Partnering with start-ups might sound like a move reserved for the fin-tech or food and beverage industry’s global giants like Pepsi or Unilever. But it’s not just for those – recently mid-cap food and beverages corporations are discovering that partnerships with start-ups might be the key lever for their organisation’s ability to innovate. Caroline Miron is starting to believe. As Open Innovation Director at Agropur Cooperative, one of Canada’s leading dairy producers, Miron has created a program to be able to collaborate with several start-ups in recent years. She says opening our innovation system, in addition to our internal innovation processes, has been instrumental in delivering faster to consumers innovations that they love and that will reinvent dairy! ‘The rate of change in the food industry keeps accelerating, consumers are more and more demanding – which is a good thing, they don’t look only for big brands anymore,’ says Miron. ‘To be in tune with trends and consumer evolution, start-up innovation is a must.’
With mergers and acquisitions too costly for almost everyone these days, more and more food and beverage companies are trying out partnerships with emergent start-ups. It can help to drive growth, relearn innovation with renewed agility, and keep a finger on the pulse of an industry experiencing disruption on many fronts. Doing so is not without its risks: ROI can be low in the first years, you’ve got to be prepared, and there are pitfalls to avoid – like the dreaded ‘Not-Invented-Here’ (NIH) syndrome. But with the right planning and just a bit of bravery, mid-cap corporates can build partnerships with start-ups, generating changes that will have them reaping benefits for years to come.
Success principles for partnership
We can learn a lot from the dairy giant Agropur Cooperative – a status that had them questioning what role start-ups could play in their business. Was Agropur, perhaps, too big to see eye-to-eye with start-ups and to act on their developments – yet too small to snap them up and leave them to their own devices? With the market moving so quickly, they decided there was no time to wait and see, and in 2017 they took the leap. In the same time period, the Food and Beverage team at Plan began working on some projects to explore the success principles involved in making a start-up partnership work for large corporate organisations. Agropur’s experience is a great example of those principles in action.
1. Be lean, smart and flexible
You’ll need to adapt quickly. In 2016, Agropur has put in place its own Open innovation process called Inno Agropur. Agropur’s first move was a worldwide innovation Challenge – Together Let’s Reinvent Dairy – that led to an in-house incubator model to grow and work with brand-new start-ups. After evaluating numerous applications from around the world, it resulted in partnering with three start-ups to develop their ideas into actual products. ‘We could not pursue the projects as much as we would have liked. The projects were very disruptive, at a very early stage of development; too far from business reality. We mutually got some great learnings, and also, an awareness of the start-up ecosystem.’
In parallel, Agropur had gone with a lean startup approach for their own internal innovation team – learning like startups, to work with a small budget on tight timelines - fitting in with Miron’s principle of ‘frugal innovation’. It’s one of the lessons Plan has learned in our work developing start-up partnership models for corporates: It is great to make organisations more responsive to the marketplace. But that means changing your organisation’s processes and how you partner with outsiders. Keep your partnership lean and flexible – adapt your capital and time investment as you learn.
2. Go hybrid
That is to say partnership models have their value and you should try the ones that fit you at different stages. Having started to work with very young start-ups in the incubation stage, Agropur moved to an accelerator model, called Inno Accel. That meant working with start-ups that already had a product in the market, even if only on a tiny scale to increase their chance of success. But more importantly, it meant finding the right ones.
‘We don’t ask for equity during the acceleration period – which is what some accelerators normally do. We may do so after the program if we feel there’s a good strategic fit for both companies’ says Miron. ‘The no strings attached strategy is key to ensure we don’t miss the great entrepreneurs. Inno Accel is not our only way of working with entrepreneurs. We have many other programs, such as Inno Capital, a 40M$ co-investment fund with CDPQ and an entire innovation management online platform www.innoagropur.com on which we also host, amongst others, technical open innovation challenges.’
At Plan, we have seen organisations starting first with an investment fund, with limited human involvement, to test first if they can work effectively with start-ups.
3. Don’t go solo too early
It’s important to decide what you want to do on your own, and where you need external support. ‘For the first one, we did our own selection process and hired a lean start-up coach.’ says Miron. For the second year, Agropur identified five start-ups with the objective of helping them with industrialisation, access to the established market, and other growth-phase operations. They partnered with OSMO Foundation to help build the best accelerator program, and on top of their own team of two and an external coach, they offered mentoring from more than two-dozen employees working on everything from R&D and marketing to packaging. Bringing the outside in is one recommendation that has come back to Plan time and time again. As a well-known external accelerator owner told us, ‘You need expertise in entrepreneurship and time to nurture start-ups. Not a lot of people know how to do this.’
4. Manage expectations
Reassess what ‘failure’ means. The most common warning is to manage expectations. Start-ups have a high failure rate and require different business models along the way. But it often costs less than internal innovation projects.
The company Habit is a great example. Created in 2015, its vision of a personalised diet, determined first by a DNA test delivered to your door, followed by a ready meals subscription service and a nutritional recommendation. Campbell’s spent more than $60M to develop the service, and link it to their fresh ready-meal offer. But what they quickly discovered was that consumers wanted to change how they cooked and ate – not just receive ready meals. Habit has since suspended the food delivery aspect of the company and focused on the expansion of at-home DNA testing.
But is that a ‘failure’, as some have called it? Campbell’s gained invaluable insight into the marketplace and consumers habits. Start-ups are a great way to test new (pardon the pun) habits. If Campbell’s expectations were, ‘we’ll find out what’s happening in a rapidly changing space in the market,’ then they’ve succeeded wildly. As for Agropur, their programme created great relationships with start-ups, and they want to continue their journey together. ‘It has generated a new sense of excitement internally among mentors and coaches when they see that their advice has an immediate effect on the start-up business’.
Four questions to ask yourself about your budding start-ups
What types of innovation do you need?
Is it about supporting your brands, creating totally new propositions? Do you want to put out there a narrow brief or be open to very different ideas that your internal teams are not developing themselves? Caroline Miron discovered that Agropur needed start-up thinking in the tech spaces that surround their brands – so that’s where she’s looking next. Where do you need a little disruption? And, perhaps more importantly, what would ‘success’ look like?
What resources are available?
What resources are you willing to invest? Financial resources, sure, but also expertise, mentorship, coaching – or the time and money to outsource them. This was confirmed by other accelerators: ‘If you are only involving a small venture team and the Board, it won’t create the cultural revolution that your company may benefit from’.
Who will find these great start-ups for you?
Is it worthwhile to go through that process yourself, or perhaps find a third-party that can help you find the start-ups you need?
What models might work for you?
As Agropur has shown, sometimes one of the goals of a partnership is learning what model works for you. If you’re interested in getting new products or brands to market, the external accelerator model can make that happen fast. If you want to do some testing while pushing your company’s own mindset, perhaps an incubator – working closely with new but exciting start-ups – is the way to go. And for many, a hybrid of various options will likely be the best route.
Vanessa Mayneris is a product strategy and innovation consultant, heading the Food and Beverage team at Plan in London. She specialises in FMCG front-end innovation, working with some of the world’s leading brands in food and confectionery. You can read more of her articles here and subscribe to our in-house magazine.