Industry Insights

Harnessing the Power of the MIT Startup Exchange (STEX) to Help Solve a Fortune 500’s Innovation Challenge

Preface: With only 12.2% of the Fortune 500 companies in 1955 still on the list in 2015[1] how might today’s C-Suite executives build a target operating model that enables their staff to uncover innovative ideas that successfully grow their businesses? In this interview, Trond Undheim (Lead for the MIT Startup Exchange and himself a serial entrepreneur) shares his ideas on the potential value that Fortune 500 companies might accrue when they expand innovation pursuits beyond their four walls.

Q. With a number of highly-regarded firms’ (Coca-Cola, MetLife, General Electric, Cisco, American Express, and others) recent efforts to build start-up entities within their own organizations to help accelerate innovation[2], is there still a need to go beyond one’s four walls, given the complexity and cost associated with engaging with external partners?

A. Actually, I recall an HBS Working Knowledge article[3] where the authors argued that information constraints have dropped dramatically and the locus of innovation has shifted from residing solely within hierarchical entities to the larger community, creating both opportunities as well as challenges. So, while these internal efforts are commendable, I believe recent trends support the value proposition of engaging with external partners like MIT’s STEX initiative. When I was asked to build STEX two years ago, it was actually based on feedback from our member companies, large multinational conglomerates in many cases, who wanted a scalable way to engage with emerging MIT-connected startups. For them, this complements their internal R&D efforts, their existing ties in to university innovation. From my own innovation activity through several startups, I know that horizon scanning is increasingly key to the way a company, large or small, finds its niche, defends its business model, and reacts to the environment.

Q. What is STEX and how does a C-Suite leader engage with the program?

A. MIT Startup Exchange (STEX), an initiative of MIT’s Industrial Liaison Program, is a platform where companies and startups can connect to collaborate or partner on new technologies and markets. At the heart of the initiative is an innovation community of

  • 230+ “Global 1000” member companies of MIT’s Industrial Liaison Program (ILP)
  • 200+ MIT Faculty who are serial co-founders of startups
  • 50+ MIT Alumni who are serial entrepreneurs
  • 1100+ MIT-connected startups

Through this platform, the core benefit to industry is when member companies submit opportunities which are requests to engage within this MIT innovation ecosystem. Upon receipt, STEX curates and categorizes them to in order to best match requesters with respondents.  Finally, STEX’s online platform enables timely communications between the two parties so that they’re able to identify potential reasons to connect and then proceed. STEX also hosts a number of campus based innovation events and a set of global MIT startup showcases (Silicon Valley, London, etc.). This Fall, we launched STEX25, the industry ready accelerator, where 25 of MIT’s top emerging startups work closely with top industry executives for a full year. Only 9 startups have been selected for our inaugural cohort thus far, representing exciting technologies such as IT, energy, manufacturing satellites, augmented reality for the scientist, artificial intelligence, tech-driven industrial water treatment, cybersecurity for open source software, making industrial grade materials out of lemon peel, industrial internet of things platform, transforming the factory floor by sensor technology, etc. Selection to STEX25 is by nomination from the MIT Innovation ecosystem.  Only C-suite leaders representing member companies with a deep commitment to our ecosystem get to interact closely with these startups. It is a win-win, literally a co-mentoring of sorts that could produce some of the most exciting companies not even conceived of yet, as new ideas crystallize in the collaboration.

Q. As STEX was just launched in 2015, what are the top best practice analogs to share with the readership?

A. First, innovation takes time and trusted relationships between Fortune 500 companies and start-ups do not happen overnight. While the online platform enables timely communications, in-person engagement still is a crucial element to build trusted relationships.  We’re fortunate to be able to connect such groups on MIT’s campus, where many participants find the environment conducive to regular, frequent and collaborative discussions on innovation and follow-up. Even so, our successes have typically not come from one-off encounters but from nudging both sides over a period of months, even years, preceding, during and after each matchmaking activity, whether it is a conference, a 1-1 meeting or whenever we touch base with them on a more informal basis. That being said, I recall one meeting where the Fortune 500 executive dialed his cell phone and made his team book a flight to come see the startup as we were still walking out of the meeting with the startup we had introduced him to. When the match is right, there’s no time to lose.

Second, while many different industries (IT, pharma, energy, manufacturing, industrials, auto, consumer-packaged goods, etc.) participate in STEX, a common observation is that  technology innovation knows no bounds. All companies seem interested in the same things these days, artificial intelligence, IoT, sensing, and autonomy, which is even a bit scary. I sometimes wonder whether it’s wise to follow the top trends without questioning them deeply.

Q. With things moving so fast in the domain of technology, what are your own reflections on how to stay ahead of industry developments?

A. In my own career, I’ve always tried to stay at the fringes of whatever organization I’ve found myself working for. While doing my PhD, I spent my time interviewing corporate innovators and venture capitalists about the future of technology in the workplace and then used the findings to reshape my academic argument about the power of proximity in the midst of nomadic promise of technology allowing knowledge work at a distance.

While still living in Trondheim, Norway, back in 1998, I co-founded InnoVisionHouse, an incubator for media and IT companies in a dockside development downtown. We were among the first to bring the full force of the university innovation to bear on citywide development, benefiting the quite traditional banks, real estate and other businesses downtown.

When working for the EU, I built a best practice exchange across the EU, so government officials implementing IT strategies and policies could see what others were doing and learn from that. I found that while often riskier, best practices in eGovernment are typically on a knife-edge between success and failure.

When working for Oracle as a technology director straddling strategy and policy in Europe, I spent my time testifying in Parliaments, working on open standards and interoperability, and generally being as far from Oracle employees as I could, to the extent that sometimes my IBM colleagues pointed me to resources in my own company. The point is, the innovation always happens at the fringes, you need to gain the outside-in perspective.

Over the past year, I’ve founded several more companies, always with the mindset to help others stay ahead of the curve. At Yegii, the insight network, I have a team tracking strategically chosen data, websites and URLs relevant to industry disruption in technology, policy, business models, or user dynamics, what I call the four forces of industry disruption, and matching that content to specific client intelligence (URLs, reports, data) using machine learning algorithms, combining man/machine intelligence for last mile delivery of tailored insights.

I guess those experiences keep me on the toes. They also enable me to see things from many sides—university, government, multinational, and startup—these are perspectives I’ve engaged with in the first person.

Finally, if you want your company to stay on the Fortune 500 list by say 2027, consider how your firm’s collaborative activities can help build a human capital pipeline of the best and brightest recruits. How do you get MIT’s upcoming graduating classes to join your firm versus the top employers for our recent graduating class? [4] As of today, our graduates want to join truly innovative, flexible employers, many of them want to join startups, or even start their own companies. To me, a C-Suite executive’s investment in STEX not only helps to uncover new business ideas but also to model ways that your firm is committed to engaging with a start-up mindset in corporate culture. Thinking like a startup is not a panacea, there are still pitfalls, and it is not easy for a large company to do, but it is a way forward that has significant promise.

picture1Trond A. Undheim is the Founder of Yegii Inc., the insight network with man/machine discovery, often referred to as the “McKinsey of the digital age”, leads MIT Startup Exchange (STEX), connecting industry to startups, is a Director of Tautec Consulting, and a former Senior Lecturer at the MIT Sloan School of Management. His PhD was on the future of work, Internet & AI/cognition. He can be reached at tundheim@mit.edu. To follow his many activities, you can connect with Trond on LinkedIn.

[1] American Enterprise Institute, 2015, https://www.aei.org/publication/fortune-500-firms-in-1955-vs-2015-only-12-remain-thanks-to-the-creative-destruction-that-fuels-economic-growth/

[2] Fortune, 2015, http://fortune.com/2015/04/26/startups-inside-giant-companies/

[3] Harvard Business School Working Knowledge, December 2013, http://hbswk.hbs.edu/item/innovating-without-information-constraints-organizations-communities-and-innovation-when-information-costs-approach-zero

[4] For MIT’s bachelor’s degree recipients, the top employers were Google, Oracle, Amazon, McKinsey, Accenture, Apple, Boeing, Microsoft, ExxonMobil, General Motors, Boston Consulting Group, Morgan Stanley, Booz Allen Hamilton, Goldman Sachs, and SpaceX. http://web.mit.edu/facts/alum.html

Associate Partner, IBM Global Enterprise Transformation

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