managemnet company strategy managemanet Why Large Companies Should Partner With More Startups

Why Large Companies Should Partner With More Startups

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By Vic Bhagat

As I observe the amount of digital transformation taking place globally, I can’t help but look back on the years I spent as a CIO and wonder, “What if?”

What if I’d altered my vendor selection strategy and partnered with more startups when launching technology initiatives rather than relying almost exclusively on market-leading enterprises? Would the outcomes have been better? Worse? Any different at all?

There’s a reason for this self-reflection.

Across most industries, CEOs are calling on CIOs and CTOs to align their digital investments with overarching business objectives, prioritizing projects that can yield the most positive financial impact. But 52% of CEOs believe their companies’ digital initiatives are taking too long to realize the value that leadership expects, according to Gartner CIO Agenda 2023.

Therein lies the rub. It’s difficult to substantially alter your business trajectory or contribute to goals beyond the underlying IT imperatives of your technology project—let alone effect change at a rapid pace—if you don’t challenge traditional thinking and approach problems creatively.

That’s why many organizations should consider taking the leap of faith I wish I’d taken more often and partner with pioneering startups.

The benefits of startup partnerships  

Forging relationships with startups and emerging technology providers that understand your industry and engineer specialized products and services can enhance your digital projects in numerous ways, bringing:

  • Agility. When you partner with an IT startup founded to accelerate transformation, you benefit from its speed and agility in making decisions and adjusting to change.
  • Ingenuity. Using a startup’s intelligence and core competencies can reduce the IT chores your company must perform, freeing your teams to drive innovation.
  • Affordability. Startups routinely build elasticity into their pricing and may be more open than industry leaders are to negotiating costs or considering value-adds.

The downside of startups

Benefits aside, Gartner’s research shows that only 28% of today’s CIOs are using startups for the technological capabilities they can provide. Common reasons include:

Three keys to working effectively with startups  

If you’re thinking about working with a startup or you’re assessing different vendors to address specific technology needs, these three key strategies can help lay the foundation for a successful partnership:

1. Remain open to change. Approach every situation objectively and welcome new ways of problem-solving.

Our Cloud Advisory team is working with a leading manufacturer of machines for the pulp and paper industry to assess the cloud readiness of its existing application landscape. Part of the IT strategy is to create a business case for running the organization’s workload on a public cloud and compare costs among potential hyper-scalers.

Rather than going the conventional route of engaging an enterprise software provider, we’ve partnered with an Austria-based startup that provides an innovative solution for evaluating the IT environment and calculating related costs for the cloud migration, the application modernization, and running the workload in the cloud.

Collaborating with a startup for this engagement allows us to work faster and address issues more quickly while meeting an accelerated transformation timeline that could have been problematic if we’d performed the workload analysis and data collection for the hyper-scaler cost comparisons using traditional methods.

The startup’s product team remains involved in the process, providing support and solution adjustments that a larger company may not have been willing or able to make.

2. Start small and expand. Enterprise solutions providers typically want to win your end-to-end business, from inquiry to remittance cycle. Conversely, startups are often content to focus on select areas within the digital ecosystem, which enables them to deliver targeted value on a specific project. Use these differences to your advantage.

While at Verizon, I forged some powerful business relationships by assigning a small segment of a specific transformation initiative to a specialty IT firm and allowing it to prove its capabilities. If its service met or exceeded my expectations, I began using the company for future projects.

It may require more coordination to work with multiple specialty firms than one large provider. However, single-source engagements often produce incremental improvements, while startup partnerships can deliver true innovation.

3. Share risks and rewards. As part of your due diligence, confirm that the vision and capabilities of potential partners align with your project objectives and desired outcomes. This step helps minimize risks and maximize rewards for all parties.

If you’re working with systems integrators or third-party advisors, involve them in the evaluation process to vet the potential partner, or identify other candidates and ensure their product or service will integrate properly with your platforms and applications. A brand-neutral consulting partner with a broad ecosystem can simplify the process further, helping you identify the best startups based on your business needs and desired outcomes.

We work with one multinational automotive manufacturer that’s considering options to improve worker safety and enhance security at several European factories. Rather than recommending a traditional solution, our team is collaborating with a California software startup to develop proofs of concept for using artificial intelligence (AI)-enabled drones to conduct safety checks, equipment inspections, and perimeter surveillance.

Once testing is complete, we can help the customer decide whether to use the technology or find other solutions based on data instead of assumptions or preferences. Either way, all parties benefit.

In this scenario, our company can deepen its internal knowledge of AI and machine learning, and our startup partner gains experience navigating the complexities of enterprise-level transformations. Most importantly, the customer will enjoy all the advantages of the relationship while staying insulated from any issues that could arise if the startup goes public, gets acquired, or ceases operations during the project.

A final thought on working with startups

Partnering with a startup isn’t always easy. It takes resolve and a willingness to question what once seemed unquestionable. But if you embrace the creativity that distinctive thinking can cultivate, you may benefit from greater innovation, increased savings, and better outcomes all around.

Let’s talk about how Kyndryl Consult can help accelerate your business.

Vic Bhagat is the senior vice president and global advisor of Kyndryl’s Advisory Practice, assisting customers with designing and deploying advanced technology environments.  

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