How can a state corporation start working with start-ups?

State-owned companies are often associated with huge sluggish structures that have been working for decades on a fixed model. But even organizations supported by the state have to change sooner or later.

Dmitry Maslennikov, the founder of private company disruptive.vc, shared his thoughts about the introduction of innovations in state corporations.

State companies are beginning to search innovations.

Innovations in state companies became one of the key issues of Dmitriy Medvedev’s presidential term. Many corporations then presented their innovative development programs, but did not achieve real results, because they did not have a deep understanding of the need for innovations. Many programs were simply tailored to what the organization was doing all that time.

For the last seven years the situation has changed, the culture of innovation has taken root in the Russian market and state companies have started to understand their need to change the structure according to new realities. Vladimir Putin emphasized this need during his speech at the St. Petersburg International Economic Forum, giving companies the task of creating internal venture funds.

Innovations in state companies do not have to be implemented from the top, it’s also possible from lower level. There’s no need to have a department for cooperation with start-ups in its structure to make changes, innovative solutions may come from the company’s employees.

Often, such proactive people are either employees working with technology, or the ones with business skills who understand how to use innovations to earn or save money.

To achieve it, the organization should have opportunities for self-realization as for internal entrepreneurs as for employees trying to introduce something new. These people do not need additional motivation, they want to change the world for the better, and for that the only important thing is a suitable environment. Unfortunately, this can be difficult in a hierarchical state corporation. The only possibility is to independently catalyze changes by gathering a group of like-minded people and developing a plan with concrete valuations and prospects.

General tips for creating innovative environment in a state corporation that can be proposed to its direction:

• less control
• more flexibility in decision-making process
• to shrink hierarchy
• to develop horizontal connections
• to implement the right to make a mistake

The last tip is of the highest importance for developing innovations. All experiments are related to a risk of failure, and if any failure is followed by a punishment, then you can forget about the innovative solutions’ development in the company.

Russian state-owned companies have already realized the value of innovation and have started to implement solutions for business development. For example, The Rosatom corporation created an accelerating program for searching promising projects both within the company and its subsidiaries, and outside the corporate structure. At the initial stage, there were more than 4,000 applications with projects of varying development degrees, then some of the projects were selected for acceleration and training which was carried out on the company’s online platform. The program’s result was the selection of 15 projects which were presented to the Rosatom top managers. In the participants’ selection, the company’s experts evaluated projects from a technical point of view and the external experts helped with business expertise.

If the company does not have the opportunity to create innovative solutions, you can collaborate with startups for business development. In Russia, there are some examples of such cooperation: at the end of last year, the fund North Energy Ventures together with the Gubkin Russian State University of Oil and Gas created the oil and gas startups’ accelerator Gubkin Innovation Booster. As a result, the projects were able to communicate with potential customers from the oil production and refining sector and two projects got investments from North Energy.

There are several models of the company’s interaction with the startup:

• partnership: the company uses the product created by the startup and they share the profit;
• to order a research to create a complex technical solution;
• license: the company buys the right to use the product;
• corporate venture investments

How to create a department for work with start-ups?

Whichever model the company chooses, there is always a risk of misunderstanding between the corporation and the startup. To prevent this, the company must formulate its requirements, requests and aims accurately, as well as document them in agreements.

Stages:

• Define your goals. To begin with, the company must understand why they want to work with startups.
• Formulate a request for innovation: without it, it is impossible to find out what the company needs.
• Make up a valuable offer. It should include resources that are really useful for startups and be profitable for them.
• Distribute the responsibility among the company’s employees. If there are no suitable people to interact with the startup in the corporation, it will not lead to success for the company whatever project will agree to collaborate.
• Define the conditions and the format for interaction with start-ups. Often it depends on the company’s policy and financing. In state structures, there is a number of restrictions that can make the desired model impossible, for example, it may be necessary to carry out a tender.
• Determine the source of searching startups, the strategy for entering the market and for organizing PR events.

Tips for a startup that wants to collaborate with a state company

You have to understand the company’s needs very well. To do it, it is necessary to make a research based on the corporation’s open reports and strategic plans.

If your solution coincides with the company’s needs, the next step should be to find the right person within the corporation. He or she should become your guide and help to bring your idea to the direction.

The manual search for a company to collaborate with can turn out long and inefficient. To facilitate the interaction between companies and startups, soon there will be a platform on disruptive.vc where companies will be able to upload their requests, and startups, to offer their solutions to state corporations.

The Ministry of Economic Development institutions are also supposed to help to create innovative solutions in state companies. They work with corporations, but in order to achieve results, state structures must share their activities and experience with private companies. Many of them understand it: according to our statistics, this year there are much more state companies (mainly related to mining and energy) asking for help in disruptive.vc.

The complexity of innovation development in state-owned companies is often due to the fact that the modernization is not a high-importance issue for them. But to maintain competitiveness and enter the international markets, innovations are needed. More and more state companies understand this, which means that they create development opportunities to people with innovative abilities.