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Digital and Goliath

01 May 2018

by Lise Ferrier

( Words)

Rabin Yaghoubi has extensive executive and entrepreneurial experience working with both global players and disruptive early-stage businesses. He is also a prolific investor and advisor, most notably for Citymapper, Trussle, Adbrain, Hiro Media, Green Man Gaming, Sony Pictures, Vodafone, Apax Partners and Bridgestone Capital.

Rabin acted as Chief Commercial Officer of babylon health, the leading AI-driven personal healthcare platform, driving its commercial efforts globally. Prior, Rabin was President of FindTheBest (acquired by Amazon) a data-driven comparison engine backed by Kleiner Perkins. Previously, Rabin was Director of Strategic Partnerships at Google, where he was responsible for launching and leading Google’s content, commerce and local partnerships across Europe, the Middle East and Africa. Prior to Google, he was global Vice President of Media at DoubleClick, responsible for managing, globally expanding and ultimately selling the Company’s Media business.

Rabin recently spoke to La Fosse about the most important factors to consider when looking to invest in health-tech, where he touched on how partnerships are essential to the space.

In his second piece, he examines corporate-tech partnerships from both sides, looking at why corporates should partner, and how to venture in as an early stage tech business.

Non-Digitally Native Corporates: Why Form Partnerships with Disruptors?

We no longer live in a world where you can afford not to be a digital company. You either adapt to new digital realities, or ultimately die. For large traditional corporates, this doesn’t just mean developing digital strategies and marketing plans to support their core business, but fundamentally transforming their core business for a digital world. Essentially, corporates have three ways to drive this transformation: (1) build it; (2) buy it; (3) partner with it.

Building technology in-house can be costly and counterproductive

The first instinct for many corporates is to try to build technology in-house (or outsource the development but maintain the ownership), allowing them to create services that are fully aligned with their business and customers from the ground up. However, if you are, say, an FMCG, fashion retailer or publisher, and building technology is not in your DNA, then prioritising technology development over your core product development often proves challenging.

The resulting lack of internal focus may complicate attracting and retaining the right technology talent to ensure your technologies are market-leading, especially when competing heavily for talent with digital pure-plays. As a result, the corporate world is riddled with examples of large companies attempting to build technology in-house and failing to do so, thereby paving the way for disruptors.

Buying, done wrong, can stifle rather than stimulate innovation

On the other hand, acquiring tech businesses can make a lot of sense when seeking to accelerate transformation, with companies being bought and integrated not just for their products and services but also their innovative start-up mentality and, ultimately, talent.

However, if not managed properly, innovation is frequently lost as soon as it is incorporated into the broader corporate construct – and the very culture acquired to spark innovation is suffocated by multi-layered hierarchies and decision-making bureaucracy.

This is a general danger when large companies buy innovative smaller ones – and it’s not only non-digital corporates that are subject to it, but also digital leaders. Google’s most successful acquisitions - like YouTube and Android – became so largely because they were initially (and in some cases still are) kept separate from the core business (Google search at the time), whereas many others that sat within the company died due to lack of executive focus and resulting entrepreneurial frustration.

Partnerships can give corporates the nimbleness necessary to thrive in the digital era

Which brings us to the benefits of partnerships with digital disruptors. Firstly, these allow corporates to focus on what they do best and leverage a technology partner. So a publisher, for example, can focus on creating compelling content, rather than building a content management system.

Secondly, the relationship is usually arms-length, and therefore far less risky economically than a build or buy – while still extracting much of the same commercial and service value to customers. A health insurer looking to offer online GP services, for instance, would provide equal benefit to its customers at much lower cost by partnering with the top provider than actually building the service.

And finally, it affords the corporate the flexibility to always work with best-in-class platforms rather than be locked into one solution. This nimbleness can prove critical in a world of accelerated innovation where complete obsolescence can happen in a matter of years and where even the disruptors get disrupted (think of MySpace or Blackberry). And it can also be a great path to a more successful acquisition – essentially dating before marrying.

Disruptors: How do you form partnerships with large corporates?

The question for disruptors, on the other hand, is usually not why to partner with large corporates, but how. Defining a clear objective for the goals of a partnership is the critical first step. Entrepreneurs are wired to see opportunity everywhere – so a clear focus on the desired outcome of a partnership helps crystallise the approach and align it with a company’s overall direction. Is the key goal growth, users, revenue or maybe brand association, product validation and case studies?

Prioritising early adopters helps build credibility

A big challenge for early stage businesses is awareness and credibility. Larger known corporates tend to be risk-averse and rarely first movers, so they will be looking for others to give validation to new technologies first. This often locks start-ups into a Catch-22 where without existing partners to point to, they can’t get new ones.

To break that cycle, the same strategy used to acquire users can work with partners. Just as it makes sense to target tech-savvy customers as early adopters for your products and turn them into advocates and influencers, it’s wise to target tech-savvy companies for your partnerships and turn them into references and case studies. Other digital businesses, or companies that have made innovation a key priority, tend to “get it” or be more open to taking risks with new technologies. Acquiring these “logos” first is usually easier and establishes validation necessary to gain the credibility with larger, more conservative and therefore slower-moving players.

At babylon health, for example, the initial focus was on partnerships with companies like Facebook, Palantir and even lessor known start-ups as partners for the company’s employee benefits solution. This helped build a solid base of satisfied clients to refer to when approaching major banks, retailers and other corporates.

Focus on solid partner benefits, not shiny product features

Start-ups, particularly in their early days, tend to be product-centric and often pitch the features of their product rather than how it will provide a solution that will benefit their potential partners. Building exciting innovative new products can create deep emotional investment in your own proposition, at times at the expense of a deeper understanding of what the prospect actually needs and wants. It is therefore not uncommon to go into pitches where the only preparation has been switching the logo on the title slide. It’s also very apparent to the prospect that’s all you’ve done!

It is essential is to spend time researching, listening and understanding what the prospect’s pain points and objectives are, not just of the company but of the individual making the buying decision (of which there will likely be many that you need to map out), to the point that you know their business and challenges almost as well as they do. And once you understand their specific needs you need to demonstrate a clear and relevant ROI – be it in the form of more revenue, lower cost, higher customer or employee satisfaction or fending off competition. If you can do so by capturing the imagination of these individuals with your vision as well, they will become your advocates and do much of the internal selling for you.

Mutual empathy is key to build trust and achieve desired long-term outcomes

People in technology businesses often express frustration with how slowly large corporates move. The reality is, it goes both ways: corporates are often frustrated with start-ups who oversell and under-deliver on product promises and ongoing optimisation.

The point is that these relationships need to be built not just on the basis of mutual benefit but on a sense of mutual empathy – where the corporate understands that a start-up has limited resources and that building tech products is always more complex than anticipated; and start-ups understand that their counterpart needs to navigate multiple stakeholders at various levels with conflicting priorities to push anything through.

Appreciating the challenges that both sides face to “get the deal done” is ultimately what builds trust and drives deeper more productive relationships between the parties, leading to more mutually successful long-term outcomes.

​Rabin Yaghoubi | LinkedIn

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