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10 Tips for Corporations to Do Proof of Concepts Right with Startups

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March 03, 2021

The era of innovation theater is over. After years of hosting hackathons, building labs, and running accelerators, many corporate innovation teams–those tasked with exploring new opportunities for growth–have few tangible outcomes to show. In the midst of a recession, they face greater pressure to dispel their perception as cost centers that haven’t shielded their business from the disruptive forces of upstarts. 

Corporations can be good at identifying a promising opportunity, but terrible at experimenting in a meaningful way.  We’ve seen many instances where corporate teams meet the right startup, but don’t quite know how to develop the relationship without it snowballing into a prolonged, exhausting exercise for all parties involved. 

In these situations, a proof-of-concept (POC) can be an ideal solution. These experiments are designed to validate the claims of a startup’s technology in a low-cost, controlled environment.  When done right, they allow organizations to get a glimpse into what could be the future, while ensuring that time and resources are not squandered.  

We’ve found there to be minimal guidance on running targeted experiments with startups, which is why our team set out to interview more than a dozen innovation leaders in a range of industries to see how they approach proof-of-concepts. Here’s what works and what doesn’t: 

DO:

1. Make your POCs hypothesis-driven.  

POCs should validate a fundamental claim about the technology and its performance in a corporate environment, and the most successful teams embark on this exercise with a clear question that yields a yes or no answer. For instance, can Technology X validate the financial transactions more quickly than Technology Y?  Can this vehicle sensor cover at least a range of 200 meters? Most corporates tend to stumble here due to the propensity for distractions as different stakeholders weigh in with what they’d like to see.  

2. Keep an Ear Out for Complaints

Collaborations with startups run much more smoothly when business units are unhappy with their current solution. One innovation lead from a financial services company said she keeps a regular pulse on who’s complaining most loudly about their existing technology vendor to determine where startup experiments would be most welcome.  

3. Run multiple POCs in parallel

Most large companies will test at least two startup solutions concurrently to reduce risk and compare outcomes. Choose technologies that purport a similar benefit and can be evaluated by the same stakeholders. Ground these conversations in data and evidence.

4. Establish POC ‘pathways’ internally

Having pre-set options for working with external partners can equip the project lead with clarity on what is needed to proceed. Standardizing and systematizing who needs to be engaged when can reduce bureaucracy and procurement friction that is a common deterrent for startups. For example, one innovation executive from a Multinational Automotive Manufacturer said that each technology test is tagged to a distinct POC path that indicates whether it will go into the next production line and for which vehicle models.

5. Involve executives and key business units as early as possible

When there is buy-in on technology areas to pursue from the beginning, it accelerates onboarding and commercial engagement with startups. One global financial services company institutes an annual roundtable of executives tasked with finding POC opportunities for areas of disruption.

DON’T:

1. Rush your POC process

Everyone likes the notion of ‘Failing Fast,’ but take the time to scope the guardrails of the experiment properly and get the right stakeholders aligned.   We’ve seen corporations take 3 to 4 months to set up and complete a test, and fail cheaply and move forward. 

2. Rely purely on superior technical performance

Startup technologies often have to be substantially better than the existing technology, which may come from a traditional vendor heavily preferred by IT. Make sure to demonstrate the business value it delivers as well, and always question the pre-set requirements that business units have for their vendors.

3. Set innovation metrics that over-emphasize volume of activity

Metrics such as the number of startup demos are good to include in KPIs, but their value can be hard to justify. Consider metrics that impact internal operations such as impact on speed, and gather small wins and qualitative feedback along the way. 

4. Limit yourself to near-term incremental business needs

We’ve seen that most corporates gravitate to later stage startups (post Series B funding) due to the availability of proven case studies and defined use cases that can be directly matched to business unit needs. But consider experimenting for priorities that may be farther out to help validate new business models and new terrains.

5. Discard startups that fail to progress

It’s likely that a disruptive technology will have use cases across the organization, and a failed POC can provide helpful learnings for others down the road.  We’ve seen startups approached by corporate leads who had no knowledge of prior introductions to a different division. Find ways to share startups and create a list of vetted partners.

To learn more, you can download the white paper.

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