By Tamara Pupic
Marjan Faraidooni, vice president of legacy at Expo 2020 Dubai, and Habib Haddad, co-founder and CEO of Wamda, talk corporations, start-ups, and how their Collaborative Entrepreneurship initiative has managed to re-shape and even revolutionise the often fear-filled relationship between the two
The cooperation between large corporations and start-ups has never been more intriguing than it is today. After decades of utter dominance, many market-leading companies have experienced major shifts in the balance of power due to a series of Uber-style disruptions across industries.
Their different responses to such business challenges have been reflecting their confidence, courage and decisiveness to acknowledge the fact that their entrenched incumbent position might be threatened. Those ranged from completely ignoring or underestimating the role a start-up can play in their industry to initiating numerous legal battles against the suddenly huge, although often still garage-headquartered, new competitor to fight back.
Over time, forward-looking companies have opted to start keeping an eye on these dreams-powered and tech-savvy start-up founders by either acquiring or funding their businesses or establishing in-house incubators to fully embrace startups’ passion for innovation.
Since recently, however, the pace of technological disruption coupled with currently difficult economic conditions worldwide have levelled the playing field between large corporations and start-ups even more, urging both to come up with a more collaborative model that enables joint value creation.
The power of collaboration is also at the heart of the upcoming Expo 2020 Dubai, the first World Expo to be held in the Middle East, Africa and South Asia region. It is expected to host more than 180 countries and draw 25 million visitors to Dubai.
The organisers’ ultimate goal is for Expo 2020 Dubai – themed ‘Connecting Minds, Creating the Future’ – to leave a lasting legacy that will benefit each participating nation and the generations to come by generating cutting edge solutions to the world’s challenges. In an attempt to gather, share and exploit knowledge, the Expo 2020 Dubai Higher Committee and the Dubai Expo 2020 Bureau have invited the regional business community to take part in the planning and delivery of the event and help deliver sustainable innovation.
“Let us teach and educate to build a true knowledge-based economy,” Her Excellency Reem Al Hashimy, Minister of State for International Cooperation and Director General of the Dubai Expo 2020 Bureau, said at the launch of the Expo 2020 Dubai business engagement programme in April. “Let Expo be your test-bed for new technologies. Let Expo be your research and development laboratory. Let Expo be your showcase to the world.”
Expo 2020 Dubai has actively engaged entrepreneurs through an on-going series of BusinessConnect workshops, the YouthConnect event, Expo Future Labs and Expo 2020 Challenges, as well as the Expo 2020 Dubai Procurement Portal, an online platform designed to invite both large and small, international and domestic, businesses to submit tenders for Expo-related business opportunities.
In addition, Expo 2020 Dubai has partnered with Wamda, a platform for MENA entrepreneurs, to launch the first-of-its-kind Collaborative Entrepreneurship initiative.
The initiative’s title - Collaborative Entrepreneurship (CE) – reflects the partners’ vision that nurturing meaningful partnerships between established corporations and start-ups will lead to the creation of sustainable solutions for the regional economies to continue generating jobs and unleashing new opportunities.
“We are using the unique convening power of Expo 2020 Dubai, in partnership with Wamda, to get behind the idea of Collaborative Entrepreneurship,” says Marjan Faraidooni, Vice President of Legacy at Expo 2020 Dubai.
“Enhancing the dynamism of economies across this region is vital to driving future growth and job creation. This requires a change of approach to business, combining the best elements of corporations, SMEs and start-ups to spur economic growth, and support the transformation into a vibrant knowledge economy here in the UAE and beyond.”
In 2013, Fadi Ghandour, chairman of Wamda and founder and vice chairman of Aramex, pointed out to the necessity of large corporations endorsing young businesses by inviting C-suite executives to join the Corporate Entrepreneurship Responsibility movement and help build region-wide entrepreneurship ecosystems.
During the following three years the Wamda Research Lab (WRL) team interviewed over 120 corporate executives and experts and surveyed over 700 entrepreneurs in the region to assess the drivers, expectations, risks and challenges to the collaboration between corporates and start-ups.
Expo 2020 Dubai and Wamda built upon the WRL research and released the “Collaborative Entrepreneurship (CE): the state of corporate-start-up engagement in MENA” report, including a corporate toolkit for collaborative entrepreneurship, a dedicated online platform, and a number of engagement programmes, at a summit held in Dubai in May.
“This whole movement today is moving globally,” says Habib Haddad, CEO of Wamda. ”But we think that the Middle East has a more acute need for that.
“If you look at entrepreneurship in the past five years, initially few people believed in it. Some people believed in it, but for the rest that start-up and innovation thing was something cute, something that was going to be there, but not in a substantial manner.
“After that we started seeing multiplication of funds and support organisations and the governments talking more about entrepreneurship. Suddenly, you started seeing companies, like Souq and Careem and others, breaking $100m in revenues and sometimes $1bn in valuation.
“All of this meant that finally this ecosystem had a commercial viability. It has become a serious thing, and everyone has started to look at it.”
The number of entrepreneurship support entities in the MENA region has grown 2.5 fold since 2010 – from 183 in 2010 to 463 in 2015 – according to the “Collaborative Entrepreneurship (CE): the state of corporate-start-up engagement in MENA” report.
The increasing support directly or indirectly contributed to the MENA region witnessing over 12 acquisitions in 2015 alone.
Haddad explains that the success of Careem, the taxi-booking mobile application launched in the UAE, which grew from an idea to a company that raised $60m in less than four years and is now rumoured to be valued at more than $150m, is a testament how quickly a regional company can grow and become a challenge to other businesses.
The fact that only few MENA start-ups with high growth potential have received enough support to become well-known scale-ups, Haddad says, is the main reason behind the Collaborative Entrepreneurship initiative and an important goal Expo 2020 Dubai and Wamda aim to achieve, pointing out: “Our goal is not to make more money for these large companies, but to make those start-ups scale.
“In the Middle East, if you think about start-ups, you have to think about them going after the whole Middle East and North Africa and not only after one country because the countries are too small for that,” he explains. “To go after multiple countries you need to have access to markets, and that is one of the key issues that has not yet been solved.
“Access to finance is an issue, but it is being solved. Funds are popping up and investment money is flowing into the right spaces. Access to the right talent is also moving. Maybe slower than finance, but it is moving to a place where start-ups are becoming the number one choice of employees and young talent.
“However, access to market has always been an issue. How can a company out of Jordan or out of Beirut access the market like the Gulf, which is the biggest market when we talk about access to financial sustainability? Even if a company is in Dubai, how can it access Saudi Arabia?”
According to the WRL findings, 94 percent of start-ups recognise the benefits of collaborating with corporations, including learning from their proved and tested market entry strategies. Similarly, 89 percent of corporations see value in a Collaborative Entrepreneurship partnership to defend and grow their market position by harnessing some of start-ups’ operational speed and creativity applied to business.
“This is where we found the benefits for both,” says Haddad. “Start-ups getting access to markets, expertise and unique assets and infrastructure that those large companies have, and large companies getting access to innovation and nimble, agile cultures.”
However, the report further revealed that the majority of MENA corporations (51 percent) in most industries did not anticipate technological disruption – corporate executives in the banking (9 percent) and aviation (25 percent) sectors were less likely to expect their industry to be disrupted, citing market entry barriers as the main reasons why their industry was shielded from significant disruption.
Haddad urges them to consider not only the present moment. “I think that anyone who thinks that they are not going to be disrupted is definitely not looking the right way,” Haddad says. “They have their head in the sand. Sooner or later, every single business is going to be changed and disrupted.
“I think that some of the companies that have said that are those who have had the luxury of having unique access to markets where they think that they are not going to get challenged and not going to get competition against them. That is not going to last for long.
“Luckily, you have a new generation of C-level executives that are coming up and talking more and more about that. As they see around them the companies like Careem that are growing and disrupting industries, they are going to change their mind very quickly.
“Even if they do not anticipate disruption, the next thing on the list is whether they are growing fast enough. Maybe some of them will not face disruption in the next 10 years, maybe they are in the industries that are very hard to disrupt today, but are they keeping up with the market? Are they capturing what they could capture? Are they leaving a lot on the table?
“The answer is absolutely. They are leaving a lot on the table by not thinking how to be digitally tuned and not thinking about fresh ideas and products.”
The report further stated that 49 percent of the surveyed corporations, which were working with start-ups, preferred limited engagement by either sponsoring start-up-related events (65 percent) or partnering with start-ups to develop new products and services (26 percent), whereas only 14 percent followed a strategic approach – investing in and incubating new businesses.
“Strategic perspective means that it is very well embedded in your business objectives, your key performance indicators, your company’s vision, and not something that is on the side,” explains Haddad.
Despite some MENA companies fearing disruption, few have developed innovation strategies to keep pace with industry changes, with 65 percent saying there were no such strategies in their organisations.
“The challenges, first and foremost, come from the realisation and the willingness and acknowledgment from large companies that there is something happening fast,” Haddad says. “If you don’t do something, it is going to come eat your lunch and compete with you. It is something that says: ‘I need to be up to speed, and I need to invest a lot in my people, my strategies, my products, and I need to come up with a new way of thinking. That is not easy. Not all CEOs do that.
“Once you have the willingness to do that, the second step is about whether you have the right team and the right culture. You, as a CEO, could be the most visionary person, but if your team is not aligned with it, that will become an issue. So, it is about how you can integrate that within the company’s objectives and not make it a cute thing on the side.
“Thirdly, it is about whether you have the right tools, the right approach. How can you find start-ups? How can you work with them?”
The Corporate Toolkit for Collaborative Entrepreneurship, developed by Expo 2020 Dubai and Wamda, is a step-by-step guide for MENA corporations to build and accelerate start-up engagement programmes. It includes defining collaboration objectives and evaluating a corporation’s collaboration readiness by using three key enablers (team, budget, reach-out to the start-up community), before choosing a Collaborative Entrepreneurship initiative the corporation plans to implement over the next three years. Lastly, the Toolkit offers The Impact Measurement Framework to enable the corporation to continuously measure the performance and the results of the established collaborations.
“Matchmaking should be based on industry, but also on stage,” Haddad says. “For example, if you are thinking about creating a new product line, you should not go to a very young company that just has an idea. They are too early for that and they might go scrappy and they might fail. You should go to companies that have proved themselves a bit more, but catch them before they go big.
“So, it very much depends on your business objectives and from there you go down to your tools, to enablers, and so on. This is what the framework walks you through.”
As with many other pioneers who propose new solutions, Expo 2020 Dubai and Wamda have to reconcile corporations’ and start-ups’ conflicting expectations and demands. Those include differences in culture, speed of decision-making processes, hierarchical structures, and strategic misalignment between start-ups and corporations.
“Both rank culture not too high as a risk, but I think it really is about that,” says Haddad. “It is about building empathy for the other side. Once you understand why large companies have long sales cycles, and once you understand why start-ups have a high risk of failure or why they do not have enough credibility behind them, then you start switching your mind of how you work with the other side.
“That is why it is very important that whoever you have on both sides really understands that. Unfortunately, I do not think that is going to change too fast. So, long sales cycles for large companies will remain there. Maybe they can reduce them and make them much faster in very corner cases and for small deals. But once you get a big deal, you are again going to go through the long processes that large companies have. A lot of these issues can be solved once you really level the mindset and the culture because from that a lot of will be adapted.“
Although the two partners have revolutionised what was previously done on an ad hoc basis, the Collaborative Entrepreneurship initiative has already showed a potential for expansion beyond its original targets. “The surprise is that we thought we were launching it for MENA, but it turned out we have launched it for the whole world,” Haddad says about the initiative’s universal appeal.
“The next step is going to be about how we can keep on reinforcing the message.
“The success metrics that we are going to measure ourselves by are whether we are able to get start-ups to scale-ups, whether we are making sure that companies are happy while allowing start-ups to become scale-ups, and whether they are working together in tandem and not fighting.”