Successful Cooperation Between a Start-up and a Corporation: Theory & Practice

Rapidly changing markets, products and services offered by start-ups make big companies think about changing their approach. Their business model has been tested for years and established, so it’s not easy to take on something new and risky. Large companies usually take on the calculated risk and their pace of work is relatively slow.

However, start-ups are starting to take the leading positions in almost every industry in the world, thankfully due to rapid prototyping and risk-taking, they are able to create innovative solutions. They work in smaller teams with a single-level hierarchy, ready to change an existing business model and able to better respond to the market demands. This is also the main reason why cooperation between large companies and start-ups is necessity.

Productive ecosystem – the goal of cooperation

The aim of cooperation is to create a productive ecosystem that reduces the time to innovate and use technologies more efficiently. Many popular brands have also decided to start such a cooperation.

The amount of information and data in the world is increasing every day, so companies are looking for solutions to automate their internal processes in order to save time and resources. Modern trends show that companies do not need to develop customised business solutions that are very expensive, but are able to use already existing ones, and this especially applies to small, medium-sized businesses. At the moment, there are enough exciting business solutions in the market created by start-ups so that every business can choose the best and the most suitable one for themselves. In the near future, companies will also need employees who are able to navigate and, more importantly, deal with all the business solutions available on the market.

Cooperation between technology start-ups and large corporations is necessary to promote innovations in the world. It can be beneficial for both sides, helping old companies to enter and create new markets, and for new businesses to develop their products. The management of both companies have the opportunity to share common strategic goals such as the development of the company, improve their competitiveness and increase revenue. Even a partnership with a potential business trap may prove useful, as it is difficult to break down an already established business from within.

The attitude of old companies in Europe is changing: most European companies today see the importance of digitizing and communicating with the start-up world. Successful cooperation depends on the ability of each party to understand the other’s interests, expectations, intentions and the ethics of culture and work. Both sides must come to a good, mutually acceptable model of cooperation, which can be either incubation, acceleration or partnership, as well as clearly defining the roles and responsibilities of each party.

Where some have deficiencies, others have amplitude

Start-ups and corporations may seem like competitors, but in reality they are very much needed for each other. Why? The reason is quite simple, where one has deficiencies, there is a potential for another with amplitude. Start-ups are flexible in thinking and decision-making, while corporations have accumulated rich experience and knowledge that has allowed them to grow into large, successful businesses. A large company could be compared to a giant liner who has difficulty in maneuvering fast when the market demands innovation, while new businesses have the capacity to continually develop new ideas. Business cooperation brings benefits to both parties – the big company gets the chance to quickly get creative and innovative solutions, while the new company gets new contacts, visibility and knowledge of the requirements of big companies.

Also, Latvia, which many would like to call a start-up’s land, is no exception, for example, Deloitte Latvia, specialising in outsourcing accounting services, successfully cooperates with the start-up CakeHR, which has developed HR management software. CakeHR, by the way, took the 5th place in the most popular top of Latvian brands; The company is working globally – with customers in more than 70 countries around the world, and according to Gartner, this company is currently ranked 8th among the world’s most popular HR solutions. CakeHR offices are located in Riga, London and Tallinn.

First, there was mutual interest in innovative solutions

The cooperation of these companies started more than a year ago when Deloitte Latvia established a new business service line, specializing in outsourcing accounting services with innovative solutions, while it was looking for innovative solutions to automate accounting and internal customer processes. As one of these solutions, one was looking for a cooperation partner in the field of personnel management, which is able to provide self-service function to the employees of the company (the software interface had to be user friendly, it had to be understood by any user without special training). Initially, several personnel management software solutions were evaluated, but CakeHR was considered to be the most suitable, with a flexible approach to various improvements (excellent feedback from existing customers, international experience), as well as support team presence in Latvia that provides more convenient communication.

Robert Schlegelmilh, Chief Accountant for Deloitte Latvia, finds that many companies may also use similar applications, but the problem is that they are unable to integrate the system into the company’s internal processes and automatically integrate the data into the accounting system, so the data is generated, but they still need to enter the information manually in the accounting system. Thanks to the API solution, the CakeHR software manages to communicate with almost any software that also has an API solution. Deloitte Latvia, on the other hand, integrates systems with robotic process automation (RPA), which is a much more flexible solution, significantly improving processes.

Benefits of cloud solutions

The service provided by CakeHR is a cloud-based solution, not a program installed the on enterprises servers. One of the advantages is the free updates that are automatically available to all customers instantly, while the monthly service price is dynamically calculated based on how many employees use CakeHR. Special added value is also the CakeHR mobile iOS and Android smartphone applications, which many competitors do not offer. Consequently, paperwork is no longer required, as all data entered, such as employee absences, are automatically entered into the accounting system, even without the presence in the office.

CakeHR software also offers special features such as employee 360-degree evaluation, expense management, time-tracking charts, and onbording-ofbording, which means a variety of recruitment and dismissal processes. Many manual activities are no longer needed, and the company is able to save time and focus on its business, thus being more efficient and competitive on the market.

Benefits for all parties

The start-up is also delighted to have been chosen as a Deloitte partner. Kaspars Upmanis, CakeHR CEO, believes that the CakeHR solution, combined with high security and quality standards, was crucial for Deloitte Latvia to acquire new business partners. Since the implementation of the project was smooth, there is no shortage of positive feedback that opens the door to other potential customers. According to Kaspars Upmanis, the co-operation has also benefited Deloitte Latvia, as it gives a large corporation a touch of freshness and innovation, and proves that the corporation have not only standard solutions, but also different innovations.

Corporate benefits are clearly visible. They gain access to the latest technologies and business models, avoiding the usual slippage that the corporation faces when trying to introduce new things within the company. The corporation gets a better market position and is able to offer the most modern product. A start-up, in exchange for its ideas and creativity, gets support and resources from the large market participant. Thanks to this collaboration, the start-up, in turn, is gaining market recognition or funding

Risk or not to risk

Co-operation between both large corporations and start-ups must be carefully considered. For start-ups, collaboration with big and well-known companies is tempting, but the new ones need to work hard to meet all the big business requirements. Meeting the requirements may require large investments, which can sometimes deter start-ups from working with big market players. Large companies, on the other hand, may be at risk with a start-up as a partner due to the stability and credibility, however they are compensated by flexibility, the ability to meet the needs of the client, and they are more willing to enter into contractual relationships than competitors already in the market, pricing is also more flexible.

Thinking about the future

“Successful cooperation can develop if there is mutual interest. Cooperation with a start-up in the Latvian economy is a viable model. We need each others help and to pull each other forward. They have partnered with a company, who has a name and the team of professionals who can understand customer’s and legal requirements, thus improving their system. We, in turn, benefit from the flexibility of CakeHR and their skills, which we do not have and which help us to sell accounting services, offering interesting and innovative solutions,” summarizes Robert Schlegelmilh.

Each company has customers that benefit from the services of another company. Those who use HR solutions can benefit from payroll services and vice versa.

Roberts believes that the digital solutions offered today are more suitable for medium and large companies, because their implementation is a time consuming, expensive event and requires special knowledge and skills. I am confident that the role of the accountant will change over time from simple data input to a person who is able to handle the latest technological solutions, or at least be able to follow, control the flow of data, information and documents. There are still a lot of accountants doing manual work, but over the next few years there is likely to be a demand for accountants who can work with the latest technological solutions, thus automating company processes.

Kaspars, on the other hand, admits that at the moment, new businesses are an up-to-date fashion trend because people like new things and new cools.

“It’s important to be persistent and believe in yourself. If there is a conviction that the product is good and useful, it will sooner or later bring tangible results, ”says Janis. “But my call to big customers – don’t be afraid to risk in the reasonable boundaries, because the benefits can well exceed the expected results. If you really want, you can always find a common denominator and a solution to make everyone happy at the end.”

Collaboration between corporations and start-ups is a challenge for both partners and it demands to get out of the usual way of thinking. Corporate employees are accustomed to following standardised procedures and are challenged by the creative behavior of start-ups. But many start-ups have set up their own businesses with the aim of breaking down borders and are challenged by the idea of ​​working with those they want to get off the pedestal.

Questions to start-up – to  be qualified for a collaboration with corporation:

• IS the start-up budget sufficient to ensure the sustainable and successful professional marketing of products and services expected by the corporation?
• WHO will sign the deal and be authorized to protect the project against corporate environment failures? Is their pain threshold high enough for them to act?
• WHO is a sponsor in a corporation that will help you enter into partnership, business and future collaboration?
• WHAT are the main indicators for successful cooperation? Will you be able to meet what is expected of you and to deliver the promise?
• WHAT is the corporate goal? Why do they want to work with you?

Questions to Corporation- to find the most promising start-up for collaboration:

• WHAT are the long-term benefits and advantages of this collaboration?
• WHY is this something different from what we create inside the company?
• WHY is a start-up interested in cooperating with us?
• WHAT kind of model of cooperation will we use?
• WHO are these interested people inside of the company, who will guide the whole process?

Norberts.

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