How Corporations Can Partner With Startups In Emerging Markets

Startup

By Shameen Prashantham

Mingke Luo is a young Shanghai-based entrepreneur who is founder and CEO of MrS.ai, a startup that uses artificial intelligence (AI) to develop “virtual agents” that converse with customers. MrS.ai has been “dancing with gorillas” – that is, engaging with large multinationals, notably BMW. “The journey was not easy”, he says, but after pitching to a BMW team tasked with finding innovative startup partners in China, his startup was given the opportunity to work with BMW to develop a proof-of-concept (PoC) over a three-month period. Luo describes this experience as “pirates working with the navy”. The PoC was reviewed with acclaim and a further seven months later, BMW became a full-fledged client of this startup. According to Luo, his startup’s “AI agents are now serving BMW customers in the China market in multiple domains”.

Luo’s experience reflects a wider phenomenon, which is one of the themes I discuss in my new book on corporate-startup partnering, Gorillas Can Dance: large multinationals with global operations have come to realize that their open innovation collaborations can potentially harness the energy and expertise of startups around the world – including in emerging markets. This is evident from the presence of Johnson & Johnson’s Jlabs in Shanghai, the Cisco Launchpad in Bangalore and a Barclays accelerator in Cape Town.

Below I discuss three key lessons from my research of over a decade on how multinationals can make the most of the prospect of engaging with startups in emerging markets.

Adapt startup partnering practices to emerging markets think global act local

There is a need to balance the scope to tap the burgeoning entrepreneurship scene in emerging markets with the reality that many startup ecosystems in these regions are still somewhat immature.

In emerging markets, there is a need to balance the scope to tap the burgeoning entrepreneurship scene in emerging markets with the reality that many startup ecosystems in these regions are still somewhat immature. Notwithstanding the presence of world-class startups in places like Bangalore and Shenzhen, partly driven by returnees from advanced markets, there is often a dearth of experienced talent in emerging markets. Adapting existing startup partnering practices in order to provide more handholding to startups may be required. For example, when Microsoft imported its accelerator concept from Israel to China nearly a decade ago, Israel’s four-month format was initially extended to six months in China because back then it was felt that local startups needed more time to refine their product-market fit and come up with concrete partnering plans. Of course, many Chinese (and Indian) startups have come a long way since then with former employees in multinationals such as Microsoft and returnees having become co-founders or important team members at promising digital startups. Nevertheless, in other emergent ecosystems – such as the UAE in the Middle East – more scaffolding may still be needed. This may entail corporations like Microsoft actively enabling and connecting startups with prospective corporate clients such as Eithad Airways within a well-structured format that helps startups learn the ropes of effectively selling enterprise solutions. Of course, adapting partnering practices to fit local circumstances is easier to accomplish if local teams are given sufficient autonomy. When Unilever Foundry’s startup partnering initiatives were introduced in China, the lead manager told me that he and his team were allowed the freedom to manage things in a way that worked for the local market. This might include partnering with important local tech giants. For instance, BMW has collaborated with Alibaba on an innovation hub in Shanghai that is also utilised for its local BMW Startup Garage activities.

Adopt ideas from startups in emerging markets locally and globally think local act global

Multinationals working with startups in emerging markets must seek to tap their innovative capacity in that market – and elsewhere, when feasible. To illustrate, through its Omega 8 partnering program, Walmart collaborated with a Shenzhen-based startup to improve the in-store customer experience in China, in this case by smoothening the process of buying loose vegetables and fruits by incorporating its image recognition technology into the weighing scales, resulting in a hassle-free one-click solution that weighs the fruit or vegetable and prints out a bar-code sticker. While that of itself was an interesting outcome, what is even more fascinating is that Walmart saw scope to apply this technology back in the US, to address other pain points such as the need to monitor and deter in-store theft. In other words, this multinational not only utilized an emerging market startup’s innovation in that market but also adopted it in other markets. In so doing, multinationals partnering with startups can also help those startups to gain business in international markets from other organizations. Cisco Launchpad in Bangalore, for instance, has facilitated network connections for its Indian startup partners resulting in business opportunities in the West. I have consistently observed in my research that these win-win outcomes are more likely to occur when corporate leaders signal their commitment to working with startups. For instance, when Bayer brought their G4A accelerator programme, the then Bayer China CEO, Celina Chew, threw her weight behind this initiative. She would be present at significant events, public and private, involving the startups during their three-month partnering programme. And Bayer’s corporate headquarters also demonstrated commitment to the effort in China by sending the global programme heads regularly (in pre-covid times) to participate in key events for the startup cohorts, like the inauguration ceremony or concluding demo day.

Aggregate startup partnering in emerging and advanced markets think global act global

While partnering with startups in emerging markets is not always easy, there appears to be considerable untapped potential in these locations that multinationals would do well not to ignore.

For multinationals engaging with startups around the world, it makes sense to think of different locations that they operate in as a portfolio. As has already been discussed, emerging and advanced markets often require differing emphases and efforts. In addition, distinction can be made between innovation hotspots and regions that are not. That is, clusters such as Silicon Valley and the Thames Valley Region (in advanced markets) as well as Bangalore and Shenzhen (in emerging markets) have certain characteristics such as a critical mass of startups that may not be seen in other local milieus (say, Ningbo in China or Glasgow in the UK – both well-functioning port cities that don’t have the same cache for their startup ecosystems). Yet, as I note in Gorillas can Dance, even in the latter regions I have found interesting examples of corporations partnering with startups, as a result of creative policy efforts. Multinationals that are able to leverage multiple locations and deal with them distinctively – including by tapping entrepreneurial policy efforts in less well-known emerging market cities – can then connect the dots to evaluate how their global open innovation efforts are making the most of different locations around the world. It is also sensible to make sure that startup partnering is explored in new frontiers, including Africa. While many of the multinationals I’ve studied have been active in China and India for the past 5-10 years, I have begun to observe a growing interest in the African continent. Prior to the onset of covid even corporate innovation specialists like Founders Factory had opened shop in South Africa. And in connecting the dots of global open innovation it becomes more feasible to consider global challenges – including those associated with the Global Goals, also known as the Sustainable Development Goals (SDGs). ABInBev, for instance, has been working with startups in Asia and Africa to address sustainability and climate change issues to tap expertise in areas like recycling and clean energy.

In sum, while partnering with startups in emerging markets is not always easy, there appears to be considerable untapped potential in these locations that multinationals would do well not to ignore. Based on the experiences of companies like BMW, Microsoft and Walmart, to name just a few, not doing so would be a missed opportunity. And this is especially so in the present Decade of Action when collaborative innovation to address business and societal challenges has never been needed more.

About the Author 

Shameen Prashantham

Shameen Prashantham is Professor of International Business & Strategy, and Associate Dean (MBA), at China Europe International Business School, and author of Gorillas can Dance: Lessons from Microsoft and Other Corporations on Partnering with Startups (Wiley, 2022).

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