Larger companies are turning to business collaboration, learning new tricks from agile smaller players to support their growth objectives.
UK CEOs are increasingly looking to collaborate with start-ups in order to drive innovation, according to the findings of KPMG’s 2018 Global CEO Outlook.
The survey of 150 UK leaders and a further 1,150 global CEOs finds that 61 per cent of CEOs in the UK are relying on a network of third parties to support their growth and innovation objectives, compared to just 53 per cent globally.
“The only way for organisations to achieve the agility they need is to increase the use of third-party partnerships”
Partnering with third-party cloud technology providers tops the list of actions CEOs are planning to take over the next three years (65 per cent), followed by collaborating with innovative start-ups (61 per cent).
And 70 per cent of UK CEOs who took part in the survey agree that the only way for their organisation to achieve the agility it needs is to increase the use of third-party partnerships, compared with 53 per cent of CEOs outside of the UK.
Kirsty Mitchell, director of growth at KPMG says, ‘The explosion of new technologies, which has impacted customer behaviours, has changed the landscape for businesses looking for growth.
‘As a result, CEOs are having to turn to new strategies to increase the agility of their often large and multilayered businesses. We are seeing more collaborations between large corporates and small businesses as they attempt to outpace their competition in the race for innovation to results.’
Entrepreneurial energy, an ability to spot gaps in the market for innovative products that consumers actually want, and speed of response to changing demands are what start-up ventures offer and what big businesses want to emulate today.
On the flipside, small companies benefit from big businesses’ strong routes to market, greater sophistication in business processes and mentors with worldly experience.
How can small companies bolster your supply chain?
It takes a board that is sufficiently entrepreneurial in its outlook to recognise that small and interesting companies could become a very valuable link in their supply chains. These newcomers might be your future competition – and it’s better to be alongside and invested in them than competing against them.
Rather than swallowing up start-up businesses via M&A, strategic alliances can be an important route for achieving growth.
Both global and UK CEOs see strategic alliances with third parties as the most important route for achieving growth, with 33 per cent ranking this top. It’s the highest-ranked strategy for growth over the next three years, followed by organic growth (innovation, R&D, capital investments and recruitment), M&A, outsourcing and joint ventures.
Make sure the fit is right
But they are also vigilant about getting the right fit with their company: seven in ten UK respondents say they have reconsidered third-party partnerships that could have helped with growth because the third party did not fit well with the organisation’s culture and purpose. Just 49 per cent of global respondents agree with this.
More on collaboration
Mitchell says that while an alliance might make sense on paper you cannot ignore the vital importance of having shared aspirations and culture, which is often difficult to achieve.
‘It is really important that both businesses are absolutely clear from the outset about what they are hoping to achieve together. A lack of understanding about how the other culture operates can stifle a good collaborative relationship.’
Other findings from the survey
- 55 per cent of UK CEOs (53 percent global CEOs) are considering setting up an accelerator or incubator programs for start-up firms to help with their growth agenda
- 51 per cent UK CEOs (50 percent global CEOs) are looking to increase investment in disruption detection and innovation processes to help with growth
- The main barrier to using third-party networks is the challenges of measuring ROI from third-party partnerships (25 per cent).
Accelerating innovation on a global scale
Unilever Foundry is a global platform for partnering with the world’s best start-ups to accelerate innovation on a global scale.
It provides a single entry point for innovative start-ups to partner with Unilever and its 400+ brands to deliver meaningful business impact. Over four years, Unilever Foundry has evolved its model to develop a ‘Pitch-Pilot-Partner’ process that can work anywhere in the world.
The process dramatically cuts the time it takes to get a new initiative to market, Uniliever says, allowing the organisation to innovate at ‘start-up speed’. This impact is equally driven and deepened by a strong culture of innovation which exists across Unilever, leading to an acceleration of experimentation and the creation of new business ideas for brands and functions at the business.
Partnership: Knorr and Good-Loop
A great example of how this model of collaboration benefits both start-ups and corporates is the recent partnership between Knorr and Good-Loop, the adtech start-up platform which converts ad money into free charity donations.
Good-Loop was founded by Amy Williams, an experienced advertising professional who decided to design an ad-unit which allows corporates to positively impact non-profits, while at the same time create a platform which gave advertisers and consumers a better experience when engaging with ads online. Unilever Foundry facilitated the initial collaboration with Good-Loop, to identify how this format and technology could deliver improved levels of engagement and give consumers the opportunity to make a positive impact on society.
In April 2018, global foods brand Knorr ran its first ever Good-Loop video advertising campaign, as part of a new partnership with the start-up. Once consumers had watched at least 15 seconds of the online advert, viewers had the option of donating to one of three selected charities – The People’s Kitchen, The Trussell Trust and WaterAid.
Knorr is a sustainable brand, so in addition to improving marketing metrics and visibility, Good-Loops solutions aligned with Knorr’s wider commitment to make sustainable living commonplace, elevating the brand’s social mission.
Jonathan Hammond, global head of Unilever Foundry, says that Knorr has seen a notable increase in key marketing metrics around completed views and ultimately the business’ marketing objectives: successfully encouraging consumers to fully engage in creative content has a direct, positive impact on purchase decisions to ultimately drive sales.
Additionally, this relationship format is helping Unilever address the challenge of bringing its social mission and commercial brand closer together in an organic way that doesn’t feel forced. This is something many of Unilever’s brands are thoughtfully addressing as purpose-driven, consumer-facing businesses. Competing for consumers’ time is becoming increasingly difficult, as average engagement time is dropping, however through Good-Loop, Knorr is seeing positive uplift and a valuable way to connect with its key audiences.
‘Start-ups are now widely recognised as invaluable sources of innovation, fuelling growth and providing pioneering business solutions,’ Hammond says.
‘During the four years that the Unilever Foundry has been operating we’ve seen the face of corporate and start-up collaboration change a great deal, evidenced in the ‘State of Innovation’ report we launched last year.
‘The report reaffirmed our belief that start-up and corporate collaboration is highly effective for fuelling innovation and pioneering business solutions when conducted in the right way.’
Some 90 per cent of corporates already working with a start-up expect to continue to do so in the future while four out of five (80 per cent) corporates believe that start-ups can have a positive impact on a large company’s approach to innovation.
However, it’s critical that a corporate innovation platform has a measurement system in place that accurately tracks the partnership performance over time, Hammond adds, and corporates must be open to learning from these.
A problem shared is a problem halved
Collaboration provides an opportunity for companies to make the most of outside intellect. Iain Gray, chief executive of the Technology Strategy Board, explains why.
‘Someone outside your organisation today knows how to answer your specific question, solve your specific problem or take advantage of your current opportunity better than you do. You need to find them and find a way to work collaboratively and productively with them.’
This quote by Ian Lafley, former CEO of Proctor and Gamble, neatly sums up for me why collaboration is so important for businesses in the face of increasing globalisation. It follows that in business, just as in life, we can’t all be good at everything. However it is knowing what our strengths are, and seeking to remedy any gaps in knowledge or skill, that will ultimately lead us to advance and succeed.
Many small businesses can be nervous at the prospect of collaboration, but for me the greater danger is that while we are busy over estimating the risks associated with this we seriously underestimate the risk of being closed to new ideas, processes or sharing.
In a recent independent survey that the Technology Strategy Board commissioned by PACEC (Public and Corporate Economic Consultants) to evaluate the real business impact of the collaborative research and development projects that we have supported since 2007, 42 per cent of companies said they had actually increased jobs and 40 per cent said they had safeguarded jobs through their collaborative efforts. This is a testament to the security that collaboration can actually provide to a small company, a total contrast to the risks that I made reference to before.
According to research conducted by Lambert and Kneymeyer, most alliances fail because they should not have existed in the first place. This was further endorsed in a report by Daugherty in 2005 that stated ‘not enough care is taken in selecting the right partners to match inter-organisational needs and capabilities’.
Small companies often tell us that they find collaboration quite a daunting prospect, especially the challenge of finding complementary partners. A great example of this is a small radio and communications company that came to the Technology Strategy Board for funding back in 2009. Morecombe-based company In Touch had recently joined forces for the first time with Lancaster University and highways maintenance company Carillion.
Managing Director John Walden attributes this collaboration with ‘totally transforming’ the 26 year old company.
‘We knew that to take a long term strategic look at the data and communications industry and predict the likely advances in innovation, we needed academic input,’ he says.
In the past three years In Touch has increased its workforce by eight people and now undertakes all its own system development work in house. Next month it will launch a revolutionary two way community travel information system.
Walden says that collaboration and working within a consortium has actually helped to strengthen the long term viability of the company. Today he urges ‘more small companies to take advantage of how universities have opened up their fantastic resources to businesses like ours’.
Of course one of the other main reasons that companies tell us they collaborate is to reduce the time to market. In a global market, success will depend upon how effectively companies manage the knowledge they have and how rapidly they commercialise the resulting technologies.
Small companies, although major and significant contributors to growth in the UK, can struggle to find finance for their ideas or partners to bring their concepts to market.
The UK’s new and emerging industries are inevitably going to be built around a series of services or products spanning many sectors, involving a range of skills and often both large and small companies. The key is to connect them all with one key outcome – growth.
Helping businesses to make purposeful connections, facilitating collaborative consortiums and developing long term sustainable business partnerships will ultimately deliver commercial success for UK plc.
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