UK CEOs are increasingly looking to collaborate with startups in order to drive innovation and support their growth objectives, according to the findings of KPMG’s 2018 Global CEO Outlook.
The survey of 150 UK leaders and a further 1,150 global CEOs on their future investment plans, found that 61 percent of CEOs in the UK are relying on a network of third-parties to support their growth and innovation objectives, compared to just 53 percent globally. Partnering with third-party cloud technology providers topped the list of actions CEOs are planning to take over the next three years (65 percent), followed by collaborating with innovative startups (61 percent).
Seventy percent of UK CEOs who took part in the survey agreed that the only way for their organisation to achieve the agility it needs was to increase the use of third-party partnerships, compared with 53 percent of CEOs outside of the UK.
Commenting on the findings, Kirsty Mitchell, Director of Growth at KPMG said:
“The explosion of new technologies, which has impacted customer behaviours, has changed the landscape for businesses looking for growth. As a result, CEOs are having to turn to new strategies to increase the agility of their often large and multilayered businesses. We are seeing more collaborations between large corporates and small businesses as they attempt to outpace their competition in the race for innovation to results.
“Entrepreneurial energy, an ability to spot gaps in the market for innovative products that consumers actually want, and speed of response to changing demands are what start-up ventures offer and what big businesses want to emulate. Conversely, small businesses benefit from big businesses’ strong routes to market, greater sophistication in business processes and mentors with worldly-wise experience.
“It takes a board that is sufficiently entrepreneurial in its outlook to recognise that small and interesting companies could become a very valuable link in their supply chains. These newcomers might be your future competition. Better to be alongside and invested in them than competing against them.”
Rather than swallowing up start-up businesses via M&A, strategic alliances were cited as the most important route for achieving growth. Both global and UK CEOs see strategic alliances with third parties as the most important route for achieving growth, with 33 percent ranking this top. It was the highest ranked strategy for growth over the next 3 years: followed by organic growth (innovation, R&D, capital investments and recruitment), M&A, outsourcing and joint ventures.
But they are also vigilant about getting the right fit with their company: seven in 10 UK respondents said they had reconsidered third-party partnership that could have helped with growth because the third party did not fit well with the organisation’s culture and purpose. Just 49 percent of global respondents agreed with this.
Commenting Kirsty Mitchell said:
“Whilst an alliance might make sense on paper you cannot ignore the vital importance of having shared aspirations and culture, which is often difficult to achieve. It is really important that both businesses are absolutely clear from the outset about what they are hoping to achieve together. A lack of understanding about how the other culture operates can stifle a good collaborative relationship.”