What we've learned from collaborating with startups and large corporations

This time, we explore the age-old yet ever-relevant theme of the relationship between startups and large corporations.

Dentsu Inc. Growth Design Unit (DGDU) has opportunities to collaborate with both startups and large corporations. Through this work, we've come to understand significant differences between the two. We believe these differences create the so-called "stress" between large corporations and startups.

Why does this stress occur? And how should we address it? By sharing insights gained from advancing collaborations using DGDU-style methodologies, we hope to present one prescription for resolving the "various issues" that arise between startups and large corporations.

<Table of Contents>
▼Common "Mismatches Between Startups and Large Corporations"
▼ "Guidebook for Large Corporation Representatives" for Startups
▼How Corporate Representatives Can Break Down Barriers with Startups
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Common Misunderstandings: "The Misalignment Between Startups and Large Corporations"

"Effective Collaboration Between Startups and Large Corporations"

I personally believe this is essential for both startups and large corporations to generate further innovation, and I often hear similar opinions from both sides. However, while recognizing this necessity, it's a fact that making it work smoothly in reality is difficult. It's a perennial theme, discussed frequently even at international conferences, regardless of country.

But where exactly does the problem lie? Interviews on startup-corporate collaboration report findings like the following:

In other words, both sides harbor unease about the collaboration. I believe "both parties bear some responsibility."

Having observed various large corporations and listened to startups, I believe the greatest difference lies precisely in their respective positions and perspectives.

Large corporations carry the weight of their long history, numerous stakeholders including employees, partners, and shareholders, and must continuously advance their business. Startups, on the other hand, are relatively young and often operate within the scope of the founder's decision-making, aiming for significant success within a short timeframe.

Below, I'll break down these differences a bit further.

① Difference in Speed
In most cases, startups have a CEO or equivalent figure who holds significant authority and maintains a high level of commitment. They take the lead in making decisions, allowing matters to be resolved quickly.

In contrast, large corporations operate at the departmental level, meaning decisions often require approval from surrounding departments. Handling numerous projects also necessitates prioritization. This creates a noticeable difference in the speed and level of commitment when advancing matters, leading to frequent complaints that "large corporations are slow."

② Differences in Risk Sensitivity
On the other hand, the processes in large corporations—such as confirming with other departments or superiors—are long-established mechanisms developed to reduce risk and ensure quality control. While some processes may have become unnecessary formalities, dismissing all such systems as meaningless seems misguided.

Conversely, startups often lack clear procedural guidelines. Even with NDAs in place, information can inadvertently leak within the startup ecosystem. This leads to concerns from large corporations like, "Is their governance and information management really secure?" making them hesitant to disclose all information.

③ Differences in Perception Regarding Outcomes
This is the most significant difference and, I believe, the fundamental issue.
Of course, both large corporations and startups aim to increase corporate value and contribute to sales and profits in the medium term. However, corporate employees—depending on the department and individual—are often motivated by diverse work outcomes and incentives beyond that, such as engaging in interesting work, meeting various people, and gaining recognition.

Entrepreneurs, on the other hand, see the company as an extension of themselves, with increasing corporate value as their direct objective. Everything else is a means to that end. I've witnessed numerous instances where, without understanding this fundamental difference in the perception of outcomes, parties proceeded without finding a common purpose, leading to failure.

To overcome the three barriers mentioned above, mutual compromise is essential.
From here, I'll analyze the operational principles of corporate representatives based on my experience and introduce the optimal approach for compromise.

The "Manual for Corporate Executives" for Startups

①&nbsp;The person handling the deal matters most, not the company name!
For seed and early-stage startups, collaborations often begin with chance encounters and progress in a casual manner. Whether such relationships can be developed into concrete "projects" depends heavily on the motivation of the corporate contact and their ability to persuade within their organization. Especially in the early phases, when matters fall within the contact's decision-making authority, if they are genuinely motivated, they can drive things forward with a certain degree of speed, even within a large organization.

In other words, rather than deciding based on the company name, it's crucial to carefully identify the right person to handle the matter, perhaps even by naming specific individuals. Conversely, it's common to find that while talking to Person A at a company yields no progress, talking to Person B gets things moving. Identifying the right person is everything.

②&nbsp;Envision a big-picture win-win with large corporations!
So, you decide, "Let's do something," and start thinking about what you can actually do.

From the large corporation's perspective, especially when collaborating with startups in their seed stage, expecting short-term profits commensurate with their size is difficult unless they take high-leverage, high-risk approaches like investment or adopt low-commitment methods.

Therefore, I believe it's crucial to start by envisioning a "mid-term, 3-5 year picture where both companies profit significantly" rather than focusing solely on the short term, and to jointly consider the nature of the collaboration. While it's good for startups to prioritize speed and start something quickly, relying solely on short-term thinking often leads to poor results and projects stalling midway.

Furthermore, if results don't materialize as the project progresses, the corporate representative may face increased scrutiny internally, leading to a drop in motivation. In such situations, returning to the larger vision for discussion can make it easier for the corporate representative to justify the project internally.

③&nbsp;Maintain a startup-style approach as the core methodology!
Even when large corporations recognize the need for new ventures, they often lack experience launching such businesses. They may want to accelerate but struggle to grasp the necessary pace, making it difficult to pick up speed. They intuitively understand that an agile, speedy, venture-like approach is best for creating new businesses and achieving results.

There is a definite demand among large corporations to "learn and experience startup know-how and methodologies," coupled with a sense of crisis that traditional approaches are insufficient. When collaborating, understanding the large corporation's processes is essential, but beyond that, proceed as much as possible using startup methods—like maintaining flat communication. My experience shows this significantly increases the likelihood of achieving results.

How Corporate Executives Can Break Down Barriers with Startups

While DGDU supports startups, we also represent the perspective of corporate representatives, and naturally, gaps emerge during collaboration.
Here, we introduce the approaches DGDU employs to minimize these gaps in its startup support efforts.

① Approach with a "Party Formation" of Multiple Functions
Even though they are startups, the CEO is the owner of a company. There are limits to engaging with them using only one corporate representative. Therefore, DGDU decided to engage with startups using a "team formation" composed of members with multiple functional roles. Only by members complementing each other to offer multifaceted professional opinions can we engage on equal footing with CEOs who possess overwhelming commitment.

For example, when working with a direct-to-consumer cosmetics company, we assemble a team combining individuals with diverse expertise: a former product manager from a manufacturer, a CRM professional, a copywriter, and an art director. This allows us to provide experience and insights based on specialized knowledge from multiple angles on the spot, supporting optimal decision-making.

For new ventures at large corporations, it's crucial not to confine efforts solely within existing department members. Instead, progress should involve engaging individuals identified as having both enthusiasm and capability.

② Align participants' interests and incentives with the work
For example, within Dentsu Inc., there are individuals who express a desire to "pursue marketing that goes beyond the scope of promotions typically handled by advertising agencies." By appointing such individuals as Brand Manager Supporters for startup new products, we draw out high motivation and commitment.

We create a system that fosters motivation by building a team of dedicated colleagues and reflecting their aspirations for responsibilities they want to fulfill and expertise they wish to deepen.

③ Build a business scheme that creates a win-win with startups
DGDU has introduced a partially performance-based revenue-sharing model. This demonstrates empathy for the risk-taking of startup founders and supports them with a stance of being in it together for the startup's growth. Implementing this scheme has also enabled us to build co-creation relationships that transcend the traditional client-advertising agency relationship, which was previously limited to a buyer-seller dynamic.

To reiterate, collaboration between startups and large corporations is essential for generating further innovation in society. Success hinges on leveraging the distinct perspectives and strengths of both parties in this partnership.

The knowledge described above is just one example. If you are interested, please feel free to contact us. We will continue to develop new services from both the startup and large corporation perspectives, advancing startup support and new business initiatives for large corporations.

Contact: dgdu@dentsu.co.jp