboration, followed by how successfully the startup, technology or collaboration project has been
integrated into a given BU.
It is important to highlight that 13.4% of the participants indicated that they do not have any KPIs
related to startup-corporate collaboration.
MARKET
DATA I N V O LV E M EN T O F B U S I N E S S U N I TS CORPORATE INNOVATION KPIs
INVOLVEMENT Startup project successfully

Innovation Team
& 5.0
4.0
generated incremental revenues
40.2
HR R&D Department
KPIs 3.0 Project / biz model / startup
23.2
2.0 successfully integrated
KPIS
1.0
External Business
0.0 Sales/Marketing Project / biz model / startup have
23.2
Unit (e.g. CVC) proved traction
We do not have KPIs 13.4

Finance Production
0.0 10.0
Procurement 20.0 30.0 40.0 50.0
Based on Innovation Index Points PERCENTAGE
34
CONTACT US
Volker Heistermann
Managing Director
vh@yushanventures.com
Boyd Jones
Managing Director
bj@yushanventures.com
Martin Khamphoukeo
Director – Southeast Asia
mk@yushanventures.com
35

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UNBUNDLING

Yushan Ventures 2017/18 Corporate Innovation Report

INTRODUCTION Startup-corporate collaboration has become a cornerstone of modern innovation.

This study, “UNBUNDLING STARTUP-CORPORATE COLLABORATION” was initiated to understand

“UNBUNDLING STARTUP-CORPORATE COLLABORATION” was conducted in affiliation with the

Surprisingly, closing the company’s innovation

Key challenges were identified during corporate engagement with startups:

COMMON Tactical barriers include the following:

Organizational barriers include the following :

Cultural barriers include the following:

Recently companies have been opening up their

Business Unit Innovation Champion

THE RIGHT TALENT IS CRITICAL!

INNOVATIVE TALENT IDENTIFICATION

Innovation Talent Identification

“Compensation is a very Performance Management

Authority 24/7 “can-do” No

Collaboration Readiness Engagement Collaboration Phase

Activate the right people

Board Member External/Internal Lack of

SUCCESSFUL Partnering with 3rd

Corporate Venture Bringing in external Country specific Assign an innovation

Localized innovation Integrating the

Innovation Standardized Collaborative Collaborative

Corporate invisible to Clearly defined goals Different stakeholder

Not limiting the Lack of intensity and

Flexibility Failure of planning

Too far away from the

20 research studies and industry reports

Yushan Ventures 30+ years team experience

How Corporations Work

Approaches To ID Startups COOPERATION

*The Innovation Index shows how much an

Universities Public/Private Business partners

INVOLVEMENT Startup project successfully

We do not have KPIs 13.4

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