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Startups are the new catalyst for sustainable innovation that no enterprise can ignore

Lucia Sinapi
20 Jan 2023

In a new series of blogs and vlogs, Capgemini Ventures asks whether startups are becoming the critical path to transformation and value creation

Increasingly, many in the corporate world and public sector are adopting a new hybrid model in which their internal R&D is complemented by ecosystems of startups. But the real implications of this change to the traditional tech adoption model are only slowly being realized. Increasingly, startups can deliver plug and play solutions that can be adopted quickly and directly – so, where does this leave Big Tech, clients, and service providers, and what is their new role in the value chain?

The market dynamics are changing fast, and corporate as well as public bodies must find the most appropriate way to leverage the power of startup ecosystems to create sustainable value.

“Standing still is the fastest way of going backwards in a rapidly changing world.” These words, attributed to the Hollywood actress Lauren Bacall, could easily apply to corporate ambition in the 21st century. While every enterprise recognizes the imperative to move forward by leveraging breakthrough technologies and evolving innovative products and services, some have also recognized that the sources of new thinking and ideas are evolving too. Where a decade ago businesses would rely on their own R&D departments, together with bilateral partnerships and strategic alliances with Big Tech companies, now there are new players in town. These are the growing number of tech startups, disrupting markets and powering technological innovation to an ever-increasing extent. Dynamic, agile, and unafraid to take risks, it is estimated that by 2025 they will constitute 44% of innovation sources, compared to 10% today.

The ability to implement groundbreaking solutions at speed – to achieve both significant change and incremental gain – is the holy grail for businesses. This is precisely what startups can help them deliver, often with plug and play solutions and capabilities and expertise that companies cannot always source in-house. Of course, external sources may always need to be complimentary to their own R&D, but whatever particular challenges a business faces, there’s a strong chance that a solution will be developed faster with the help of a startup.

With this new dynamic, the traditional way of collaboration may no longer be the right model. Corporates know that they need to widen their horizons but are understandably wary of bilateral or consortium partnerships with young businesses that have no track record and little accountability. Some have already dipped their toes into forging relationships and investing in startup businesses, but the chance of backing the wrong horse holds others back. A collaboration can seem like a leap in the dark for notoriously risk-averse corporates.

Time for a new collaboration paradigm

So, instead of thinking in terms of closed, siloed partnerships, let’s blur the boundaries and open up the conversation. One way to accelerate the adoption of innovation and dynamic intelligence is through an open ecosystem that facilitates collaboration between corporates, Big Tech, and an infinite number of startups.

Of course, there’s more to think about than simply adopting an open ecosystem and embracing the startups within it. There are important considerations and questions to answer that we will address in more detail across a series of blogs and videos, including:

1.   Will organizations need to change at a fundamental level?

Working successfully with startups is not simply a change of mindset. As collaboration through an open ecosystem speeds up time to market (one of its core benefits), enterprises may need to adopt completely new ways of working, adapting their organization, processes, systems, and even business models.

2.   How can risk management cope with startups?

For a large corporation, adopting startup solutions at scale into the organization comes with a clear cultural shift and, specifically, it needs to overcome its intrinsic risk aversion. To make deployment easier, it is necessary to properly consider the critical aspects to be addressed.

3.   How will Big Tech and VCs influence innovation in the new model?

Big Tech and VCs are still a primary source of investment for startups. According to a recent IDC study, Salesforce and its partners will grow the Salesforce economy by 1.2 trillion dollars by 2024, creating 4.2 million new jobs – a potential game changer for the startup ecosystem. Venture capital funds are also investing in innovative startups at unprecedented levels. According to CBInsights, global funding for startups has increased by 157% YoY between Q2 2020 and Q2 2021, reaching $156 billion in just that last quarter. On top of funding, the VC industry has clearly become a critical source of qualified market intelligence.

4.   How can the startup ecosystem be leveraged for strategic insight?

Given the depth and diversity of startups, analysis of qualified intelligence can provide advanced indicators of technology evolution and market trends. This could become a strategic lever for corporates to use to their advantage.

5.   The corporate dilemma: Collaborate or acquire?

Buying a startup is clearly part of the “make or buy” dilemma, as demonstrated by GAFAM (Google, Apple, Facebook, Amazon, Microsoft), who are currently acquiring startups at a rate of one a week. Is this the right strategy, and are all stakeholders aware of the driving forces and benefits of a dynamic startup ecosystem?

6.   Beyond POCs/POVs with startups: How to ensure adoption at scale

Since startup solutions are often plug and play, adoption could be seen to be as simple as the IT integration of the solution. Yet, that is often only true in theory. Our experience has demonstrated that the adoption of SaaS into established organizations often faces major integration and cultural issues due to the existence of legacy IT and well-established processes. Therefore, sustaining value creation at scale becomes a lot more complex than expected.

The change is happening now

The simple truth is that startups are becoming a core part of new technology solutions and every corporation must define a strategy of working with them or risk missing out on the disruptive technologies that could power their future. An open ecosystem has huge potential advantages for all players – corporates, Big Tech, and the startups themselves. But what structure should apply to this ecosystem, and what framework needs to be designed to ensure a successful and sustainable collaboration? Working with tech providers has been Capgemini’s core business for decades and, today, opening the collaboration play to emerging yet promising tech partners has become an absolute necessity to keep bringing and creating value for and with our clients. In the forthcoming blogs and vlogs, we will be capturing insights from various ecosystem stakeholders to better understand how to sustain innovation at scale within big private and public companies.

Lucia Sinapi

Expert in Innovation, Startup Ecosystem
All along my professional career, I have been embracing a variety of domains and roles, both in the finance area or more recently in charge of a Capgemini business unit over 3 continents. Key drivers in this journey have been a mix of curiosity and strong commitment. Now in charge of Capgemini Ventures, I am delighted to extend this approach to the innovation playfield, and in particular to innovation stemming from the start-up ecosystem. In partnership with ISAI, Capgemini Ventures has launched mid-2019 an investment fund into the most promising B2B start-ups and scaleups, future leaders of the software industry (SaaS, IaaS, PaaS), and sustainable IT whose innovations, ideas, and solutions will most benefit our clients and their business. With an investment envelope of 90M€, ISAI Cap Venture will take minority tickets ranging from 1 to 5M€. This unique formula for a Corporate Investment fund combines the strengths of a recognized professional VC -ISAI- and Capgemini as a growth accelerator to start-ups in portfolio. No doubt Capgemini Ventures shall contribute to our Group innovation and market intelligence, as well as to support our strategic and growth agenda.