I have an 8-year-old daughter and a 6-year-old son, and a favourite book in our house is TheDadLab by Sergei Urban. Reading it will take you back to your school science classes dressed in mini white lab coats and feeling the adrenaline rush as the Bunsen burner fires up.
The kids and I run mini scientific experiments in the kitchen, balancing eggs on cardboard tubes and blowing brightly coloured bubbles in paper cups. We go through a structured process to get a measurable result and learn something along the way.
This scientific (or Lean) approach is what entrepreneurs do every day. When they start, most of their ideas will be based on a hunch or, in scientific language, a hypothesis. The job of a startup founder is to test these hypotheses through a series of experiments as quickly and cheaply as possible. Doing so builds certainty that their solution effectively solves a problem their customers care about.
Let’s get scientific
We’re particularly interested in collaboration experiments run between startups and established industry partners. Often referred to as pilots, these focus on how a new solution developed by a startup performs in the real world and whether it’s solving the challenge of a particular corporation or public sector organisation. From the corporate perspective, the questions they want answers to are likely to be, ‘Does it actually work?’, ‘Does it integrate with our systems?’, ‘Can it scale?’ and ultimately, ‘Should I invest in this (time, money, reputation)?’.
Over the past nine months, Plus X Innovation has carried out a research project in partnership with Brunel University and funded by the Hillingdon Enterprise Fund to discover how to optimise these innovation collaborations for success. We’ve spoken to corporate innovation teams and startups who have experience running collaborative pilots and asked them to share their tips and their cautionary tales. While many approaches exist, a few common themes have emerged.
An unlikely match
The first thing to say is how powerful these collaborations can be. They can bring new solutions to market and complement one another's skills and experiences. Startups bring new ideas, agility, and appetite for risk. Corporates bring deep industry knowledge, resources, and market reach.
But of course, they work in very different ways, which brings its own challenges. If we consider the innovation journey as a race from idea to real world impact, startups and corporates have very different race strategies.
Startups are built for speed and don’t care about breaking things along the way. They have nothing to lose except running out of money and are happy to take risks. Corporates are built for care. They have everything to lose and have built up a whole bunch of protective processes to make sure they don’t break anything. There are very real tensions between moving quickly and moving with care.
These collaborations are a bit like a three-legged race with a giant’s left leg strapped to the right leg of a hare. So, how do we design the right approach so that our lopsided teammates win the race rather than running in circles?
Quick wins VS game changing innovation
The starting point for success is open and transparent communication. Startups need to be honest with corporates about how ready their technology is, and corporates need to be clear about what they’re looking for and how they can help.
A good starting point for communication is agreeing where the ‘new idea’ currently is on the innovation journey and whether that’s a good fit for the corporate.
Technology Readiness Levels (TRLs) are one framework for discussing how mature a technology is, and while they can be rather dry, they do provide a shared language, which can be very useful. TRLs take us from Basic Research around a new idea through Feasibility, Development, Demonstration, Integration and Operation. Whatever framework or language you use, it’s important to be clear about how much testing (or experimenting) is still to be done.
Some corporates simply don’t have the appetite for extended testing and are looking for an off-the-shelf solution ready to ‘plug and play’. These companies should create ways to connect with startups that have market-ready solutions. There may be some small experiments to be run around the integration and operations end of the innovation journey, but fundamentally, this is around procuring a commercial solution. The biggest challenge here is likely to be finding the right startup to work with and getting around established procurement practices that make it hard to work with startups that don’t have a proven track record.
The best methodology is often a form of ‘smart procurement’ that allows the corporate innovation team or other internal buyers to bypass an unwieldy procurement system. Heathrow Airport, for example, has launched a programme called ‘Lift Off’ focused on bringing local SMEs into their supply chain by hosting quarterly pitching events.
The barriers to this approach are low, and it can produce some quick wins to demonstrate the power of working with startups.
On the other end of the spectrum are corporates looking for radical new ideas to give them a competitive advantage. To achieve this, they are open to engaging much earlier in the innovation cycle, working with startups still developing their technology and demonstrating its efficacy.
An engaged corporate partner can play an invaluable role at this early stage by telling the startup about their needs - informing the development of the solution - and running collaborative pilots demonstrating that the solution works.
How high are the stakes?
The next question is what kind of pilot to run. And again, there is no one size fits all answer.
The critical question at the start is, how high are the stakes? The lower the stake, the quicker and scrappier the experiment; the higher the stake, the more robust and time-consuming.
Bringing a new product to market usually takes a series of experiments. Each one is trying to either get to a quick ‘no’ or build confidence to spend more time and money getting to ‘yes’.
The pharma industry is a great example of this. Bringing a new drug to market is high stakes, with potentially millions of lives on the line. On average, it takes over 10 years and $1 billion to bring a new drug to market. The process includes experiments, from computer models and human cells in labs to animal testing and human trials, with safety built in at every stage.
For corporates, when designing a pilot with a startup, it’s important to understand the stakes involved. As you involve your customer, integrate with existing systems, or deal with regulation, the stakes rise. And if there are health and safety considerations, like pharma, the risk levels can change dramatically. As you design your experiments or pilots, you must measure for side effects as well as desired outcomes.
Some environments are intrinsically complex and high-risk. The NHS or large-scale infrastructure projects, for example. These are highly regulated and risk-averse industries (for good reason) and, thus, notoriously treacherous ground for startups. But they are also industries that need innovation, where the right new solution could have an outsized impact on people’s health and our environment.
Working on ways to pilot new technologies and approaches in these areas is one of the most important things we can do. So, what are the right approaches?
Creating the environment for success
Deciding the proper testing ground is integral to the pilot design process. For startup and corporate collaboration, we move out of the lab and into the real world (or as close to the real world as we can get).
Many innovations can be piloted on real users in situ, removing variables and giving us maximum confidence in the results. Software develops test new releases on small groups of users to work through bugs and get feedback. Brick-and-mortar retailers trial new products in pilot stores before rolling them out more broadly.
The ultimate pilot for corporate startup collaborations will be based in the real world, where possible. When this isn’t possible for practical, security, regulatory or safety reasons, we must design clever pilot environments that mimic the real world but remove risk elements.
There are lots of models and terms used to describe different versions of these near real-world environments, such as testbed, sandbox, demonstrator and living lab (as outlined by NESTA here:
In essence, you want to create environments that mirror the real world as much as possible but with the safety rails up. This can be anything from putting a data set into a closed system so experiments can be run without fear of data leaks or contamination or creating physical assets removed from wider systems, closed off to customers, or even signposted as experimental to set expectations.
Our interview with Sophia Goncalves from UK Power Networks was illuminating here:
“We work on critical national infrastructure in one of the most highly regulated and controlled sectors. So, we cannot just implement something into a substation and risk the lights going off in 2,000 homes or at local hospitals. Our testing environments, therefore, need to be very well thought out, secure and able to represent a live on grid environment as effectively as possible.
We use entities like the energy system dataports, one of our partners. They have a living lab connected to 15,000 homes in the UK, where they implement smart technologies and monitor the homes. If we want to travel in a safe environment that is monitored, we use them as a kind of database with measurements of historic baselines of people's consumption.” - Sophia Goncalves – UK Power Networks
If you plan to run many pilots, you will need various test environment options to fit the use. For example, at Plus X Innovation last year, we worked with Connected Places Catapult to run the pilot-based accelerator programme, Future of Air Mobility. Each of the 11 startups and scaleups involved was funded through Innovate UK to run a pilot with an industry partner.
The consortium included Heathrow opened its airport as a testbed where appropriate, and Cranfield University, who offered a range of unique testing environments – from an on-campus airport terminal to a digital air traffic control centre – to accommodate startup pilots that couldn’t happen at a functioning airport.
Digital Twins are an emerging approach growing in popularity. In essence, they are a virtual copy of real-world environments which can be used to trial approaches and run experiments quickly and safely. Unsurprisingly, this has important applications in healthcare - where there are aspirations to build digital twins of individual patients and environments to trial bespoke treatments on - where it can aid testing in complex, interconnected spaces. This would have health and safety risks and prohibitive costs in the real world.
Other key elements for success
Problems and problem owners
Having the right people engaged in the process is also key to success. The ultimate goal of a pilot is not to demonstrate the effectiveness of a new solution but to get the corporate to adopt the solution and deploy it at scale so it can make as significant an impact as possible. This requires buy-in from the right people so they become champions of the project and not blockers.
Too often, innovation teams (or those informally tasked with connecting with startups) fall in love with a shiny new solution that lands in their inbox, or they come across at a conference and then try to get others excited about it. Starting with the solution and trying to find a home for it is a long and lonely road.
It’s more effective to start by hunting for internal problems to solve. Speak with business unit managers across the company and understand the challenges they are currently facing. Ask them what would make their life easier. What solutions would they love to have if they had a magic wand?
By starting with the problem, you will have the key people hungry to pilot the solution if the right one can be found. And in today’s world, there is a startup working on almost every solution you can imagine. You just have to find them.
Other champions
Work out which other internal stakeholders could become enablers or blockers, such as your data team, procurement or legal. Make them feel part of the process from the beginning so they buy into it or work out how to cut them out of the process. Finally, find a senior champion to give you some air cover and blast through blockers when they arise.
Lean methods
Plan your budget, activities and timeline on lean principles. What is the minimum amount of money needed to learn something meaningful and the minimum time required to produce a measurable outcome? Start small and build up through a series of tests and pilots rather than trying to design the ultimate experiment.
For example, an early informal test is to judge the strength of the founders. Spend time with them as you explore the technology, and hopefully, you’ll find open and collaborative co-pilots. And remember, they will be running the same test on you!
Remember that getting to a fast ‘no’ is a positive outcome, too. Either it will illustrate what needs to change and inform future product development, leading to success next time around or, just as valuably, show when something is not worth pursuing and save everyone a huge amount of time and money.
Measure and learn
Through running a pilot, we want to learn something and to do that, we need to measure our outcomes. So, a key part of setting up a pilot is deciding what success looks like and what you will measure. The right metrics are very bespoke to each pilot.
Some will be technical: “Does a novel material have the tensile strength we need?” or “Does this neurological stimulation device decrease stress levels?” (Both examples of innovations we have supported at Plus X Innovation).
Some will be more subjective: “Does using robots to collect customer feedback lead to less biased answers?” or “Does the introduction of smells into virtual environments improve the user experience?” (More innovations we have supported).
The measurements will vary greatly, but considering what data will make a compelling business case will unlock investment into future trials or confidence in moving to a commercial contract.
It’s not all about the measurable results
While it’s important to get into the details around measurements for each pilot, it’s crucial to keep in mind the wider benefits of working with startups.
Charlotte Kanagasabapathy, Director – Innovation at Barclays, explained to us that one of the most important insights her team made early on is that not everything can be measured. Working in a highly regulated field such as finance makes it very difficult to integrate with new technologies. Not every pilot will succeed.
It’s just as important to recognise and celebrate the wider value being created in the organisation through collaborating with startups, from creating an internal culture of entrepreneurship and curiosity to stimulating new ideas, inspiring new thinking or positioning the company as an innovator at the forefront of technology.
Coming back to our scientific experiments, I have a hypothesis. The scale of the challenges we face today and the speed at which things change makes collaborative innovation the best option. Partnerships between corporates and startups are faster, cheaper and more effective than closed innovation projects – even with the challenges they involve.
That is reflected in the fact that the world of startup and corporate collaboration has never been more robust, with accelerators, studios, venture funds and pilot programmes becoming a standard for many multinationals.
Everyone we spoke to as part of this research, whether they were starting or were industry leaders in collaborative innovation, were eager to learn more and share knowledge. We are just beginning to see how big an impact collaboration can have in driving innovation, and the fact so many smart people are so open and eager to share means we are heading in the right direction.
If you’re looking for space to innovate or want to connect with exciting innovators at the leading edge of their industries, book a tour of a Plus X Innovation hub in London, Slough, or Brighton.
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