The Phocuswright Innovation Summit is one of my favorite industry events each year, and the 2021 edition didn’t disappoint. The creativity on display from the startups who pitch energizes and inspires even the most jaded industry veteran.
One thing I’ve noticed coming out of this event (and other startup competitions like it) is not only how much enthusiasm there is from the large established players to collaborate with these innovators – but also how quickly momentum stalls once the conference ends and everyone gets back to work.
Why is that? With all the enthusiasm for supporting startups shared onstage by the leaders of these online travel agencies, travel marketing companies, GDSs and suppliers (let’s call them "Big Companies," or "BigCos"), one would think the path to accelerating collaboration opportunities would be well greased for the startups working so hard to bring innovative ideas to market.
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Sadly, if you ask any startup founder, you’ll find that the big talk from the BigCo leaders rarely translates into a commercially viable partnership. The challenge stems from three areas:
- Process. The larger the company, the larger the bureaucracy. BigCo execs rarely have any awareness of how convoluted the process is to do deals in their companies. Navigating the black holes of IT security, finance, procurement and legal can take months, if not quarters or even years. Time kills deals, and for a startup it happens faster.
- Financials. For all the on‐stage crowing BigCo leaders do about supporting startups, they rarely allocate any budget to the cause. Whether it’s lack of budget, insistence on risky commercial terms like exclusivity provisions or an unwillingness to pay for a service until some arbitrary metrics are achieved (hello, endless free pilots), BigCos routinely squeeze startups commercially. This is misguided and defeats the purpose of fostering innovation.
- Sponsorship. One paradox of innovation is that it frequently doesn’t fit cleanly into an organizational hierarchy. As such, startups struggle to find a sponsor within a BigCo to drive a deal though – even despite advocacy from the C‐Suite. Valuable time is burned trying to find and engage the proper stakeholders.
It’s time we fix this.
Startups are a different class of company than more established businesses. They live on the knife‐edge of viability, so every deal they do is exponentially more critical to surviving and thriving. There is much less margin for error on process, commercials and timing.
Big companies routinely squeeze startups commercially.
Here are a few suggestions for how BigCo leaders can truly support the travel startup ecosystem. If they want to stand up on stage at the next Phocuswright event bragging about how much they love working with startups, then they need to walk the talk.
- Paid pilots. Any BigCo wanting to engage a startup on a pilot implementation should pay market rates. Full stop. If they believe in the product or service enough to use it, they need to pony up.
- Startup fast track. For BigCos that desire to work with startups on any regular basis, they should create a “fast track” comprising all the key stakeholders who have a hand in the deal cycle: procurement, IT, legal, product, business, customer support, etc. Create a slimmed-down process to vet the opportunity, eliminating or deferring requirements that really aren’t material at the early stage, and provide a roadmap for achieving full vendor status over time.
- Be a good (paying) partner. Most startups won’t get it right the first time. The only way they can get better is with patient partners who provide compelling feedback. Don’t pull the plug at the first wrinkle – these startups are learning too, and the best way to learn is by leveraging positive feedback loops. A truly collaborative partnership goes both ways. And pay invoices on time!
And for the startup teams, make sure you have a line of sight on critical enterprise‐scale services like data privacy controls, information security protocols and support workflows. Addressing these early in life will make deals with BigCos move much faster, in addition to being good business hygiene. There are a number of companies in the market now who offer SOC2/ISO 27001, GDPR/CCPA and PCI compliance services on a cost‐effective basis for startups.
We all win
At the end of the day, BigCos and startups need each other to drive innovation forward, and we as consumers need them to make it happen. The inefficiencies in how deals get done between the two does no good for anyone, so if you’re part of BigCo leadership reading this, please make 2022 the year you really dig in to your internal processes, budgets and org structure to eliminate needless hurdles.
The faster our industry can accelerate innovative technology getting to scale, the better the travel experience will be for all of us. Isn’t that why we do this?