Large corporates and startups seems like a match made in heaven. The former have the customer base, budget, and scale that the latter crave. And startups bring speed and agility and can help enterprises experiment with emerging technologies and business models. There’s even a whole industry of matchmakers — platforms and accelerators that aim to bring the two closer together. But the reality of those relationships isn’t as rosy as the numerous press reports of hackathons, incubators, and proofs of concept (POCs) paint.
Many emerging vendors have negligible track records, lax attitudes toward risk and compliance, and questionable financial viability, which all could undermine operations, draw fines from regulators, and damage brands. That’s why many enterprises’ risk, compliance, and procurement departments have implemented robust rules and processes for supplier onboarding. But third-party risk management processes built for million-dollar outsourcing deals will preclude working with startups or expose you to more risks as managers bypass the process. Conversely, it’s not about cutting your process to the bone but rather adjusting it to startup-specific risks and mitigating those with equity investments, board seats, and accelerators. In our new report, my colleague Duncan Jones and I outline a risk-tolerant approach with specific processes and frameworks that will enable you to balance innovation and the risk of working with startups.