“For as long as we have been in business, we have been trying to protect our company from the underhanded R&D practices of major corporations.”


A Filipino American entrepreneur has recently accused PepsiCo of “corporate plagiarism”, right down to the communication strategy and brand identity. Celeste Perez, CEO and Co-Founder of Droplet, recently made an announcement claiming that the beverage giant’s new Soulboost drinks allegedly plagiarized her adaptogenic beverage startup.

As explained in Perez's words - back in January 2020, when Perez’s company was originally branded as Dewdrop, PepsiCo allegedly took legal action to have Dewdrop abandon their trademark filings and branding in order to prevent confusion with MTN DEW (Mountain Dew). Although Perez claimed that the U.S. Patent and Trademark Office indicated that the two brands would not be in conflict, she still rebranded and become Droplet by August 2020 to avoid further legal fees. Soon after, a PepsiCo employee allegedly bought Droplet's sampler pack just before Soulboost was launched - Perez was initially hesitant in completing the transaction as their legal conflict happened not too long ago but the PepsiCo employee allegedly claimed it was in support for women-led small businesses. When Perez saw the new Soulboost collection, she felt betrayed and shared her side of the story online.

In light of this situation, we wanted to dissect the root cause to discuss productive and collaborative options to explore between large corporations and smaller businesses. In the next section, you can find:

  1. Challenges that small businesses face
  2. How small players can influence large corporations
  3. What big companies need to keep in mind while approaching smaller firms
  4. The rise of open innovation during the pandemic


Challenges That Small Businesses Face

This being said,  It’s an incredible achievement to start a business; however, maintaining it is a challenge - it can take a while to get the ball rolling and really achieve that initial momentum. In the first few years, small business can face a variety of different challenges – according to the U.S. Bureau of Labor Statistics, as reported by Fundera, about 20% of small businesses fail by the end of their first year and 50% will drop off by the end of their fifth year.

The key takeaway is understanding that challenges faced by small business are all ones that most large companies have grown out of a long time ago. The time, effort, and attention demanded by entrepreneurial management is often stretched thin across all the different business functions. Even if their solutions are exactly what the marketplace needs, small businesses are likely held back in achieving wide-spread growth, scaling, recognition, and distribution. Oftentimes, the foundation of these challenges is rooted in a lack of funding and expert mentorship.

How can small players influence large corporations?

Small businesses and startups are often seem as the little guys, but the U.S. Small Business Administration (SBA) states that they actually form the core of the U.S. economy and account for 99.7% of all employers, making up more than a third of known U.S. exporting value.

This is where the big players can come in. The best collaborations happen when both parties have something of value they can offer, creating synergy (1+1=3)! Large corporations have more resources, a wider influence, and a stronger foundation, while smaller players can be more agile, innovative, and can target more niche (but loyal) audiences.

There are a multitude of ways to tap into this unrealized potential for accelerated growth, and although we are all trying to survive in this competitive landscape, sometimes recognizing an opportunity for collaboration can be ground-breaking. Small businesses and startups not only create jobs but have an incredible influence on their local communities as ecosystems of personal connections are built.  Here are just a few of the ways that small business can present significant opportunities for large corporations:


1.    Customers

According to the SBA, and reported by Oberlo, there are over 30.7 million small businesses in the U.S., serving a significant population in both the U.S and globally. This total addressable market represents an enormous growth potential for large businesses, signifying more niche needs out there that have not yet been recognized by big corporations (yet). This being said, small businesses and startups have the ability to be hyper-responsive to their customer’s needs and create access to an entirely new customer base because they work so closely with their communities.


2.    Competitors

In relation to the section above, small businesses and startups can help signal emerging industries and identify rapidly growing trends through competitor analysis from a unique perspective. Think of this as having a person “on the inside”.


3.    Partnership

Forming a collaboration can offer incredible synergies by bringing together respective offerings, resources, and strengths to deliver more value to the customer. Entrepreneurial firms can provide solutions and perspective to more specific needs or cutting-edge cases. Working with a local small company can inject a unique and more intimate touch to the new offering – this method capitalizes on complementary strengths while respecting the independence of each party involved.


4.    Acquisitions

Large corporations can take advantage of the contemporary image curated by smaller players, brightening their current global portfolio in a way that complement existing offerings.


5.    Consultation

In several ways, these nimble, entrepreneurial firms can offer expertise in areas such as innovation, agility, and ideation processes – while large corporations can observe rapidly changing trends in their industry, often disrupted by these small businesses and startups to understanding the market in real-time. By focusing on a more specific product or service line, smaller players can make quicker pivots through data-driven decisions and testing new technologies, methodologies, and systems. The deep understanding of their industry can offer new perspectives, ideas, and drive new discussion to create something innovative – not only in goods and services but including management practices.


Well-managed and rapidly-growing smaller business have proven themselves to be experts at anticipating industry trends, capitalizing on new technologies and systems, and using lean methodologies to outpace their larger rivals. Although smaller companies can be incredibly nimble on the playing field (especially when it comes to less bureaucracy), they are also limited by barriers that can easily be addressed by big corporations, such as distribution channels, capital, and marketing budgets. In recognizing this, collaborative efforts could jumpstart the hopes of these small firms in establishing a presence beyond their current borders and unveil the potential of their offering in a bigger market.


What To Remember When Approaching Smaller Firms

Although large firms can be considered an obvious source of aid, there’s a tendency to regard large corporations with suspicion and caution as they are not always characterized by ethical practices. The example that we opened this article with is only one of many examples where corporations have not always shown respect for small businesses.


Many entrepreneurs actually come from the corporate world, where the idea of us living in a “dog-eat-dog” world, or “big fish eats little fish” theories are quite prevalent. Understandably, small company founders maybe weary of developing relationships with large businesses in fear of ruining their company’s independence and identity. By approaching the situation with a dedicated, special strand of emotional intelligence can create opportunities for prosperous, mutually beneficial arrangements.


As an industry leader, this is also a chance for you to review the influence, reputation, and responsibilities you hold as a big corporation. Our modern customers are becoming more educated about your internal activities and genuinely care about ethics, social responsibility, and environmental awareness. Your business practices must be consistently updated and reviewed as rapid advancements in technology and increases in the wealth gap can create instability for the long-term future of our society.


Open Innovation During The Pandemic

It’s now or never – during periods of survival, we are more willing to see past competitiveness and find opportunities for collaboration. Entrepreneurial firms represent a powerful engine in the open innovation processes, which is the practice of businesses and organizations sourcing ideas both externally and internally. This elevated form of knowledge sharing welcomes solutions and suggestions from people outside the business to participate in problem-solving and product development – and this can take form in established partnerships, co-creation labs, hackathons, intrapreneurship, or even crowdsourcing!


Henry Chesbrough, UC Berkeley professor and Silicon Valley veteran, created our modern concept of open innovation. He defines it as “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation… a more distributed, more participatory, and more decentralized approach to innovation.” In traditional business R&D, there is a culture of siloed secrecy, whereas open innovation is a two-way relationship where these companies will also share knowledge and expertise with these communities. In simpler terms, you can develop products and identify solutions better, faster, and cheaper.


An earlier example of this is Proctor and Gamble’s ‘Connect+ Develop’ initiative that helps initiate partnerships with their brand in order to develop valuable patents – from individual inventors, to startups and small business, and even Fortune 500 companies. It’s built on the belief that collaboration accelerates innovation in this increasingly connected world.


Hundreds of companies today have open innovation programs, and we believe that startups are the ultimate partner in order to find the most success. They are industry disruption experts (status quo, who?) and more importantly, they have a built-in efficiency with a focus on always moving – whereas more mature businesses generally have lengthier processes that work within their business organization and structure. Speed is a critical advantage in our increasingly competitive business world.


In fact, open innovation is arguably what kept our society afloat during the coronavirus pandemic. When companies were struggling to cope with the global health crisis, they saw the urgency for digital adoption to manage both the immediate challenges and long-term barriers they faced. EdwinShow, assistant CEO and innovation expert from Enterprise Singapore (ESG) said that crowdsourcing through open innovation became the natural solution to find new, tangible solutions fast. This demand-led approach tapped into their external sources, which were local startups and small and medium-sized enterprises (SMEs) to jointly develop innovative solutions.


Without a doubt, the pandemic has dramatically pivoted the priorities for every single business, and has everyone wondering how to prepare for the future. With globally aligned goals, many innovations will be born as a result. It is uplifting to recognize the companies who began to come together to work openly as an unprecedented level. Heavy truck maker Scania and the Karolinska University Hospital partnered to convert Scania’s trailers into mobile testing stations, where Scania directed highly-skilled purchasing and logistics experts to help locate, acquire, and deliver protective equipment to health care workers. Similarly, Ford worked with GE Healthcare, United AutoWorkers, and 3M to speed produce ventilators using portable battery packs, 3D printing, and seat fans.


We also witnessed a huge surge in startups developing tools to help stop the spread of the virus, including artificial intelligence spread modelling, symptom-tracking, and people-tracking with nearby infection notification. For example, Y Combinator-backed startup Inokyo, which normally builds and installs autonomous checking for retail stores, used their technical expertise to build Act – a system to help companies deploy new contract-tracing technologies to their workplaces and warehouses. Qventus is a medical software company helping hospitals manage patient flow and streamline resources, and OhmniLabs developed the “telepresence robot” for hospitals and care organizations to enable virtual visitation.


Another fantastic example of startups solving corporate problems is 27 Pilots. This company helps large companies leverage startup expertise and IP and together with big-name firms including BMW, Bayer, and Airbus, it set up “Startups against Corona”. It’s a free and completely open website where large companies publish problems they’re facing during the pandemic and startups can respond with innovative, quickly implementable solutions.


Final Thoughts

Despite the usual enthusiasm we see when introducing the idea of open innovation to companies, there is rarely follow-through. Similarly to how brainstorming sessions can feel unproductive, co-creation competitions and hackathons can never reach the point of implementation due to a lack of planning, budgeting, and dedication. This can stir frustration among partners, employees, and participants who had big dreams with their ideas.


The idea of open innovation isn’t new, it’s been on the table since the ‘60s; however, this global pandemic has put it in the spotlight because urgency demanded it. This recent burst of open innovation can be a reminder of the incredible potential that collaboration can bring. Hopefully, we can see businesses and corporations continue to carry on with this spirit of innovation even when we are not in a crisis, but it will require an open-mind and modified business practices – a small price to pay for massive, necessary transformations. We believe that it’s time to fully embrace open innovation and its concept is incredibly beneficial to incorporate into your regular strategies.


Competition will always be a natural element to the business world; however, when you can recognize and leverage strategic and collaborative efforts, you can reap in incredible synergistic benefits while expanding your network. There is a massive amount of untapped potential within our SME’s and startups today, and with the right approach, there is so much that large corporations can still observe and learn from them.

Interested in seeing how we can support you and your business in your innovation initiatives? Book an introductory call with Victor Li, Founder & CEO of Onova.
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