UK CEOs are increasingly collaborating with start-ups to drive innovation and support their growth objectives, according to KPMG’s 2018 Global CEO Outlook. The survey, which included 150 UK leaders and 1,150 global CEOs, revealed that 61 percent of UK CEOs are relying on third-party networks to support their growth and innovation goals, compared to 53 percent globally.
Partnering with third-party cloud technology providers emerged as the top priority, with 65 percent of UK CEOs planning such actions over the next three years. Collaboration with innovative start-ups followed closely at 61 percent. Interestingly, 70 percent of UK CEOs believe that increasing the use of third-party partnerships is the only way to achieve the necessary agility for their organisations, compared to 53 percent of their global counterparts.
Graham Pearce, KPMG’s head of technology in the North, highlighted the impact of new technologies on customer behaviours and how it has reshaped the business landscape. As a result, CEOs are adopting new strategies to enhance the agility of their extensive and multi-layered enterprises. Pearce noted, “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 customers actually want and speed of response to changing demands are what start-up ventures offer and what big businesses want to emulate.”
Conversely, Pearce pointed out that small businesses benefit from large corporations’ established routes to market, sophisticated business processes, and experienced mentors. “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.”
Strategic alliances, rather than mergers and acquisitions, were cited as the most important route for achieving growth. Both global and UK CEOs consider strategic alliances with third parties as the top strategy for growth over the next three years, followed by organic growth such as innovation, research and development, and recruitment. Mergers and acquisitions, outsourcing, and joint ventures ranked lower in priority.
Despite the enthusiasm for partnerships, CEOs remain cautious about cultural fit. Seven in ten UK respondents admitted reconsidering third-party partnerships due to misalignment with their organisation’s culture and purpose. Pearce emphasized the critical importance of shared aspirations and culture in successful alliances, stating, “Whilst an alliance might make sense on paper you can’t ignore the vital importance of having shared aspirations and culture, which is often difficult to achieve. It’s 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.”
The reliance on start-ups and strategic alliances is increasing among CEOs as they seek to foster innovation and growth. However, the importance of cultural alignment and shared aspirations cannot be overstated, and careful consideration is essential for successful partnerships.