With one startup for every 1,400 citizens, Israel may have the highest “innovation per capita” ratio of any country on Earth.
That makes it little surprise that Itai Green, founder and CEO of Innovate Israel, would be the one to help explain what corporates need to do in order to make the most out of their collaborations with startups at FinovateEurope in Berlin last month.
Green advocates an innovation model – open innovation – in which corporates leverage their local ecosystems to collaborate and partner with startups, entrepreneurs, universities – even customers and other corporates – in order to develop whatever products or services will allow it to grow and expand. This argues against the in-house innovation model, which many have found to be an insufficient way of driving major innovation due to factors ranging from a lack of internal incentives to inconsistent and/or unclear support from management.
Green made the case to our audience that open innovation provides the lowest risk and the greatest return on investment a company can ask for – if they do it right.
In his presentation at FinovateEurope this month, Green outlined the most important factors that businesses need to keep in mind when working with innovative companies in an open innovation context. He listed nine distinct “Tips for Corporates” – a few of the more compelling ones are highlighted below.
Commitment – A theme that was quite common at FinovateEurope in Berlin this year – that bringing tech-savvy diversity to a financial institution’s board of directors was a must – was echoed strongly by Green. He advocated that companies have at least one technology/innovation-oriented board member – though having three, he noted, was far better. Green said that this kind of board representation was increasingly common in Israel where he pointed out that boards of directors typically had 20% of their members under the age of 40. Compare this to the S&P 500, where the age of the average board member is above 60.
FOMO > NIH – Even among companies that have recognized the importance of digital transformation, there can be a reluctance by corporates to embrace non-native ideas. This “Not Invented Here” attitude can be especially harmful when working with innovative startups, who often arrive on the scene with a passion to, if not disrupt, then certainly make a clear difference for their partner and a strong representation of their technology.
Green argues that a “Fear of Missing Out” on the next big opportunity is a more healthy psychology for the corporate when working with a startup rather than any sense of injured pride at not having come up with the innovation on their own.
Show Startups the Money – Another highlight on Green’s list was the importance of paying for the work. This was a point that Steve Frook of Best of Show winner Horizn would underscore in his FinovateEurope presentation, Landing Your First Bank Customer, later that day. From Frook’s perspective, it was important that startups avoid the temptation to, essentially, work for free in an attempt to show their enthusiasm and eagerness to collaborate. Establishing a business relationship – even a modest one – was an important early step for startups to take, Frook suggested. Green, from the perspective of advising the corporate, concurred. Companies should come to collaborations with startups with a budget and be prepared to use it. Paying startups, Green explained, sends a positive, professional signal to the company and to the broader community of innovators and entrepreneurs, as well.
Founded in 2017, Innovate Israel helps partner global corporations with innovative entrepreneurs and startups in Israel to help them implement advanced technologies in their businesses.