Innovation Diary: Startup collaboration isn’t new – but it’s increasingly intentional

Tom Welsh
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ROYAL Mail’s privatisation is certainly an expression of confidence in the company, with investment set to speed up the pace of restructuring away from its declining letters business. But the future may not be so rosy. Writing in City A.M., the futurist Ian Pearson suggested that Royal Mail’s profitable package business could itself be challenged by insurgent trends in corporate structure.

Enabled by technologies like 3D printing and driverless cars, manufacturing may soon become dispersed across decentralised “cloud” companies – corporate groups, with open source webs of small, local producers and retailers working collaboratively. The package service Royal Mail is betting its house on may prove irrelevant, as driverless vans speed materials over networks, and consumers pick up products direct from the manufacturer.

Collaborative networks of smaller firms, however, are nothing new – even if technological advances may act as a further enabler. Raoul Shah, founder of communications agency Exposure, started his company 20 years ago and quickly adopted the practice of parcelling out tasks – via full outsourcing or collaborative work with experts – as a means of growing his business. “Partnering with other companies was central,” he says. “I didn’t have any robust business strategy for doing so. It just seemed like the right thing to work with skilled people in areas I wasn’t skilled in.”

Research by Zipcar, commissioned by StartUp Britain, uncovered starker benefits. It found that 54 per cent of UK startups are clubbing together to share core business functions with other firms. Over half identified this as “essential” to their survival, with the practice ranging from sharing technology, office space and vehicles, to functions like accounting, administration and human resources. Rather than being a reaction to economic conditions, half the business owners said it was part of their original business plans.

Shah says collaboration “gives you speed, agility, and is a great way to manage cost. You can scale up and down, without carrying the usual overheads.” From a cost point of view, he also thinks it refines focus on quality. “When you’re buying services in, you have to pick well.” But the open company structure this entails can prove tricky. “You have to protect your own margins and those of a third party.” It’s vital not to get tripped up by misunderstandings or unwritten assumptions.

Accessing these networks, however, is a different question. Shah was initially offered space by another company, and partnerships developed from there. He now does the same with other small firms. The idea is also built into a raft of startup accelerators and co-working spaces. At Workspace Group, which lets commercial property, one in four companies based in each of its centres trade with each other. Campaigns like StartUp Britain (which is running events in Canary Wharf in October for budding tech entrepreneurs) can help you find similar startups, with the potential for making fruitful connections. Even collaboration with larger companies is possible. “We’re seeing big businesses open up their assets to small ones; be it space, human resource, or their supply chain,” says Emma Jones of Enterprise Nation.

“It’s natural,” says Shah, and as such it’s wrong to over-rationalise the process. “The best partnerships are forged from instinctive belief.”

Tom Welsh is business features editor at City A.M. @TWWelsh