Successful startup-corporate partnerships — the full adoption of startup tech or integration into a corporation's business unit — are a relatively rare outcome. Corporate executives want to know how startup adoption will help their bottom line: will it open new markets and increase efficiency? Is it relatively easy to adopt?
Even when there is a good match, the transition often gets lost in corporate friction and complexity, because of corporate incentives, a lack of capacity or mismatching expectations or a combination of those three.
"If we want to move slow [on decarbonization], it's working just fine, but we don’t have time. If we factor in the time horizon, the incentives to move at the pace we need are 100 percent broken," said Cyrus Wadia, CEO of Activate, founded in 2015 to bring scientific innovation to market, and former innovation lead at Nike and Amazon.
Sources of friction
In order to hit sustainability goals at the speed that is needed, corporations need to get this handoff right. Let’s look first at the obstacles to success:
Corporate incentives
Corporate boards are conditioned to respond to quarterly results, managing risk and profits on short time horizons. At a fundamental level, sustainability is at odds with traditional corporate governance because sustainability initiatives are long-term strategies, taking years to materialize.
The same is true for innovation within corporations, particularly on climate tech. Not every startup is built to become profitable in a three-year window, and not many large corporations have the patience to nurture new technology, build markets and the infrastructure to access them.
Lack of capacity
Startup adoption in corporate business units is hard.
Technical challenges are common; it takes time for business units to understand the tech and even longer to integrate it, and corporate bureaucracy slows down the process as innovation managers need buy-in from corporate leadership to run with a startup partnership, which can take months or years.
Mismatch of expectations
Startups and corporations operate differently: startups move fast and corporations move slow. Startups need corporations as a partner to help prove their technology and collect impact metrics; corporations want to see proven capabilities and existing markets before taking on the pilot or deployment. This mismatch causes friction from the outset.
How can corporations work better with startups?
- Align incentives: Corporations should reconsider their governance structures to incentivize sustainable innovation on par with other business objectives. This could involve reshaping incentive models to reward long-term sustainability outcomes.
- Create demand signals: Corporations can proactively help shape market demand for sustainable technologies. By providing clear signals of their needs, corporations can guide startups and investors, streamlining the innovation process.
- Enhance risk tolerance: To expedite the adoption of climate technology, corporations must become more risk-tolerant. Streamlining approval processes and greenlighting pilot projects more swiftly can facilitate faster technology testing and deployment.
Corporate innovation managers work to de-risk the startup adoption process as much as possible to get buy-in from leadership. "When appli
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