Table of Contents
Recommendation
As AI start-ups aspire to disrupt industries, many incumbents are hesitant to partner with them, preventing start-ups from achieving their full potential as business transformers. A survey of AI start-ups and incumbents from Boston Consulting Group’s Henderson Institute sheds light on the collaboration blocks AI start-ups are facing today, and what leaders can do to build competitive collaborative ecosystems despite these challenges. Gain actionable insights into how to guide incumbents toward understanding your value proposition, and learn more about the ways AI has drastically changed the nature of competition.
Take-Aways
- Incumbents struggle to grasp AI transformers’ value proposition – work to change this.
- To build trusting partnerships, position yourself as an ally – not a threat.
- Companies won’t win alone in an AI-powered world, but must join collaborative ecosystems.
Summary
Incumbents struggle to grasp AI transformers’ value proposition – work to change this.
Despite the fact that leaders at many AI start-ups believe they offer a clear value proposition to established industry leaders, many struggle to form partnerships with incumbents. According to research from Boston Consulting Group’s Henderson Institute, 80% of AI start-ups report difficulties getting product visibility. The vast majority attribute collaboration blocks to incumbents’ lack of understanding of the value transformers can bring. Indeed, of the incumbents who haven’t pursued collaborations with AI start-ups, nearly half admit that they don’t yet understand the emergent AI players’ value propositions.
“The benefits that AI players can offer incumbents are clear, yet many still struggle to be seen – and heard.”
However, after surveying 600 AI scale-ups and start-ups and 600 incumbents, the Henderson Institute found that when AI players share their talent pools, incumbents follow suit, reciprocating by sharing data. Additionally, when transformers helped incumbents by upskilling their workforce through providing training support, the incumbent was 50% more likely to share substantial data insights. Such collaborations can result in mutually beneficial arrangements, as transformers can improve the operations of an entire industry by creating efficient AI solutions that give incumbents a competitive edge.
To build trusting partnerships, position yourself as an ally – not a threat.
About a third of incumbents, who hadn’t collaborated with an AI start-up, attributed their reluctance to pursue a partnership to a lack of trust. Transformers should take the lead in closing this trust gap and work on shifting the mind-set of the incumbent. Focus on helping the incumbent understand that you aspire to expand its market base, framing your value propositions explicitly.
“Transformers will need to help to recast AI players so they are seen not as disruptive threats, but as allies that can help the incumbent to expand its market base.”
Do the following to build trust and overcome common misunderstandings:
- Push for transparency – Be an advocate for increased transparency, ensuring contracts clearly define data rights, control mechanisms, mitigations and standards.
- Help incumbents access adjacent services – Provide access to services that increase incumbents’ trust in you, such as access to digital insurance products from partner companies.
- Clarify expectations – Many incumbents believe that AI products aren’t yet ready, that they won’t equally share in partnership risks and lack clarity on pricing rationales. Work to overcome the perception of risk asymmetry, offering incumbents proof of your value proposition (such as trials) while committing to transparency on your pricing strategy.
- Demonstrate quick wins – Build momentum by delivering on solutions as fast as possible (for example, by providing daily progress updates), while remaining transparent and realistic.
- Showcase your scaling capacity – Demonstrate a robust understanding of use cases across partner organizations and the potential to replicate AI solutions at scale.
Companies won’t win alone in an AI-powered world, but must join collaborative ecosystems.
In the past, competition for incumbents meant competing against other companies, but AI has disrupted the marketplace, and an ecosystem model of competition better serves companies operating within today’s dynamic marketplace. Companies that thrive will be those that form collaborative partnerships, creating competitive ecosystems.
“AI has changed the nature of competition, shifting it from companies versus companies to competition between ecosystems of collaborative partners.”
Many incumbents worry that AI players, in particular, start-ups, lack the resiliency and size to deliver on future solutions with any certainty or reliability. There are several ways you can take steps to quell incumbents’ worries: Guide incumbents in understanding the value of joining your ecosystem; leverage the reputational advantages of partnering with a tech giant; and support incumbents in their risk assessment process by taking steps such as providing them with access to your board of directors and giving them data they need to make an informed decision about partnership. Remember, start-ups that successfully transform industries will be those that support and guide incumbents through their AI adoption initiatives, while gleaning valuable insights from their partners’ data.
About the Authors
François Candelon is a Paris-based managing director and senior partner, as well as a global director at Boston Consulting Group’s Henderson Institute. Rémi Lanne is a Paris-based project leader and a BCG Henderson Institute ambassador. Clément Dumas is an external consultant, as well as a Paris-based BCG Henderson Institute Ambassador.