Don’t Just Attack Incumbents, Court Them — With Eyes Wide Open

Startup entrepreneurs often fashion themselves as disruptors of established markets, who can better serve dissatisfied customers. Increasingly, though, the path to success includes a partnership of convenience with a large incumbent firm.

Some entrepreneurs meet incumbents through formal innovation exchanges, where they get exposure and feedback. One innovation exchange, for example, paved the way for a large beauty retailer in Europe to be the exclusive retailer for a startup focused on nontoxic beauty products. Through the same exchange, a large packaging manufacturer and distributor signed a five-year deal with a startup for manufacturing analytics and predictive maintenance.

Other pairs connect through venture capital firms that have hired staff explicitly focused on matchmaking, in order to find the right large partners for the small portfolio companies.

Each party can benefit. The incumbent gets access to new technology and ideas, as well as an entrepreneurial culture that may spark useful changes in the older bureaucracy.

Startups, meanwhile, can profit from the relationship in several ways. They gain access to a large customer base and, using the incumbent’s name, can get a meeting with a customer in days, where previously it might take a year. The incumbent’s scale also provides expert resources to solve issues ranging from factory safety to choosing accounting software to untangling supply chain snarls, potentially saving time and hassle.

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