The COVID-19 pandemic has quickly and drastically changed markets around the world and forced companies to make significant pivots, especially given the many restrictions on movement. Many companies responded to the pandemic with temporary measures but may not realize that they need to make more lasting revisions to their business models.
Because of this fact, entrepreneurship will likely play a significant role in the economic recovery from COVID-19. Entrepreneurs thrive on solving problems and identifying new opportunities. Much of the innovation in the business world comes from small businesses and startups, and larger corporations may find that partnering with them can yield significant benefits.
Partnerships between larger corporations and smaller startups are not one-sided arrangements. These deals can also help the small companies survive. Many startups are facing significant challenges in the current market—starting a company is never easy, but it’s especially difficult right now. In many cases, revenue streams have slowed drastically or dried up altogether, which has threatened companies that would otherwise be thriving. VC funding slowed down during Q1 2020. We’re in an unprecedented situation, and there’s a lot of uncertainty regarding how consumers will behave and what recovery will look like.
While both large corporations and smaller startups can benefit from partnerships, these relationships face a few challenges—both internal challenges, as some people may feel threatened by new business partnerships, as well as external ones. In many cases, it may not be clear to startups or corporations how to approach one another to build such partnerships.
Internal Problems Related to Collaboration
Already, tech startups have played an incredible role in creating products adjusted for a new stay-at-home economy, especially in the sectors that have felt the greatest impact, including retail and food. Despite this issue, many larger, established companies seem hesitant to collaborate with startups even if the benefits appear obvious.
Much of this hesitation may relate to attitude. Sometimes, it can feel like lifting up another company will detract from the success of the larger one, even if it helps them adapt and survive. To avoid this issue, leaders need to reframe their state of mind and see the situation as a win-win type of partnership. Another potential issue is the belief that creating such a partnership is a sign of weakness or even a way of giving away business. However, it is important for business leaders to keep in mind that forming new partnerships to adapt to our new reality is actually a sign of strength and a commitment to putting the customer first.
Another big challenge is the fact that middle management may handle many of the opportunities for collaboration. These individuals may feel like the potential collaboration could put their jobs at risk. While it is natural to look at change with apprehension, companies of all sizes need to recognize that these partnerships are in the interest of all employees. By working together, both companies can deliver a better experience to customers, attract new business, and increase revenue more than either company could do independently.
One example of this issue is the delivery of groceries since the start of social distancing. Large grocery chains have had many hiccups in keeping up with delivery orders, while e-grocery delivery startups that had already created online infrastructure had such a surge in orders that inventory could not keep up. A partnership could have addressed both of these issues.
External Obstacles to Corporate Collaboration
One of the biggest difficulties in setting up partnerships between startups and established companies is starting the conversation. Entrepreneurs may not feel like they can approach a large company with a pitch, while corporate leadership may not know how to identify the right startup or propose a partnership.
Addressing this issue may be a key part of driving innovation and keeping both startups and established companies afloat in the months and years to come. Luckily, some partnerships can serve as examples. One prime example is Market Access, a program of the Dubai Startup Hub. This platform is meant to facilitate collaboration between startups driving innovation and corporations facing business challenges. Market Access serves as a forum for creating value for both organizations and new opportunities that wouldn’t be possible for either organization on their own.
In Dubai, Market Access was a relatively easy sell to both startups and corporations. For a startup, partnering with a larger organization makes it easier to access new markets and stable sources of revenue. In turn, legacy companies can access new products and technology and offer something new to their customers. In the end, both organizations benefit. Startups get the leverage they need to succeed, and established companies getting help adapting.
Programs like Market Access can help drive innovation during and after the pandemic to create lasting solutions that address the economy’s changing needs. In the future, it would not be surprising to see similar programs being developed in other cities with significant startup ecosystems, including many in the United States.