11 October 2015

Entrepreneurs could see synergy working with larger companies

Corporations seek greater revenues from working with entrepreneurs, while large and small businesses are failing to use digital collaboration to innovate together, according to new research* by Accenture. As a result, they are putting at risk a US$1.5 trillion growth opportunity, equivalent to 2.2% of global GDP.

The report, Harnessing the Power of Entrepreneurs to Open Innovation, published in association with the G20 Young Entrepreneurs Alliance, surveyed more than 1,000 entrepreneurs and 1,000 large companies in the G20 economies. It found that 82% of corporates say they can learn from startups/entrepreneurs about how to become a digital business. And they expect the proportion of their revenues generated by collaboration with entrepreneurs to rise from an average of 9% today to 20% in five years.

Large companies and entrepreneurs agree that today’s corporate venturing and incubator models of collaboration will increasingly give way to more open and joint innovation, whereby corporates don’t just fund startups, but use digital collaboration to jointly create innovations in broader networks of partners. However, corporates and entrepreneurs don’t see eye to eye on how to achieve that.

While 78% of large companies say that working with entrepreneurs is important or critical to their own growth and innovation, only 67% of entrepreneurs hold that view. And while 41% of corporates believe small companies are committed to supporting their growth as they work together, only one quarter (24%) of entrepreneurs think large companies are likewise committed to supporting the growth of their smaller partners. Further, entrepreneurs and startups are four times more likely than corporates to say their counterparts lack commitment to working together (29% versus 7%).

“In the digital economy, corporations have the opportunity to disrupt their markets by working more effectively with innovative startups to jointly create new products and services,’ says Paul Daugherty, Chief Technology Officer, Accenture. “That means corporates should not just fund startup innovation, but actively participate in it by pooling ideas, assets and intellectual property. And it will require them to take new approaches to sharing risks and rewards more equitably.”

The report also reveals that greater digital collaboration between G20 large companies and entrepreneurs could result in an additional US$1.5 trillion in global economic output, according to Accenture’s Digital Collaboration Index and economic model, equivalent to a 2.2% uplift to global GDP. US$779 billion of the total would be generated directly through greater revenues by large companies, and US$671 billion would be generated indirectly through economic activity in value chains.

The Index uses the survey data and economic modelling to predict the potential dividend of greater digital collaboration. It shows that the top fifth of those committed to collaboration achieved higher levels of revenue growth and that, if all entrepreneurs and large companies were to achieve the degree of collaboration of the top 20%, revenue growth rates could rise between three and 18 percentage points for entrepreneurs, and between two and 16 percentage points for large companies.

“The journey to open innovation requires large companies to recognise that collaboration cannot continue to be done on their terms, on their premises or just for their benefit,” said Jitendra Kavathekar, MD, Open Innovation, Accenture. “To make a success of digital disruption will require new forms of innovation in which multiple partners collaborate to create, fail and try again in more experimental and entrepreneurial settings. That can only happen if more participants come together through digitally enabled networks to create innovations together.”

*Accenture explored the views and attitudes of entrepreneurs and large companies relating to collaboration and innovation. The research, conducted in cooperation with the G20 Young Entrepreneurs’ Alliance, comprised of the following:

· An online survey of 1,002 entrepreneurs and 1,020 executives at large companies
· In-depth interviews with 20 executives at companies and institutions
· Analysis of the digital business and collaboration landscape in all G20 countries