A multinational’s research team often uncovers a customer need it has little interest in exploiting
Getting consumers to adopt a new innovation is perhaps the largest challenge any new company faces. Success requires startups to understand consumer needs and best position themselves to meet them.
Business leaders must rely on research to maximize their chances of broad and rapid market penetration, but gathering this information can be time-consuming and arduous. It’s one reason why startups should consider partnering with existing corporations.
Many multinational corporations (MNCs) have extensive marketing resources and have compiled extensive databases of research that would be impossible for any single entrepreneur to gather on their own. In my experience, this information is typically comprehensive and can accurately quantify the pent-up demand for prospective disruptive solutions. Through these marketing programs, MNCs identify unmet market needs and new ideas for how to meet them.
My team and I never start a business based on our own assessment of market demand. Instead, we always partner with MNCs. By leveraging the resources of these large corporations, we learn what the market is looking for even before we decide to create a startup.
We are also able to understand customers’ desired specifications, as well as the price that would be required to trigger rapid market adoption. Empirical data like this makes decision-making as clear and reliable as possible during the vetting process for potential projects.
If an MNC’s marketing team has identified demand for the product or service you are developing, then they constitute a natural channel through which your startup can start reaching interested consumers. But the value of partnering with MNCs extends far beyond that. These large companies may also become customers themselves for your products or services during the development process.
Toward this end, our startups generally find and commercialize inventions that MNCs have developed to meet their own needs but aren’t interested in developing the business themselves since bringing them to market would constitute too much of a distraction. We call this “closing the loop” – the same MNC that identified the market need and developed a technology solution becomes a commercialization partner.
In one past example, an MNC’s market research team uncovered the need to turn plastic waste into reusable virgin plastic. Scientists at that same MNC then invented this groundbreaking technology, but since the MNC chose not to bring this innovation to market itself, the company approached our team. We then created a startup called PureCycle, which now supplies the parent company with the virgin plastic it requires.
When MNCs become an innovative product’s first customers, it provides a revenue stream for the startup. Validating the market with meaningful initial orders like this is critical because these early sales mean your solution has hit the mark with the right specifications and price.
MNCs also possess the sales and marketing infrastructure that can promote rapid market adoption, providing far more leverage than a typical startup can wield. For instance, by leveraging the channels of the original MNC, PureCycle has presold all the output of its first commercial plant for the next 20 years. We are now working to build more plants to expand our capacity.
This example illustrates the classic challenge that Geoffrey Moore outlined in his book “Crossing the Chasm”. Entrepreneurs should plan their capital needs for manufacturing and distribution in advance so that they can fulfill market demand as quickly as possible once initial commercialization has been achieved.
By partnering with MNCs, startups can achieve meaningful market penetration much faster while mitigating the risk that customers could fail to adopt their innovations. As a result, they can overcome one of the most daunting challenges of launching a successful startup.
