Connecting New Firms With Old Firms: A Step-By-Step Guide For Innovation

Just as academics aren’t natural entrepreneurs, many established corporations, especially in midsized cities without a strong tech ecosystem, may not know how to innovate, at least from a technological perspective.

I am an urbanist who specializes in economic development and the intersection of legacy industries with emerging technologies. As the founder of Tulsa Innovation Labs and a senior fellow at Heartland Forward, I’ve worked to transform Tulsa from an oil-driven economy into a thriving tech hub.

What I discovered in Tulsa was that our energy corporations had little precedent working with start-ups. For most of their history, they didn’t need to. By and large, their business model was stable, and they had everything they needed to make massive profits—they’d extract oil and gas, refine it, distribute it and then sell it. And because the energy industry is so cyclical, there is high mergers and acquisitions activity, with wild swings in the workforce. The industry is designed to expand massively in the boom times and then cut to the bone when the market drops. This makes investing in R&D more difficult or uncommon in energy. As a result, Tulsa had very few energy-related tech start-ups because its corporations weren’t drawing them to the region. At Tulsa Innovation Labs (TIL), an early step in our process was to educate our corporations on how to work with start-ups, what I called “Innovation 101.”

But first, we needed to understand a bit more about why they didn’t work with start-ups to begin with. I discovered several reasons, which apply to many corporations across industries:

• Risk Aversion: “Risk isn’t in our DNA,” one Tulsa energy leader told me. To Tulsa’s generations-old energy companies, start-ups seemed scary. In oil and gas, operational failures can lead to physical harm or death, so there isn’t an incentive to take risks on start-ups or their technologies. As one energy insider told me, “Corporations and executives can say they want to be innovative, but in reality, the safest path forward is to use the same process as everyone else: the industry standard.”
• Uncertain Returns: A local corporate leader told me that “investors have certain expectations,” and that doesn’t typically involve taking “speculative risk on new markets or technologies.” The returns of working with start-ups—financial and otherwise—are difficult to understand, much less quantify, for many corporations. The trouble is that many companies, especially in energy, create business goals at an annual (or at best, quarterly) cadence, so they can lack patience and an ability to invest over the cycle time needed to get innovation fully baked into their culture or for partnerships with start-ups to pay dividends.
• Access to Talent: Many corporations in legacy industries like oil and gas can lack the technologists needed to champion and work with new firms. Corporations may just not have the in-house know-how to innovate. In Tulsa, what I heard regularly was that in addition to technical talent—data analysts and scientists, in particular—the city lacked middle managers and executives who can run start-ups or corporate innovation programs, a problem that could be solved only by a strong executive-in-residence program and MBA pipeline. To create a more dynamic talent pipeline that infuses corporations with folks other than petroleum engineers, Tulsa’s energy companies need to form stronger and more diverse partnerships with local universities.
• No CVC Team: Most of the energy corporations in Tulsa didn’t have corporate venture capital (CVC) teams before TIL got to work, meaning there wasn’t an approved mechanism to engage or invest in new firms—much less a budget for doing so. This lack of CVC capacity is no doubt linked to the same risk aversion of corporate business models, which favor reinvestment into existing products and processes over an unproven, external team. CVC, however, can provide corporations with clearer insight into potential market-disrupting firms and technologies. Also, a dedicated CVC team making the right bets can expand the corporation’s revenue and footprint in the given industry without changing product or process focus internally.
• Nonexistent Culture: Without precedent, there’s no internal culture of working with start-ups. The lack of technological innovation and start-up partnerships was a feature of the industry standard and became an unfortunate cultural trait. Like universities, corporations can become too insular and disconnected from the innovation ecosystem and stuck in their ways.

These blockers to innovation generally fall into two buckets: mindset (risk version, uncertain returns, hubris) and internal capabilities (teams that work with start-ups, talent to work on these teams, a CVC arm). Changing your mindset likely requires a burning platform (you are losing market share), education (this will help your business), and time (this is a process of changing culture and attitudes). Changing internal capabilities likely requires training and programs (either consultants or organizations like TIL and its initiatives), and new partnerships to build this out at an industry versus company level.

Economic development organizations can help de-risk innovation even for successful corporations, which is why TIL and GKFF’s strategic guidance and financial support were helpful in getting Tulsa corporations on board with new programs and willing to tackle long-standing internal barriers. With that context, you’ll want to find or build a program to guide your corporations through the innovation process. Think of EDOs as innovation Sherpas for local corporates. This is as much about change-management as it is technological innovation.

Five-steps of Innovation 101:

Step 1: Commit to Innovation. Like everything else, if you’re not committed, you’re not going to succeed. Halfhearted efforts, symbolic investments or ambivalent gestures are a waste of time and money. For a corporation looking to start an innovation practice for the first time or work more closely with city partners on tech-led economic development, you’ll need the CEO’s buy-in to set innovation as a company priority, approve budgets and appoint an executive champion who can devote bandwidth to driving the effort internally. For TIL, we engaged directly with Williams CEO Alan Armstrong and Devon CEO Rick Muncrief—Muncrief even sat on TIL’s advisory council—and both empowered deputies to drive action on their end. To get CEOs on board, it was good that I had George Kaiser in my camp—which meant access to a network of corporations he partners with as well as start-ups and firms he invests in, including a respected VC, Energy Innovation Capital, that would be TIL’s future operator for our energy-tech initiative. You’ll also need local champions who can sway CEOs. We had GKFF’s CIO, Robert Thomas, personally engaged and advocating for the program.

Step 2: Understand Needs. Corporations need an internal mechanism to review and analyze their innovation requirements and to prioritize them. Outside partners can help with this process. In assessing innovation needs, corporations must ask themselves a couple of basic questions: First, how do we continue to improve what we do every day (a.k.a. innovation in the core business)? And second, how do we continue to evolve and strengthen as a company (a.k.a. innovation in new business areas)?

Step 3: Define Success. More times than not, the relationship between start-ups and corporations doesn’t work out as either party planned. McKinsey finds that “the majority of CVCs stop investing after two to three years, and . . . only 28 percent [of startups] said they were satisfied with their corporate partnerships.” Having a clear set of strategic goals, complete with key performance indicators, will be important in guiding your investments and partnerships. As I witnessed, stakeholders can often leap too soon, excited by a technology or a founder without doing the due diligence or defining goals for the relationship. If you’re looking to enter a new technology, create a new business line or just find a solution to meet a discrete need, each of these goals requires different investments, partners and KPIs.

Step 4: Plan to Integrate. Executive commitment is particularly important when it comes to integration and adoption of new technologies, as “only 14 percent of incumbents that invest in young companies have adopted the practices necessary to sustainably generate value from such relationships.” Committing to innovation means more than pilots and testing: it means partnering with start-ups, adopting new technologies and integrating them into the existing business in a way that generates new, scalable opportunities. To do so, corporations should plan to identify gaps in culture and methodologies so they go into relationships with eyes wide open for potential hiccups and brainstorm, on the front end, ways to mitigate them. A common obstacle is misalignment on timelines—as one investor told me, a “six-month delay at Shell is no big deal, but six months might be all the cash runway a startup has before bankruptcy.” Corporations will need to be clear on the timeline they can move on and communicate that to start-ups.

Step 5: Explore Solutions. A BCG study shows that corporations use a multitude of ways to drive internal innovation: “At the end of 2018, 19 percent of corporations were using at least one innovation lab or digital lab, 17 percent were using one or more accelerators, 17 percent were using one or more CVC units, 13 percent were using one or more partnership units, and 6 percent were using one or more incubators.”  A few notable examples: Starbucks launched a 20,000-thousand square-foot incubator space; Barclays partnered with TechStars on a fintech accelerator; and others have created internal investment groups, like Intel Capital or Google Ventures. Each model has pros and cons, and corporations should work to find the right method to achieve their goals. Internal organizations, for example, can be challenging because successful CVC requires expertise, expensive labor and clear alignment with the core business. If these internal options are difficult to implement, external sourcing is a fair option. VC-as-a-service models involve partnering with a proven VC firm to invest in start-ups, but corporations don’t have to own new companies or necessarily operate innovation programs themselves. Becoming a start-up’s customer is also a great way to dip toes in the water; it immediately adds value to the local ecosystem and could infuse some creative thinking into the corporation.

Taken from Reinventing the Heartland by Nicholas Lalla Copyright © 2025 by Nicholas Lalla. Used by permission of Harper Horizon, a division of HarperCollins Focus, LLC. harpercollinsfocus.com/harper-horizon