Why it makes sense for corporations to encourage start-ups

While most businesses tend to think of the Industrial Internet in the abstract (73% of companies have yet to make any concrete plans for it), the proof is in the pudding: GE Chairman and CEO Jeff Immelt recently announced that his company is poised to deliver more than $1bn in incremental revenue based on its Industrial Internet offerings—with $1.3bn in orders. To grow those numbers even further and build an estimated $15trn industry by 2030, however, the big players will need a little help.

“Collaboration is key,” says Richard Soley, executive director of the Industrial Internet Consortium—an industry-wide initiative to test and deploy best practices in applying Industrial Internet solutions. Of particular importance will be the collaborative efforts between large companies and small start-ups to create the next generation of Industrial Internet (II) services.

While these partnerships between Davids and Goliaths may seem counter-intuitive to some because of the very different scale and nature of the entities involved, they are far from unusual in the tech space. Furthermore, with large companies already collaborating on demonstration projects (to create demand for II solutions) andcommon platforms (to facilitate scale-up), partnerships with start-ups have a key role to play in ensuring that demand growth can be sustained.

No wonder, then, that as they open their II platforms to developers, corporate behemoths like Microsoft, Cisco and GE are simultaneously investing in creating the II start-ups of tomorrow, often through their corporate venture arms. GE Ventures, for example, is currently investing in seven software and analytics companies with products ranging from cybersecurity, like ThetaRay, to predictive analytics like Predixion Software. While some investments will target existing start-ups, others will aim at creating them, including via incubators.

Created from scratch or not, start-ups will be the ones populating the II ecosystem. Securing a first-mover advantage to this talent pool, therefore, will be key to long-term success. Speaking at the opening of GE’s Garage in Berlin last month, Mr Soley offered the following advice to large corporations interested in doing so: “Look for the opportunities. Look for disruption from underneath. Be flexible and innovative. You want to be part of the disruption, not of the disrupted.”

This article is published in collaboration with GE LookAhead. Publication does not imply endorsement of views by the World Economic Forum.

To keep up with the Agenda subscribe to our weekly newsletter.

Author: Holly Hickman is a writer at GE Look Ahead. 

Image: Employees work in the office. REUTERS/Thomas Peter.