Debunking Collaboration Assumptions

By: Sasha Kazantsev

6 min read

So, you have decided to start an open innovation project. You have found a perfect partner to pursue your idea with. You have had the first meeting and even broadly discussed the potential price of your joint service for the end-users. It looks like working together will be the everlasting honeymoon. What could possibly go wrong?

Let’s take one step back and assess the situation. When we talk about an open innovation project, most often we refer to a situation whereby one partner (a startup) is a supplier of a new technology and another partner is applying it to an existing system (an enterprise). The expectation behind such a project is that the joint project has a greater market value. From the perspective of an enterprise, the project is a win, because, with it, they can save time and money otherwise spent on developing the tech in-house. For a startup, that has so far been working with limited access to the market joint innovation is a promise of capitalising on their technology relatively soon and on a significant scale.

So far so good, right? A sensitive and empathetic reader can already notice a seed of conflict in this setup. Unlike traditional teamwork, where you and your mates are aiming for the same target, open innovation presents a challenge that is more comparable to a symbiotic relationship. You are supporting your partner in the final vision of a joint opportunity, while at the same time your strategies of reaching this objective can be very different.

In Vertical we ignite early-stage collaboration of this kind and helping the partners to align their expectations about each other is one of the fundamentals of long-term success. Where should one start? Being on either of the two sides, you can start by validating (or de-validating for this sake) your fundamental assumptions about your collaboration partner.

4 fundamentals of collaborative relationships

What we are about to do is a little bit like a relationship counselor session. For the sake of simplicity you want to begin with addressing not all of your project as a whole, but only the clusters of them at first. Let’s first run through the categorisation in the order of priority, and then dive into possible solutions for each of the challenges.

1
Innovation is costly and isn’t possible on a commercial scale without significant monetary investment. The clarity about the
financial picture for both sides of the collaboration is an essential milestone in setting up a lasting project. Surprises in this realm tend to be even more unpleasant with time passing. Learning that your partner can not (or was not planning to) provide funding for another step in your project can be a great setback not only for your joint effort but for your company as a whole. 
2

The next obvious, yet tricky, aspect of working as a team is reading your partner correctly as an individual. We tend to equate our partners’ personal behavior to this of the company they represent. Rest assured — this is a trap. Not every scientist wears a white coat, not every entrepreneur is willing to work for free, and certainly, not every person employed in a big enterprise is simply there to steal your unique ideas. 
3

The cultural divide between the small and the established businesses is very tightly linked to shaping such personality assumptions. At the same time, organisational structures are a common reason to call for the confusion. There is usually limited capacity on the side of the startup as the supplier and for this limit to expand, small businesses usually need time. Meanwhile, there is a heavily regulated decision-making process on the side of the enterprise. A 90-day delay in paying the invoices can be customary to an enterprise, while for the startup this delay can mean the death of the company. 
4

Finally, there are going to be assumptions that both sides are going to make about the collaboration itself. When you shook hands-on “a pilot project”, how sure were you that both sides understood it the same way? It is always a good idea to discuss the steps that will follow your initial project. Will there be a need to pitch for additional funding? Will there be a need to train service operators and sales managers if you choose to go for a market trial? Placing your kick-off project in the context of a long-term business relationship is often the key to a healthy brief. 

CHALLENGE RECAP

What types of assumptions are there and why should I challenge them?

1 – Financial 2 – Personal 3 – Organisational 4 – Collaboration
Leading to misunderstanding in pricing/funding Leading to misunderstanding in communication Leading to misunderstanding in strategy Leading to misunderstanding in project dynamics

Financial assumptions

Assumptions – enterprise Assumptions – startup
“We read that last year Company X has made 15B € in the first quarter” “We estimate the R&D expense for the startup to be no more than 10k €.”
How can you challenge it? How can you challenge it?
Discuss the range* of budgets allocated within the Enterprise in particular for R&D or licensing in your area.

*You do not need sensitive data here. What you need to know is whether the project can expect 10k or 100k for a pilot in the future

Negotiate how does the project funds additional development expenses (e.g. legal compliance services).Discuss what development cost the startup can pick up as part of their internal product development.


Personal assumptions

Assumptions – enterprise Assumptions – startup
“We haven’t heard from Jill in a month. Maybe they have found another project and lost the interest.” “They seem to be eager to learn. They are gaining so much from this collaboration in soft values.”
How can you challenge it? How can you challenge it?
Make sure to align your collaboration milestones with the level of your enterprise partners’ occupancy.It is usual for your enterprise partners to be booked months in advance. Mark in your calendar the times optimal for interaction. While entrepreneurs usually are very motivated and engaged, it worth remembering that they often bet their entire wellbeing on a project with you, and may have impatient investors behind them. Ask the startup team about their stakes in accepting your partnership.Try to accommodate a startup for the off-boarding, in case of a fallback.


Organisational assumptions

Assumptions – enterprise Assumptions – startup
“Pilot went great. They love our product. The next step is an international market!” “They have managed a pilot just fine. We are ready to call them for a big trial”
How can you challenge it? How can you challenge it?
Most of the large enterprises have heavily fragmented market operations. Learn your partner’s organisation structure in the early stage of collaborations. Often expanding delivery output for a startup means hiring new resources. To allow them to scale with your demand, make sure that payment can be fragmented (not 1 time on delivery).


Collaboration assumptions

Assumptions – enterprise Assumptions – startup
“We agreed to a pilot — we have a great deal” We agreed to a pilot — we have a great deal”
How can you challenge it? How can you challenge it?
Internal sales* are just as diverse as the external ones. Learn what drives your collaboration from the strategy standpoint of the partner. How and how much do they expect to profit from it?

*For example, if person X has paid your pilot based on your pitched deck, this does not yet mean that his supervisor will sponsor your project for another year on the same value proposition.

Have you provided validation criteria for a pilot? How do you know what to do next?Provide the startup with insights* necessary to draft a continuation plan.Document/log the efforts and derive initial validation criteria for collaboration.

*E.g., consider the internal end-user of the service (usually corporate mid-management).


Other common assumptions

Assumptions – enterprise Assumptions – startup
“Our project sponsor knows exactly who’s an end-user of our service.” “Innovation with a startup can be done without internal managers allocated to the project.”
How can you challenge it? How can you challenge it?
At every stage of the project ask your team: If we were to release a beta version of the service tomorrow, how would it work? Do we need to train the staff? Does the staff need a special interface to operate it? Your true end-users are often also hidden within the company. Ask yourself: Will I be able to be present for 1-2 weeks of the on-site pilot full time? Can I join a telco with the startup weekly on their schedule? Often, it makes sense to allocate a PM for practical tasks early on, to have a prepared person ready to scale the effort.

Vertical Collaboration ToolBox

 

Debunk assumptions –

4 fundamentals of collaborative relationships

 

Use these cards to set up a dialog or a series of talks about your collaboration project. It can serve you as a checklist for a project that is just starting or the projects that came to a stall for an unclear reason. For example, you can include this template into your collaboration project kick-off agenda to inspect mutual expectations. Another possible use-case for these cards is conducting a meeting on conflict resolution if you noticed that deeply ingrained stereotypes have revealed themselves throughout the project.

TO DO’s for an enterprise TO DO’s for a startup
  • Financial
    Discuss with the startup the estimates for collaboration development costs. Work together on variants and breakdowns.
  • Personal
    Discuss the company stakeholders, burn rate and parallel projects. Where does your collaboration lay in their greater activities?
  • Organisational
    Discuss the capability of the company to scale with you. Can they supply your demand? What will you have to compromise?
  • Collaboration related
    Start thinking of what gateway of quality (quantitative) this project will have to pass.
  • Financial
    Ask your partner about the resources that are typically allocated in your area.
  • Personal
    Align your calendars and make sure to sharply set the checkpoint milestones.
  • Organisational
    Learn your partner’s organisational structure. How would you scale from a local pilot? What is business interest (financially) in your segment? Is this interest distributed or centralised.
  • Collaboration related
    Start mapping the profitability metrics of your opportunity. It will later become validation for your venture suggestion.

More details?

Please get in touch with Sasha Kazantsev if you should have any questions or if you need more details.

Sasha Kazantsev

Strategy | Collaboration

sasha@vertical.vc
+358 45 878 7079