July 6, 2018 at 14:27IIDF conference: corporations are not vs startups
We not only write announcements of events, but also periodically visit them. One of the vivid impressions of this summer for our team was the IIDF conference - “Launching pilots with startups. Cases of corporations. " As occupying an intermediate position between these categories, we can play the role of a referee and praise the organizers for their ability to maintain a balance. Contrary to the name of the site, representatives of corporations and start-ups divided almost equally, the problems and interests of one group did not clog the problems and interests of another in discussions, so the overall picture did not turn out to be one-sided.
Photos from Fria’s official Facebook page
For the most part, it was about the very first stages of cooperation — launching the project in test mode. The program neatly progressed from the general to the particular: from history and the general scheme to particular moments, surprises and mistakes that participants encountered in trying to apply it to reality. Under the cut, we’ll talk about everything we’ve learned in these few hours.
The first presentation was made by Evgeny Borisov , a representative of the IIDF, who presented a doklad with the saying “How and why should corporations launch pilot projects with startups”. In fact, a problem and subject field was outlined in it, which, personally, a bit distant from the topic, pleased us with its prudence.
Pilot projects have proven to be a necessary stage of digital transformation for large corporations. When this trend took shape several years ago, the IIDF team was optimistic and expected enthusiasm and vigorous activity from major players. But in fact, companies were in no hurry to integrate technology solutions from start-ups. They needed to see the result first.
The reality is: Russian startups are now underestimated. Foreign corporations are more interested in them than domestic ones, which is not bad for the founders, but not very promising for the economy.
To rock the market, IIDF took the position of an intermediary between giants and indie developers. First of all, it was work with corporations: discussion and identification of their needs. The following two blocks turned out to be the most promising:
In these areas, startups in theory can bring large companies a lot: new technologies, new business models, and access to new markets. But, on the other hand, implementation may not be possible or may not bring the expected benefits. That is why in the integration process, a testing stage is necessary - that is, a pilot.
Firstly, as Eugene emphasized, the effect here is economic. A startup should show in the allotted time that its technology is really capable of generating profit growth. For a corporation, this is the main argument in making a decision.
Another keyword is "short term." Ideally, tests should be run and run in a month or two. Abroad, they are already meeting these deadlines, but for Russian companies pilots still last 3-6 months. This is disadvantageous, first of all, for startups themselves, which often give a lot of time with a dead end option.
Finally, an important parameter is the presence of a two-way control system. Without this, there will be no material for analysis - the very economic KPIs that should determine the outcome of a case.
The launch of the pilot consists of five stages:
The transition to the next report turned out smooth: if Eugene defined the basic concepts and principles of pilot projects, Vadim Kapustin , development director of X5 Retail Group, spoke about how and why they began to be put into practice in his company.
Vadim Kapustin “Launching pilots with startups: practical cases” The
answer to the question “why” turned out to be a comprehensive review of the picture of the modern retail market. The main driver of innovation there has been and remains high competition. The main trends today are the intensification and acceleration of technological development, which will entail a fundamental change in the industry. In order to survive in the span of 10 years, corporations simply need to cooperate with innovative structures.
In Russia, the volume of investment in innovation now amounts to about 1% of GDP - a gap of 3-4 times compared with other states. This is great news for startups: the money will go first to them. On the experience of large foreign FMCG corporations, you can see by what scheme this usually happens. With the growth of scale, all systems and processes of the company become heavyweight, inhibiting the introduction of new models. Many giants are now solving this problem radically: experimentation is completely separated from business. Venture capital funds and laboratories are being created that are engaged in innovation and, in particular, interact with startups.
The X5 Retail Group took this path in 2016, following such giants as Amazon and Walmart, and Vadim had the opportunity to experience all the financial, logistics and psychological processes associated with him personally. One of the major barriers is the skepticism of the majority. The first stage of innovation is to search for drivers within the company - people from top and middle management who are ready to take risks and invest a lot of resources beyond.
The experience of the predecessors shows that the innovation department usually has about two years of the “honeymoon”, when they can work calmly and freely receive financing - after this, impressive results must be presented. Such a time frame can be met only if a systematic approach is developed. Therefore, the team immediately identified the areas that are most relevant for innovation:
Vadim gave several examples of technologies that are in demand for solving acute problems in the retail business:
Technologies and directions are represented unevenly in current pilots. The niches of logistics, HR and finance are most poorly mastered - the reason, apparently, lies in the fact that there are few open source solutions on the market now, a high level of expertise is required.
To date, the X5 Retail Group special department has reviewed more than 400 projects, 54 of which have entered the pilot stage. Selection takes place according to the scheme presented in the first report. The analysis provides innovative advice from company employees who are familiar with internal processes and needs. The threshold of entry is the presence of a prototype: projects at the idea level are much more difficult to evaluate and “promote”. However, advice seeks flexibility, so exceptions are possible. So, the human factor also decides a lot - how much people are infected with their idea and how much they are set to cooperate.
After the corporations expressed their views on the pilot projects and the approach to organizing the process, the time has come to look from a different angle. The second part of the program was given to representatives of startups with focal cases and broad conclusions. In total, three speakers spoke, whose experience, for balance and objectivity, covered the whole spectrum - from obvious success to disappointment.
Najib Muabbata “How to prove value and integrate with the telecom giant?” Hot WiFi
team representative Najib Muabbata became the first voice from startups and immediately set a positive tone: the guys won the telecom market successfully and even witty. The B2B product they offer serves as a platform for managing wifi networks with a web interface with which the client can interact. Historically, at its inception, the startup worked with the restaurant business, and eventually focused on serving this niche after the acceleration and the growth stage. Now Hot WiFi work with 3400 points, a significant part of which came through partners - large telecom companies. From this place the most interesting begins.
The situation in this market segment is peculiar: since there is no product line as such, operators are trying to increase the value of their services by aggregating additional capabilities. Accordingly, it was necessary to sell primarily the idea that wifi can give business more. According to the canons, for this it was necessary to go on the part of partners, proving their benefit in theory in order to get access to customers. The team took the opposite approach: it began to warm up the market, demonstrating value primarily to the restaurant business owners, who soon began to start conversations with their telecom partners themselves. In fact, they pulled demand over to their side and managed to close the need with themselves before other comers appeared. The main conclusion that the speaker makes of this goes against the opinions of other participants - the case is not needed, quite convincing arguments in favor of value. If they are, the pre-warmed market will work for the startup itself.
In the second part of the speech, several more useful observations were made that Hot WiFi made in concluding a deal with the giant company itself - Rostelecom.
Sergey Budyakov: Start a pilot with a private bank
, Sergei Budniak from startup usedesk presented the same antikeys disappointment - a negative story of a cooperation a major bank and a small technology team. The story was pleasantly surprised by its benevolent balance: no dirty laundry, only objective facts and conclusions.
Every unsuccessful pilot is unsuccessful in his own way, so it makes sense to look into the background. Usedesk service was developed to combine communications with customers through different channels into one system, minimizing lost profits. The parties entered into a fatal deal about a year ago, at the IIDF demo bottom. By that time, the team had already gained some experience - it had several active pilots. However, as the speaker admitted, the further development of events showed that some harsh truths so far passed by them.
Usedesk representatives came to make the deal prepared. The plan was this: present a project, conduct and show a pre-project study, conclude a prepaid contract, take two weeks to launch and spend about a month on a pilot with a presumably happy outcome.
Reality quickly began to make adjustments: although there were no problems with the research and demo, contracts had to be concluded in the form of a bank, without the ability to make corrections and without any mention of prepayment. Then the deadlines floated hopelessly: the launch process took six months. Partly the fault was purely technological issues (complex network circuits, non-standard technological stack), and logistics problems played a major role. Signed by the NDA allowed the team to work only in the bank’s offices and prevented any attempts to bring information out, even for purely business purposes (say, throw off a screen shot to a colleague). After all the circles of purgatory, when the service was finally configured, the long-awaited pilot lasted only a week, after which the decision to refuse was announced.
In general, the usedesk team does not evaluate it as completely negative (and not only because the payment still took place). He allowed to reflect on some of the nuances of the relationship between small and large and to derive a number of rules for himself.
Arkady Alshan "Our experience working with large companies and why we're still alive"
Speech Arcadia Alshana how antikeys not position, but we think it was close to him in spirit. In fact, the history of the PayZ team also illustrates mistakes in the approach of startups to work with corporations, but with the caveat that they were revealed here at an earlier stage. Pay-Z
appimplements the concept of "smart store", eliminating the most common irritating factors - queues, communication with the cashier and the tape. It allows you to simply get the finished grocery set in your hands after scanning all the necessary barcodes in the room and paying online. The founders of the startup already had some entrepreneurial experience in the BTC sector, which, in the end, let them down, inspiring a false feeling that everything was also captured in BTB.
It all started with the fact that the founders fell into a trap, which Arkady defined as “preliminary yes” - that is, a non-binding manifestation of interest, which many respond to the first offer of the pilot, especially free. Then it seemed that this was enough, even if the deal was going nowhere.
Having thus accumulated a considerable hypothetical portfolio, the team was convinced that the idea would go on the market with a bang and the main thing now is not to cheapen. Here, in fact, begins and ends the story of their relationship with giant companies. The start-up began to focus exclusively on them, but although no one answered with direct refusals, it quickly became clear that something was wrong here. Building contact lists also had no effect.
Communicating with more experienced people opened their eyes to them. The decision came down to pumping a realistic look and choosing the right segment - in the case of PayZ, these were small retailers and franchises. That's when contracts and cases appeared. After 3-4 months, people began to talk about the product and now it took a week or two to conduct the transaction. Life hack: if you go to the CEO or founder, things will significantly accelerate.
In retrospect, the team realized: with a large network, it makes sense to conduct only a substantive conversation, with numbers and cases brought up - then communication will be more or less equal. Potential deals and preliminary “yes” have no weight. Accordingly, it makes sense to start with small companies, gradually moving towards larger ones.
As for the wishes for the corporations, Arkady called on both sides to be as honest as possible. If the implementation is unlikely, it is better to immediately make it clear - startups cannot afford to wait months for progress.
Further, the site again passed to the owners of the market. The panel discussion was very dynamic, the participants touched on many painful topics - from the white label model to prepayment. If you single out the most instructive for startups, you need to mention the following:
Photos from Fria’s official Facebook page
For the most part, it was about the very first stages of cooperation — launching the project in test mode. The program neatly progressed from the general to the particular: from history and the general scheme to particular moments, surprises and mistakes that participants encountered in trying to apply it to reality. Under the cut, we’ll talk about everything we’ve learned in these few hours.
The first presentation was made by Evgeny Borisov , a representative of the IIDF, who presented a doklad with the saying “How and why should corporations launch pilot projects with startups”. In fact, a problem and subject field was outlined in it, which, personally, a bit distant from the topic, pleased us with its prudence.
Pilot projects have proven to be a necessary stage of digital transformation for large corporations. When this trend took shape several years ago, the IIDF team was optimistic and expected enthusiasm and vigorous activity from major players. But in fact, companies were in no hurry to integrate technology solutions from start-ups. They needed to see the result first.
The reality is: Russian startups are now underestimated. Foreign corporations are more interested in them than domestic ones, which is not bad for the founders, but not very promising for the economy.
To rock the market, IIDF took the position of an intermediary between giants and indie developers. First of all, it was work with corporations: discussion and identification of their needs. The following two blocks turned out to be the most promising:
- Sophisticated industry solutions for private needs. They are also in demand in the foreign market.
- Cross-cutting digital technologies: Big Data, augmented and virtual reality, cybersecurity.
In these areas, startups in theory can bring large companies a lot: new technologies, new business models, and access to new markets. But, on the other hand, implementation may not be possible or may not bring the expected benefits. That is why in the integration process, a testing stage is necessary - that is, a pilot.
A pilot project is short-term controlled tests of a technology or product to verify the feasibility of the effect declared by the startup, as well as the team, business model and other parameters.There are several key points to this definition.
Firstly, as Eugene emphasized, the effect here is economic. A startup should show in the allotted time that its technology is really capable of generating profit growth. For a corporation, this is the main argument in making a decision.
Another keyword is "short term." Ideally, tests should be run and run in a month or two. Abroad, they are already meeting these deadlines, but for Russian companies pilots still last 3-6 months. This is disadvantageous, first of all, for startups themselves, which often give a lot of time with a dead end option.
Finally, an important parameter is the presence of a two-way control system. Without this, there will be no material for analysis - the very economic KPIs that should determine the outcome of a case.
The launch of the pilot consists of five stages:
- Search for projects: for this, you can attract existing funnels, apply to universities, research institutes and incubators, conduct your own events
- Selection of projects: it should be carried out by a special expert commission. A superficial glance is not enough: you need deep tracking, “unpacking” the technology and understanding its place in the business. There are almost no perfect hits, most projects have to be adapted somehow.
- Launch and pilot: support and team work is carried out throughout its duration.
- Analysis of the results: calculation and discussion of KPI, summing up. Even in the case of a successful pilot, it is worth paying attention to the shortcomings and bottlenecks.
- The final decision: scaling, investing, buying a startup, entering into a partnership or canceling a project.
The transition to the next report turned out smooth: if Eugene defined the basic concepts and principles of pilot projects, Vadim Kapustin , development director of X5 Retail Group, spoke about how and why they began to be put into practice in his company.
Vadim Kapustin “Launching pilots with startups: practical cases” The
answer to the question “why” turned out to be a comprehensive review of the picture of the modern retail market. The main driver of innovation there has been and remains high competition. The main trends today are the intensification and acceleration of technological development, which will entail a fundamental change in the industry. In order to survive in the span of 10 years, corporations simply need to cooperate with innovative structures.
In Russia, the volume of investment in innovation now amounts to about 1% of GDP - a gap of 3-4 times compared with other states. This is great news for startups: the money will go first to them. On the experience of large foreign FMCG corporations, you can see by what scheme this usually happens. With the growth of scale, all systems and processes of the company become heavyweight, inhibiting the introduction of new models. Many giants are now solving this problem radically: experimentation is completely separated from business. Venture capital funds and laboratories are being created that are engaged in innovation and, in particular, interact with startups.
The X5 Retail Group took this path in 2016, following such giants as Amazon and Walmart, and Vadim had the opportunity to experience all the financial, logistics and psychological processes associated with him personally. One of the major barriers is the skepticism of the majority. The first stage of innovation is to search for drivers within the company - people from top and middle management who are ready to take risks and invest a lot of resources beyond.
The experience of the predecessors shows that the innovation department usually has about two years of the “honeymoon”, when they can work calmly and freely receive financing - after this, impressive results must be presented. Such a time frame can be met only if a systematic approach is developed. Therefore, the team immediately identified the areas that are most relevant for innovation:
- Analytics (big data, effective tools for processing data arrays)
- Marketing (customer focus, deep understanding of customer needs)
- Operations (automation of all processes in stores, as well as information collection)
- HR, analytics and IT (tight cost reductions for cost advantage)
Vadim gave several examples of technologies that are in demand for solving acute problems in the retail business:
- Video analytics: necessary to monitor the availability of goods on the shelf, control queues, create a black list of customers, create movement and interest maps.
- Computer Vision: Monitors Competitive Prices
- Big Data: allows you to summarize information on price series with a minimum cost.
Technologies and directions are represented unevenly in current pilots. The niches of logistics, HR and finance are most poorly mastered - the reason, apparently, lies in the fact that there are few open source solutions on the market now, a high level of expertise is required.
To date, the X5 Retail Group special department has reviewed more than 400 projects, 54 of which have entered the pilot stage. Selection takes place according to the scheme presented in the first report. The analysis provides innovative advice from company employees who are familiar with internal processes and needs. The threshold of entry is the presence of a prototype: projects at the idea level are much more difficult to evaluate and “promote”. However, advice seeks flexibility, so exceptions are possible. So, the human factor also decides a lot - how much people are infected with their idea and how much they are set to cooperate.
After the corporations expressed their views on the pilot projects and the approach to organizing the process, the time has come to look from a different angle. The second part of the program was given to representatives of startups with focal cases and broad conclusions. In total, three speakers spoke, whose experience, for balance and objectivity, covered the whole spectrum - from obvious success to disappointment.
Najib Muabbata “How to prove value and integrate with the telecom giant?” Hot WiFi
team representative Najib Muabbata became the first voice from startups and immediately set a positive tone: the guys won the telecom market successfully and even witty. The B2B product they offer serves as a platform for managing wifi networks with a web interface with which the client can interact. Historically, at its inception, the startup worked with the restaurant business, and eventually focused on serving this niche after the acceleration and the growth stage. Now Hot WiFi work with 3400 points, a significant part of which came through partners - large telecom companies. From this place the most interesting begins.
The situation in this market segment is peculiar: since there is no product line as such, operators are trying to increase the value of their services by aggregating additional capabilities. Accordingly, it was necessary to sell primarily the idea that wifi can give business more. According to the canons, for this it was necessary to go on the part of partners, proving their benefit in theory in order to get access to customers. The team took the opposite approach: it began to warm up the market, demonstrating value primarily to the restaurant business owners, who soon began to start conversations with their telecom partners themselves. In fact, they pulled demand over to their side and managed to close the need with themselves before other comers appeared. The main conclusion that the speaker makes of this goes against the opinions of other participants - the case is not needed, quite convincing arguments in favor of value. If they are, the pre-warmed market will work for the startup itself.
In the second part of the speech, several more useful observations were made that Hot WiFi made in concluding a deal with the giant company itself - Rostelecom.
- Come in from all sides. This applies not only to the startup-partner-client chain, but also to the search for contacts within the company. Many people prefer to work with one lead, but this is a risky strategy. It is better to strive to make several contacts: the more people know you, the more likely it is to resonate with someone, to get to a person who will be truly interested in this deal.
- Manage the process. It may sound too ambitious for a startup, but Najib is convinced that even in a more vulnerable position, you can set a certain bar for negotiations. If a startup clearly adheres to deadlines, complies with all agreements and maintains a high pace of negotiations, the corporation will be forced to comply.
- Work as a team. Here we are talking about the startup’s internal culture. It is difficult for one person to pull the whole deal, it is better to distribute tasks among several drivers. The standard separation is legal / financial and technical issues. Founders must supervise the process, giving down only routine tasks.
Sergey Budyakov: Start a pilot with a private bank
, Sergei Budniak from startup usedesk presented the same antikeys disappointment - a negative story of a cooperation a major bank and a small technology team. The story was pleasantly surprised by its benevolent balance: no dirty laundry, only objective facts and conclusions.
Every unsuccessful pilot is unsuccessful in his own way, so it makes sense to look into the background. Usedesk service was developed to combine communications with customers through different channels into one system, minimizing lost profits. The parties entered into a fatal deal about a year ago, at the IIDF demo bottom. By that time, the team had already gained some experience - it had several active pilots. However, as the speaker admitted, the further development of events showed that some harsh truths so far passed by them.
Usedesk representatives came to make the deal prepared. The plan was this: present a project, conduct and show a pre-project study, conclude a prepaid contract, take two weeks to launch and spend about a month on a pilot with a presumably happy outcome.
Reality quickly began to make adjustments: although there were no problems with the research and demo, contracts had to be concluded in the form of a bank, without the ability to make corrections and without any mention of prepayment. Then the deadlines floated hopelessly: the launch process took six months. Partly the fault was purely technological issues (complex network circuits, non-standard technological stack), and logistics problems played a major role. Signed by the NDA allowed the team to work only in the bank’s offices and prevented any attempts to bring information out, even for purely business purposes (say, throw off a screen shot to a colleague). After all the circles of purgatory, when the service was finally configured, the long-awaited pilot lasted only a week, after which the decision to refuse was announced.
In general, the usedesk team does not evaluate it as completely negative (and not only because the payment still took place). He allowed to reflect on some of the nuances of the relationship between small and large and to derive a number of rules for himself.
- Individual people should be allocated to the project , on both sides. This is important for startups, because the resource consumption can greatly exceed expectations: if necessary, you need to be ready to completely “throw” a person into tasks related to the transaction. Corporations, by appointing those responsible, can significantly speed up and facilitate the work process - it will always be clear to those working in the office who to contact and who will not have to look for at least someone.
- You should be prepared to play on other people's terms (and do not wait for money right away). Corporations are not very interested in startup preferences, especially in legal matters. It is highly likely that it will act on the part of the force and resolve them unilaterally.
- It is necessary to immediately build and clearly articulate expectations. One of the reasons for the failure, Sergey sees, is that the team relied too much on the streamlined “the product will be pleasant and everything will be wrapped up”. The benefits should not only be felt, but also measured in specific KPIs, which can be appealed to when discussing the results.
- Similarly, you should consider the sequence of steps after the pilot : which departments to work with, which timeline, etc. It is important to imagine at least the general scaling scheme already at pilot launch. In this case, the startup will immediately have something to offer for a substantive conversation. Otherwise, the process of concluding a deal risks being delayed for a long time, and the initiative will be lost.
Arkady Alshan "Our experience working with large companies and why we're still alive"
Speech Arcadia Alshana how antikeys not position, but we think it was close to him in spirit. In fact, the history of the PayZ team also illustrates mistakes in the approach of startups to work with corporations, but with the caveat that they were revealed here at an earlier stage. Pay-Z
appimplements the concept of "smart store", eliminating the most common irritating factors - queues, communication with the cashier and the tape. It allows you to simply get the finished grocery set in your hands after scanning all the necessary barcodes in the room and paying online. The founders of the startup already had some entrepreneurial experience in the BTC sector, which, in the end, let them down, inspiring a false feeling that everything was also captured in BTB.
It all started with the fact that the founders fell into a trap, which Arkady defined as “preliminary yes” - that is, a non-binding manifestation of interest, which many respond to the first offer of the pilot, especially free. Then it seemed that this was enough, even if the deal was going nowhere.
Having thus accumulated a considerable hypothetical portfolio, the team was convinced that the idea would go on the market with a bang and the main thing now is not to cheapen. Here, in fact, begins and ends the story of their relationship with giant companies. The start-up began to focus exclusively on them, but although no one answered with direct refusals, it quickly became clear that something was wrong here. Building contact lists also had no effect.
Communicating with more experienced people opened their eyes to them. The decision came down to pumping a realistic look and choosing the right segment - in the case of PayZ, these were small retailers and franchises. That's when contracts and cases appeared. After 3-4 months, people began to talk about the product and now it took a week or two to conduct the transaction. Life hack: if you go to the CEO or founder, things will significantly accelerate.
In retrospect, the team realized: with a large network, it makes sense to conduct only a substantive conversation, with numbers and cases brought up - then communication will be more or less equal. Potential deals and preliminary “yes” have no weight. Accordingly, it makes sense to start with small companies, gradually moving towards larger ones.
As for the wishes for the corporations, Arkady called on both sides to be as honest as possible. If the implementation is unlikely, it is better to immediately make it clear - startups cannot afford to wait months for progress.
Further, the site again passed to the owners of the market. The panel discussion was very dynamic, the participants touched on many painful topics - from the white label model to prepayment. If you single out the most instructive for startups, you need to mention the following:
- Projects often do not reach the stage of financing primarily because of high expectations. To come and set strict conditions for prepayment and payment deadlines of an unborn project is a way to nowhere. Often this is what causes failure. Corporations are more willing to take a free pilot project for implementation, and then they will more than pay for it.
- Legal rigidity, which looks like an unwillingness to make concessions, is more characteristic of state institutions, as well as long launch times. Non-state ones are now rapidly switching to fast track according to the Western model. This sector specificity should be considered.
- The great and terrible non-disclosure agreement in Russian realities is not as scary as it is painted. There are times when developers lose serious money on their oversights. But on the whole and in general, it is difficult to prove the leak, and the amounts of compensation are usually so large that the court often does not allow them to be charged in full. In addition, domestic companies are relatively loyal and ready for dialogue - but it is better not to joke with foreign partners.
- Some corporations, especially banks, are generally ready to take technologies that have already been implemented from their competitors. If someone managed to sell the idea, this does not mean that you will not realize it anywhere else. But extreme care must be taken.
- And to conclude on a positive note, we repeat: in all the areas presented, there are many directions where the demand for innovation is not yet closed. Corporations need startups and for all their differences, they are ready and interested in investing in projects.