02 Nov 2017 |
Research article |
Entrepreneurship & Management
Centech: Linking Small and Large Businesses
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On September 25, 2017, Substance published an article entitled “Building Ties between Large Corporations and Start-Ups, the MIT Way“, which described the approach developed by MIT, encouraging large corporations to create links with start-ups. This article describes the approach favoured by Centech, the business incubator and innovation hub at the École de technologie supérieure (ÉTS) in Montreal, to interest large corporations in start-ups, and compares both approaches.
Centech: Incubator AND Innovation Center
Centech has evolved to better meet the needs of start-up companies. To its incubator chapter, it has added another innovation hub so that start-ups can adopt an open innovation approach with large corporations, in collaboration with talented researchers and students.
Corporate Spaces Dedicated to Large Companies
Centech is expanding: this incubator and innovation hub will open a new building on the ÉTS campus in spring 2018. In this new location, ten spaces will be offered to large corporations to work with researchers and start-ups. Siemens Canada was the first to book a corporate space and others will join shortly.
Why would large corporations choose office spaces at the ÉTS campus? According to Richard Chénier,
“Large corporations are attracted to Centech because of technology transfers, creative problem solving, innovation opportunities with start-ups, partnerships with professors and researchers on innovative projects, and talent management. The latter is an important factor for these companies considering that demand for new talent increases faster than supply.”
For Richard Chénier, companies can no longer continue to innovate in a vacuum. In order to offer innovative products and services, they must now address needs influenced by the major social challenges of the 21st century. Large corporations must innovate with collaborators, develop partnerships and sometimes even work with competitors. Centech offers them the opportunity to experiment with the open innovation concept with start-ups and with other large corporations that will share the dedicated spaces.
The arrival of these large corporations on the ETS campus will attract the interest of students and researchers alike. Centech believes that this strategy will create leverage in entrepreneurship: students, researchers and professors will consider the possibility of going into business to work with the large corporations operating on site. Several “spin-offs” could emerge ̶ companies founded by professors and students as a result of their research work.
About Buying a Start-Up
Many companies acknowledge that buying start-ups is not the best strategy. Instead, Centech encourages them to partner with start-ups early in their business cycle and to help them grow. These types of strategic partnerships can allow start-ups to take off and develop their autonomy while maintaining their agility.
The Mandate of First Customers
Centech offers two start-up programs: the first one, called “Acceleration”, is a 12-week program that allows entrepreneurs to start their business project with advice from Centech mentors and experts. The best business projects can then enter the “Propulsion” program, which lasts a maximum of two years, helping them move from idea to innovation and become a profitable business. As of 2017, 30 start-ups are part of the Propulsion program: 80% of these companies are already doing business with their first customer.
These first customers are experimenting technologies in real-world conditions right before the marketing phase, known as the “lean startup” approach, in partnership with the start-ups. These customers develop a privileged relationship with the start-ups: they can devote research and development time and resources to help them develop their technologies and reach the desired marketing phase. They will then be able to:
- help start-ups market their products and services;
- invest in the start-ups; or
- acquire the innovative technologies.
- Evenko annually produces more than 1,200 music, family and sporting events throughout Quebec, the Atlantic Provinces and the northeastern United States. It is the largest independent developer, producer and broadcaster in Canada.
- Location Locketgo Inc. offers a “turnkey” smart locker rental service for event promoters and festival goers.
- SpiritEvent creates and markets automated and self-service cocktail vending machines.
Do’s and Dont’s in Dealing with Start-Ups
Large corporations can get involved with start-ups in several ways:
- Experimenting in situ, in real time, with start-up product and service prototypes under development;
- Helping start-ups market their products and services at a later stage;
- Investing in start-ups;
- Acquiring innovative technologies.
They must avoid:
- Negotiating legal requirements and guarantees with start-ups: these small companies will have great difficulty in meeting them;
- Buying a start-up and integrating it into the corporation too quickly.
Start-ups have qualities that differ from large corporations—the sense of innovation and agility that allows them to adapt, and quickly adjust to the needs of their customers.
A Word on Intellectual Property (IP)
Some large corporations try to quickly cash in on IP when working with a start-up. For example, a large media company offers to collaborate on a start-up company’s project by allowing it to use its infrastructure to experiment with an idea and to design prototypes. It may happen that the initial idea evolves or that new ideas emerge during the experimentation phase. The situation becomes more complex when the large corporation tries by legal means to establish a license sharing agreement on transfers and revenues generated by these new ideas or their evolution. Start-ups do not have the resources to enter into legal agreements to share IP rights or to defend their rights if a legal conflict occurs. It is far better to support them so that the initial idea becomes a profitable innovation; there will be ample opportunities for agreements afterwards.
Centech vs MIT
Centech and MIT share a similar approach: established companies are better off developing privileged relationships with start-ups to help them take off and become self-sufficient while maintaining their agility. Start-up companies must be given the chance to innovate. If successful, there will be many opportunities for the established businesses that helped support them.