Buy, build or partner: A new model of working with startups


Earlier this summer Nike announced it was acquiring AI startup, Celect, in order to “beef up its predictive analytics strengths”. It’s a smart move. A data move. Like all things artificial intelligence, this solution needs a lot of consumer or retail data to get smarter. And Nike, with its $36.4 billion in revenue last year, has a lot of data. 

A tech acquisition is a complicated beast that comes with as many challenges as it does advantages. And it should not be seen as an innovation silver bullet by most corporates. 

Take augmented reality by comparison for instance, an area where we’ve seen multiple acquisitions over the past couple of years. This space is changing so rapidly, the tech you buy is almost immediately obsolete. There is higher image quality every day, new capabilities in what it can read – like skin diagnostics and not just makeup in beauty for instance – and constant challenges to stay ahead in the market as a result. 

For a company that has pulled such startups in-house, there needs to be serious commitment to advance the technology. Unfortunately, what tends to happen is that a lot of the potential development work gets lost. A startup on the outside, by comparison, has to keep evolving in an aggressive way in order to survive. But how can an acquired startup remain competitive if they can’t seek out your competitors as clients? 

Another approach to innovation is building, where brands create solutions in-house, or with agency partners, from the get go. More often than not, this sort of work comes under the experiential header: a tech solution based on the creative. What we frequently see as a result, is big investments (six figures and above) for little return due to the fact the technology just doesn’t rise to the task. 

Not that there aren’t successes within all this – there are many examples of building solutions internally, especially foundational or backend tech – that do make sense. But in our experience with the companies we work with and have gotten to know, it often doesn’t work. Even for basic technology needs, building in-house can frequently be met with many of the same challenges as an acquisition does, namely the fact progress and development gets caught up in the politics and daily grind of everyday business. 

It doesn’t matter what size of organization you are in this case either. We work with large public companies that are leaders in the industry – and we see the same challenges time and again. Things don’t evolve quickly enough and objectives are not met. Eventually, no one is watching that investment any more and innovation gets a bad rep. 

So we believe in a third option. 

With the challenges presented by buying and building, not to mention a lack of progress in internal culture making room for innovation to be successful, we decided to create a platform for partnerships. This middle step is known as open innovation. 

Very simply, this is about setting objectives internally, creating a blueprint of what you want, and then searching exhaustively for the best external partners that fulfil that brief. 

One of the benefits of this tends to lie in the quality of output you receive. When working with an outside partner – particularly at the startup level – a new large corporate client could become the centrepiece to the startup’s growth. This often means the team will continue to update the product and guard its integration after launch. It becomes part of their story. Having the chance to work with an established brand or retailer is almost sacred to an entrepreneur, which is a very different mindset to what you may find in an employee. 

But startups struggle to deliver work ethic with a full understanding of execution needs, deadlines and ability to navigate the red tape in corporations that could hold back the project. That’s why we believe open innovation is most successful when it comes with an assigned partnership manager. Our ultimate role is about providing the framework that can lead to success. 

What we’re increasingly being asked for more recently however, and thus now offering, is essentially a hybrid model – one that is all about partnerships, but unique ones that more closely align with the optimal version of building. This is where we start talking about having your cake and eating it too. 

Many companies have figured out that working with curated top startups is the most cost-effective and efficient option. But then last year, we started to see a new conversation emerging around the fact that often what retail executives look for just doesn’t exist as yet. The kind of solution you have in mind is not what is being pitched to you. You look at all the possible startups in the space and all of them are missing that one thing. You don’t want an incomplete approach. You want the full package.

How are you thinking about new innovation? The Current Global is a transformation consultancy driving growth within fashion, luxury and retail. Our mission is to solve challenges and facilitate change. We are thinkers and builders delivering innovative solutions and experiences. Each of the rules referenced above is matched by one of our products and services. Interested in how? Get in touch to learn more.