‘How to get access to new technologies to improve operations and explore new markets?’ ‘How to validate and deploy my technology and get access to the market?’ Two different questions from two angles with the same context and the same perspective: making a partnership between large and small work. Reality is that these companies often face difficulties working together. How can we bridge the gap between start-ups, scale-ups and corporates and create valuable partnerships? During Buccaneer Delft’s Partner meeting on May 14, Geert van de Wouw, Vice President at Shell Ventures shared his key takeaways from partnerships with start-ups and scale-ups.
An industry in great need for innovation
Since the last oil crisis in 2016, the oil&gas industry is still very depressed which is noticeable in their share price. They’re not making any money for their shareholders and there’s not enough margin to fund innovation. The sector is clearly in need of efficiency improvement, especially to compete with renewable energy. At the same time renewable energy prices are continuing to go on a spectacular low-cost curve, both in solar and wind. Setting ambitious targets related to zero-emission, makes the challenge even bigger.
Corporates are being outnumbered, outsmarted and outspent by start-ups when it comes to innovations. $30 billion has been spent by venture capitalism in start-ups in the new energy and oil&gas domain. A strong case to leverage external innovation through start-ups and scale-ups and reason enough for corporates to get involved and create partnerships.
Identifying the challenges
Reality shows these partnerships in the making often face difficulties. Geert mentions some hurdles start- and scale-ups are facing when trying to establish a partnership with corporates.
The oil&gas supply chain has its challenges, the sector is mainly organized in joint ventures which makes the level of influencing tender boards very limited. Next to that Integrated Services Contractors and EPC’s are often not incentivized to ‘pass-through’ innovation to the field. Their focus is on meeting schedules and budget targets. They don’t like technical risks. And then there are lengthy qualification cycles, having to requalify in different regions (‘reinventing the wheel’) and onerous contract terms which may not always fully apply to start-up companies.
‘We like the idea but not enough because it’s not ours’ or ‘We’ve already done something similar’. Also known as the ‘Not Invented Here’ syndrome. Companies favour their internal R&D over external technologies, especially in times of crisis and prefer incumbent innovation partners with established relationships. Read more about the NIH syndrome in this blog by Buccaneer’s Seriena Bal.
Everyone is always fascinated by new technologies but in the end, nobody wants to go first. Whether it is by having limited incentives to innovate or the unwillingness to ‘take one for the team’, it all comes down to risk aversion. Or local laws and regulations inhibit risk taking. Companies rather ‘race to be second’ but building that first pilot plant is of critical importance to start-ups.
Start-ups and scale-ups are often offering a segment of a broader solutions. They’re too much ‘product thinking’ and lack ‘system thinking’. Like how is it going to be integrated with existing assets, how will it be executed?
Learn, adapt and act!
Now what can be done to tackle these hurdles? Unfortunately, there’s no silver bullet for creating partnerships between corporates and start-ups and scale-ups. But when knowing the challenges and difficulties, you can learn and adapt to act. These are the takeaways by Geert van de Wouw:
- Involve assets at the earliest moment and make the innovation their success;
- Introduce a ‘procurement light’ process for start-ups;
- Focus on internal champions: leading assets, preferably with 100% ownership;
- Provide downside financial protection so perception of risk is reduced;
- Assign people in the company, for example Implementation Managers, to facilitate the deployment process;
- Look for executive sponsors to support/push deployments across the line at key moments, to support Project Managers taking technology risk;
- Think ‘system integration’ from the get-go.
Also, have a look at this article by the University of Cambridge about making partnerships work between established companies and start-ups.
Making partnerships work
Let’s put theory into practice and make these partnerships work! Would you like to get in contact with technology ventures? Or does your company have a project or topic which requires technology deployment? Reach out to Seriena Bal, Managing Director at Buccaneer Delft, email@example.com to help you get in contact with the right people.
After already having several positions within Shell, Geert van de Wouw became Vice President of Shell Ventures in 2012. Shell Ventures is Shell’s corporate venture capital arm where Geert has been able to help shape the future of Shell in areas such as renewable power and mobility, whilst making their oil & gas assets more cost-efficient and sustainable. And at the same time being a (launching) customer to start-ups and scale-ups and getting internal departments onboard. Geert also wrote a blog addressing this topic. Read it here.