In today’s competitive corporate arena, everybody is looking for a way to get ahead of the curve and innovate. Some may think that innovation in any industry is pushed forward by the large behemoth companies and only people within their confines. However, this is not the case at all. Increasingly, large companies are realizing the benefits and quite frankly, the necessity of working with startups in their industry. This seems like a departure from the common thought that larger, more established companies want to squash any possible competitive startup in their industry to consolidate the market. This is because larger companies are now realizing the value of a positive working relationship with these hungry startup enterprises.

To further explore this burgeoning relationship between large companies and startups, I contacted Paul Tyler, the Chief Marketing Officer for Phoenix Companies, Inc. He has extensive experience in the insurance industry in terms of the startup and larger company relationship. The first thing I wanted to know is when he realized there was a need for this connection. “I reached this conclusion in 2007.” Tyler said, “For many years, my peers continually wrung their hands over the failure of our industry to reach a broader market. We failed to address the needs of many uninsured or under-insured individuals and families.” This often seems to be the case in any industry. Necessity is the mother of invention, so when a portion of your market is not being served, this creates a gap that needs to be filled. Tyler also elaborated on the changing technology landscape that caused this shift:

“In that year (2007), Apple introduced the iPhone, Facebook reached critical mass, and Amazon Web Services made incredible infrastructure accessible and affordable. Insurance had long been a social, mobile, and computationally-intensive business. Those three services promised to radically changes those three pillars of our business.”

With all these factors coming together, you might think that the larger companies were the ones on the forefront of the innovation and shift. However, as Tyler explains, larger companies had certain issues that prevented them from leading the charge:

“Implementing these technologies required new business models that defied the conventional organization structure and business processes of mainline carriers. Many of us saw the emerging opportunities, but ran into significant internal barriers when we tried to pursue them. We realized that startups had the opportunity to quickly execute on the opportunities and prove the viability of new ways to attract and serve new customer segments.”

Tyler brings up a very salient point on where startups can help larger companies innovate. In larger national, or even global companies, there are many moving parts that need to operate in order for anything new to be green lit. Startups don’t have this issue because they operate on a smaller scale and don’t having internal “red tape” to slow down the approval process. Like any industry, getting things done efficiently and quickly can be the difference between success and second place. Startups are like a small, agile animal that can move quickly and squeeze through smaller gaps. Larger companies are sizable, powerful animals that move slowly, but shift the ecosystem they are in. Together, they can cover all the bases required in any industry.

This seems like an easy decision, so have larger companies completely embraced startups? Tyler says it hasn’t reached its full potential, but his industry is moving towards full commitment:

“I’m very encouraged by the level of investment in dollars, employee time and executive attention across the industry. Many carriers have launched VC arms, invested directly in startups, established innovation labs, and even acquired innovative startups. That said, companies need to make dramatic changes to processes, organization structures, and priorities embodied by startups to truly capitalize on the disruption. That level of change has only begun.”

This is usually how change in an industry occurs. It starts with acknowledgment that this is the direction the industry is moving. Then it reaches the current stage where the industry has started to utilize the new vision, but the best practice hasn’t been established. It sounds like the insurance industry is becoming increasingly invested in what startups can offer, but still must figure out the way to maximize the potential they offer.

The actual product or service a startup offers isn’t the only thing that larger companies can gain from this relationship according to Tyler. “In the life insurance space, we can learn how to better approach problems from the customer’s perspective, not our own.” Tyler said, “Too frequently, industry veterans assume that we know the problems better than our customers. Products can easily be developed that have no market.” This brings up an issue that deals with the larger scale that these companies work on. Startups are closer to the market they deal in, so they may have a better understanding of what is needed in an industry. Tyler summed it up best, “A startup lives or dies by the problem it intends to solve. Insurance carriers desperately need this skill.”

It’s now clear what larger companies can gain from startups, but for a true two-way partnership, startups must gain some value from working with larger corporate counterparts. The obvious plus is that larger companies provide startups with the resources they need to make their vision a reality. Startups can gain access to things that can make the difference between success and failure. Tyler brings up more excellent points in terms of startups learning from the companies that have been involved in a given industry for years:

“Startups in our industry can benefit greatly by listening closely to the advice of industry veterans from established carriers. Insurance is a highly regulated and operationally-complex business. Speed is essential for building a new business. However, it remains equally critical to respect privacy, comply with a host of regulations, and create a stable operating environment in order to deliver on commitments that span well into the future.”

As a startup, having someone who can guide you through the process, so you don’t hit major speed bumps can save you a lot of headaches, time and money. As Tyler said, they can also help you create a framework for continued success down the road.

So, it seems that this relationship is mutually beneficial for both parties involved. That’s why at Upward Hartford one of the pillars, we stand upon is creating and fostering connections between startups and larger companies. With both types of businesses in our space, connecting the two sides has never been easier. The vision of Upward Hartford founder, Shana Schlossberg, is for the hub to act as an intersection where startups and and larger companies can connect and work together in an innovative, informal environment.

To this end, Schlossberg has been reaching out to the Fortune 500 companies in the Greater Hartford area to move innovation teams to Upward Hartford. Last month, XL Catlin was the first company to sign a 12-month lease for an office next to Amnetpro, a Colombia based IoT company that will be setting up operations in Hartford.

Special thanks to Paul Tyler from Phoenix Companies Inc.