Innovate with Silicon Valley Startups

“In France, you get freedom of action … but you must think like everybody else. In Germany, you must do what everybody else does, but you may think as you choose … in England … you’re ground down by convention … because it’s a democratic nation. I expect America’s worse.” – W. Somerset Maugham, “Of Human Bondage”

“Innovate or die!” – a new trendy saying you may have seen on a bumper sticker or hanging on an office wall. Unfortunately, the saying is true. There is no doubt that we are living in a hypercompetitive world and everyone has to adapt to a rapidly changing landscape. Established companies may not have the talent, resources or technology to accommodate those challenges. If you are one of those companies facing these current challenges, leveraging the power of Silicon Valley (SV) startups could be a fruitful journey – if it is done the right way.

Silicon Valley has people, technology and the drive to help you succeed. Top schools, venture capitalists (VCs) and talent are frequently mentioned alongside the name of Silicon Valley. Partnering with SV startups (typically those in the first stage of business and or in business for less than five years) could give you access to these sought after connections. Stanford University and University of California, Berkeley, not only supply intellectual powerhouses and high-achieving students but also foster a culture of collegiality and risk-taking. This is why the many corporate offices in SV are called campuses. Because VCs bet on people with good ideas, this in turn attracts more talented people to join the party. I once worked with a tech startup that pioneered massive parallel processing and used their research findings from Stanford to help us quickly analyze billions of transaction data to uncover previously unknown customer behavior.

Innovation is a combination of ideas and technology, and, fortunately, SV startups are rich in both. New companies are hungry for customers and use cases. The partnership provides an environment in which you can deploy those new tools or processes to your customers at unprecedented speed. For example, one of our vendors invented a novel way to reformat public data, which significantly sped up our analytic application development.

Startups can complement your critical talent shortage. Those with high-demand skills are often not easy to find and are even more difficult to keep. Working with startups allows you to tap into a pool of talent without paying unaffordable prices. For example, we partnered with a firm that specialized in cloud technology and were able to quickly stand up a new system.

Focus on implementation is the key to success. “The journey of a thousand miles begins with one step” (attributed to Chinese philosopher Lao Tsu more than 2,000 years ago). This philosophy is also relevant to working with startups – one has to start small and focus on implementation. There are always more things you want to do than time and resources allow. As a result, you should have a clearly defined outcome (or minimum viable product, MVP) to help you focus on the practicalities in implementation.

It sounds obvious, but you should make sure the project is the most appropriate one. This includes separating hype from reality, considering the risk and return, and understanding its rationale. In the past, we worked with a firm that collects online user data. We defined what data we wanted to collect and excluded those that might be too sensitive from the privacy standpoint. We used this process to ensure that we achieved value from the new data but also stayed within our risk tolerance.

Political considerations can also make or break a project, especially when working with “unproven” parties. Established companies are risk-averse, and many people prefer the status quo. Therefore, it is important to understand the political dimensions of the issues, concerns of the stakeholders and barriers to success on both sides. Will the efficiency gain have budget implications for some departments? Does the startup misrepresent the effectiveness to boost its customer list? Who could derail the project? Who are the naysayers and why?

Culture, risk and stability are factors of concern. It is common to encounter cultural issues. Startups are risk-takers and challenge everything, whereas established companies have a past and reputation to uphold. Both managements need to make an extra effort to achieve mutual understanding and resolve unavoidable conflicts. For example, a daily stand-up meeting could be replaced by an online group chat because people might work on different schedules.

Working with startups is not without risk, namely reputation, operation or financial risks. A startup may step on some gray lines that a company may not be comfortable with. For instance, a startup could build a risk model that contains an inmate phone card purchase, but the company will need to consider the public relations (PR) implications. We call this the “Wall Street Journal front page test.” Startup may not have comprehensive operation support, and thus, it poses an operational risk when things are not working well. Furthermore, many startups often face financial challenges because most do not have deep pockets.

Startups may also be unstable due to staff turnovers, merger and acquisition (M&A) activities, or management issues. It would be helpful to have a backup plan. At one point, our vendor was acquired by our competitor, and we had to immediately terminate current projects. Startups usually do not have many backups and thus could be in trouble if some key staff are gone. Expect changes and be prepared for them.

Table 1: Sample use cases in which leveraging startups could enable additional services and capabilities

Fruitful results require patience and effort. Working with startups has great potential to jumpstart your capabilities. It could also complement your workforce and provide an edge over your competitors. This is a rewarding journey but not without risk. To mitigate risk, you need to make a concerted effort to remove obstacles and be prepared for the unexpected. Even a pandemic can only lower the fever but has not changed the fundamentals of the world-changing power of SV. For example, ChatGPT of OpenAI in San Francisco could completely change how we write. SV is still hungry for new opportunities and dreaming for a new world. Given that we now have Silicon Alley, Silicon Roundabout, Silicon Beach and Silicon Hills, imitation is indeed the sincerest form of flattery.

Author’s note: This article is partly based on a presentation for the Akademie3 conference in Vienna, Austria, in July 2020. Everything expressed or implied in this article is the author’s personal opinions only.