The more events I attended around town, the more entrepreneurs I meet. And the more entrepreneurs I meet, the more it becomes clear to me that someone is missing in almost every room: Atlanta’s Fortune 500 corporations. Other than the TAG/GRA Business Plan Finals, I can’t recall seeing anyone from Home Depot, Georgia Pacific, AT&T’s Wireless Group, Kimberly Clark, Coca-Cola, UPS, Turner or Cox anywhere about town. So why is that? Why is there little to no interaction between the biggest companies who need innovation to continue powering their businesses and those most suited to creating innovation?
And while I detest those who compare resumes, I’ll give the three-sentence version of mine to provide some context for my comments. I’ve spent 20 years in technology in Atlanta, always in interactive marketing but on both the agency and corporate side. My earliest agency run was technically PR, but we were really launching brands and companies into that newly created Internet thing. From there I spent just over five years inside UPS, then popped out into the big agency world with outfits like Digitas and Tribal DDB. I’ve literally seen all three sides of this fence: startups, corporate and agency. Okay, lineage defined. Now on to my theories on this problem, and how we solve it.
So why is there a complete disconnect between entrepreneurs and big companies? One of the main reasons is the source of innovation inside large companies. While some of the best have dedicated staff thinking about the future, most are awash with wide ranks of middle management trying to get promoted to the next level – which more often than not means incremental improvement, not blow-the-world-up ideas. And I have an entire theory about the source of real innovation in companies of more than 500 employees: unless your in the C-suite, the system only allows Big Ideas to come from outside consultants or agencies. The political capital required to push an idea through an entire management chain is absolutely more painful than when the Omnicom account guy convinces your boss’ boss that same idea would increase revenue and decrease cost-to-serve. And somehow the IBM sales guy always seems to be right there with an army of interactive consultants to staff up two more IT projects than your own resources can handle. My challenge to the Fortune 500 leaders is to isolate and cultivate the brightest among your ranks, and set them loose – particularly those 5-7 years experience. Why not encourage them to leave the fold to start companies in the same space (think Google’s mantra that engineers spend 10% of their time working on their own projects). Certainly a $150,000 bet on someone who knows your business inside-and-out is a smarter move than pounding dollars at some buzzword-crazed consultant.
A second reason for this disconnect is that most entrepreneurs aren’t considering these local companies when formulating new businesses. Why not start a company with a big-ass paying customer in mind? Granted there aren’t 3-4 huge success stories to make it really obvious, but why aren’t there more logistics startups in Atlanta? It’s not as if UPS hasn’t snapped-up players in every corner of the shipping and logistics markets – plus they even have a strategic investment fund. Again I ask, why aren’t smart engineers creating companies tailor-made for investment or purchase by Big Brown? And why are there no startup ecosystems surrounding Coca-Cola, Home Depot or Turner?
Let me give everyone a real-life example of Fortune 500 working with early-stage startups here in town. In early 2000, I was asked to define the corporate-wide policies and channel implementation of marketing email at UPS (yep, nothing existed before then). Neither the Bain or IBM guys had a group I could turn to, so I ran across a small startup in town that had done some great pro bono work for the Annie Casey Foundation. That 10-person company was called Silverpop. I worked many days, nights and weekends with Bill Nussey and his just-assembled management team to get the effort in-place ahead of our Teamsters contract negotiations. In the process, Silverpop won full delivery of customer email for UPS. It was a perfect example of leveraging an external subject matter expert, and Silverpop today employs more than 300 people in Atlanta. I got the industry’s sharpest minds, and Silverpop got themselves one hell of a reference client. The relationship still pays dividends for both companies today – more than 10 years later. This is a great example of a large corporation finding a small startup to execute on programs outside their core competencies. Why aren’t there 100 more stories like that?
A third reason for this disconnect is the ‘work-for-hire’ mentality most IT procurement managers take of technology that’s created externally. Again, I could wax at-length on the comedy of melding UPS and Silverpop from a contractual perspective, but those who find it funniest already know all the stories (Hint: think external security audits of hosting facilities). While there are some natural points of contention among entrepreneurs and companies, it seems there’s plenty of middle ground. If you’re on the corporate side, setup a strategic pool where the entrepreneur retains 15% of the licensing rights to their innovations. The reason for this is simple: the biggest consultants and agencies have a standard playbook – one that rehashes many of the same ideas over and over. And an entrepreneur, by nature, desires to create something completely different. For a great example, remember the Netflix Prize, where they challenged developers worldwide to improve their algorithm by 10%. Why settle for the IBM sales guy who’s been instructed to sell “cloud computing” this quarter when you could have the brightest entrepreneurial minds cranking on a solution? And if they do create the future of your industry and you’re scared about not owning 100%, just buy them and move on. Google does it all the time… And from an entrepreneur’s perspective, be prepared to run a couple projects as an outsourced development shop in order to prove your worth. By the way, this is a perfectly viable way to secure dollars for your own ventures – most large corporations are accustomed to paying well over $150/hour for external marketing and IT expertise. Not without some quid pro quo, but get in there and prove your value. And here the reality: 15% of something that has UPS or Kimberly Clark as a reference customer is probably more loot than almost any other idea you could take to market alone.
So the final question is how do we fix this? It starts with the two camps talking first. I know of a few experiments like Lunch 2.0, but we need to get serious about creating these relationships. This is a common debate around the TechDrawl Cave, and we’re interested in hearing everyone’s take on tactics. And speaking of tax credits, why not give state incentives to corporations who invest or simply spend money on local startups? And what about the role of organizations like GTRI and ATDC as honest brokers between entrepreneurs and Fortune 500 companies? And if I really think hard about it, give these organizations a matchmaking fee to help solve their budgetary issues. My primary point is there are lots of great ecosystems that simply aren’t working together.
So I challenge everyone reading this – regardless of whether you’re in Atlanta, Charlotte or Austin – what are you doing to connect startups with your town’s biggest companies? And for senior management inside these companies, what better way to improve your hometown economy than to prove a rising tide floats all boats? Everyone should care, but not enough do. Stop whining about the West Coast, and become part of the solution.