Corporate Innovation: How Businesses Can Effectively Work with Startups

Anuar Lensat, city — Almaty, Hokage RS Bootcamp venture studio, investor relations manager at Activat VC

Currently, working with startups is becoming an important element of the strategy of many corporations. This is not just a trend, but a tool that, with the right approach, can bring tangible business value.

Startups provide corporations with:

— access to innovative solutions that are difficult or expensive to develop in-house
— flexibility and speed in launching new products and hypotheses
— the ability to test entry into new market segments with minimal costs
— new approaches, technological platforms, and entrepreneurial thinking that are beneficial to integrate into corporate culture
— and also a differentiator that will provide an advantage over competitors.

Market situation

In Kazakhstan and the region as a whole, there have been numerous attempts to create comprehensive corporate innovation programs. In some cases, they have become part of business processes and started delivering results. But in a number of cases, such initiatives did not take root — and this is also part of the normal process.

Corporate innovations work most successfully in industries with high competition, such as the banking sector. In such areas, companies actively seek ways to stand out, accelerate, and offer customers new services.

In industries with limited competition, especially where the state dominates or there is a stable division of market volume, the implementation of innovations is often limited to image projects. However, as markets become more democratic and competition intensifies, the need for real work with startups will grow. More competition = more innovation.

4 conditions for effective corporate innovations

At RS Bootcamp, we highlight four key dimensions by which a company's readiness to work with startups can be assessed:

1. Strategy
   Does the company's strategy include a direction related to innovation? Are goals, mechanisms for interacting with startups, and desired results documented?
2. Operational implementation
   Who is responsible for implementing innovations? Have resources — team, budget, processes — been allocated? If it is only an initiative "at the idea level," implementation will be difficult.
3. Corporate culture
   How open is the company to change? Do employees understand why they need to work with startups, and are they ready to adopt new approaches? Is there information exchange between the strategic and operational levels?
4. Motivation
   What incentives do employees have to participate in innovation projects? What does a manager gain who takes on additional work for piloting solutions or integrating new products?

If a system is built across all four areas, the chances of successful work with startups are high. If some elements are missing, it makes sense to first eliminate organizational barriers, and only then launch joint projects.

This must be done before starting any form of interaction

It is important to emphasize: such an audit and organizational preparation should precede any initiatives in the field of corporate innovation, whether it is:

— launching pilot projects with startups
— acquiring or investing in a startup
— creating a corporate venture fund, CVC.

Without internal readiness, such projects will either not deliver the expected effect or will quickly stall. This is especially true for venture funds at corporations, which are often launched "externally correctly," but are not integrated into the company's real processes and therefore lose strategic value.

The main barrier is the level of middle management

We often encounter a situation where the initiative to work with startups comes from top management. Executives, as a rule, have international experience/education and well understand the value of innovations.

However, difficulties arise at the level of middle management. Without clear motivation, proper engagement, and competencies, working with startups can be perceived as additional workload that does not bring results. Sometimes there is even resistance — due to fear of change or lack of understanding of the process. But this is not the fault of middle management; this is normal, and it needs to be addressed. All the dimensions we discussed are aimed precisely at ensuring that this barrier is absent or minimized.

What to do

Corporate innovation requires preparation. It is important to assess the organization across all four key dimensions, eliminate weaknesses, and only then begin interacting with startups. This is the key to a systematic approach, not one-off PR activities. There are many examples of quick, ill-considered actions in the market that brought nothing to corporations, only disappointment and now an allergy to startups. Within the framework of creating a fund at Activat VC, we encounter this often and try to change the minds of corporate owners who have been burned before and quite successfully.

Experience shows: if you build the right model, startups can become a powerful driver of growth and transformation. This is especially relevant for companies that want not just to maintain their positions, but to develop in conditions of increasing competition. The world is changing too fast, and this is a challenge. Not engaging in this today is not an option.