How can incumbents partner with start-ups to drive growth?

The takeaways

• A pragmatic approach to start-up collaboration drives innovation and business model reinvention.​
• Hybrid engagement models with start-ups outperform risky moonshot investments and deliver faster impact.​
• Companies can unlock value by partnering with, investing in, sourcing from, or even building start-ups with strategic fit.

All big, established companies face a contradiction. The business model and strategy that brought them success may eventually hold back reinvention efforts that keep them viable. This self-disruption paradox, explored in the work of the late author and academic Clayton Christensen,¹ sees large and otherwise thriving organisations failing to disrupt their industry because they’re unable to first disrupt themselves.

Today, the pressure to disrupt—and reinvent—is rising as changing customer expectations meet, and are themselves shaped by, the confluence of AI, physical climate risk, and other megatrends. Together, these forces are blurring industry boundaries and putting huge amounts of value in motion. According to PwC’s research, an estimated US$7 trillion was up for grabs in 2025 alone from companies reinventing business models—that is, fundamentally transforming how they create, deliver, and capture value.

Nonetheless, the uncomfortable reality for big companies is that successful new business models usually originate in start-ups, which thrive on upending incumbents’ legacy value propositions, cost structures, and business models.

This naturally makes start-ups a competitive threat, though savvy executives also see them as valuable innovation partners. In the not-so-distant past, this collaboration often took the form of high-risk, high-reward venture capital, or so-called “moonshot” investing. These highly ambitious investments in projects or start-ups have the potential to revolutionise industries or generate massive returns—but they also carry a significant possibility of failure.

For large companies, moonshots can miss for several reasons: The venture sits too far from the core business to sustain ongoing focus or internal momentum. High investment needs burn cash too quickly. Progress simply stalls—and patience runs out—when the product or service is so novel that no clear market yet exists.

Some forward-looking incumbents are addressing these issues by adapting traditional approaches and shifting towards hybrid partnership models to harness start-up agility and innovation while playing to their own strengths.

These approaches may be less glamorous than shooting for the moon or hunting unicorns, but they’re proving successful as companies look to thrive in an era of industry convergence. Three approaches stand out: corporate venture capital (CVC), corporate venture building (CVB), and venture clienting.

The CVC approach sees established companies investing directly in start-ups to gain early access to emerging technologies, disruptive innovations, and even new customer pools. While CVC has long been part of the corporate toolkit, its role is evolving. Rather than treating start-up investments mainly as financial plays (often kept somewhat separate from core operations), leading companies today use CVC to build strategic partnerships that strengthen their competitive position and spur innovation.

Investing in start-ups to capture ‘return on collaboration’

Consider the example of a large European home improvement retailer we worked with. The retailer needed an operating model for a CVC unit tasked with accessing new markets and technologies by investing in start-ups focused on climate technology, circular retail, and property technology.

One of the property tech start-ups helps homeowners with independent, personalised advice—including a detailed cost plan—on renovating their homes to improve energy efficiency. The partnership delivers a triple win. Customers value the support and services the start-up provides. The start-up and retailer, meanwhile, benefit from sharing resources, expertise, and networks (the start-up, for example, learns from the retailer’s massive customer base; the retailer, in turn, draws lessons from the start-up’s capabilities in product and service innovation).

A key advantage of investing in start-ups in this way is the much shorter time to market, given that they already have a proof of concept and, often, a track record of sales and revenue. Indeed, this more integrated form of CVC investing is becoming more common as incumbents seek to complement their core competencies while picking up new ones in areas such as artificial intelligence, sustainability, and digital transformation.

The benefits of a decentralised approach to CVC investing

Another emerging development in this space is the decentralisation of CVC activities, where individual business units within a company make their own independent start-up investments. This is the case for ABB Group, a major global technology leader in electrification and automation. Historically, the company’s venture activities sat at the corporate group level, covering broad themes instead of the more specific priorities of the different business units.

When ABB decentralised its main business lines five years ago, it also split its CVC arm into four vehicles for each unit: electrification; motion; process automation; and robotics and discrete automation. Each pursues investments in start-ups aligned with the unit’s own goals and innovation needs. By allowing individual units to invest directly, the company enhances its agility and responsiveness to emerging market opportunities—while still ensuring innovation efforts are closely tied to business priorities.

There’s no centralised investment committee, as the divisions make the investments directly. This offers a significant advantage over a centralised model: speed. Each division accounts for its own profit and loss from these investments.

The CVB approach involves an established company creating new business ventures from scratch, typically making use of internal resources, corporate assets, and start-up methodologies. CVB efforts tend to be best known for pursuing high-risk, disruptive innovations far from the core of the business—think of how X, a division of Google LLC, was famously dubbed the company’s “moonshot factory.” While such ventures operate with entrepreneurial autonomy, they benefit from the parent company’s infrastructure and market access.

Today, CVB tends to be more down to earth, as companies focus on developing business models that are adjacent to current ones—in hopes of creating value quickly and facilitating integration into existing operations. This shift reflects pressure for faster return on investment, increased scrutiny of innovation budgets, and the realisation that ventures built too far from the core are harder to get right.

Procter & Gamble’s P&G Ventures illustrates this more pragmatic side of CVB by focusing on new consumer product brands in areas adjacent to the company’s main businesses. Each venture targets tangible customer needs and makes use of P&G’s existing expertise while avoiding speculative projects.

How Otto built a billion-euro platform by investing in adjacencies

About You, launched by the retail giant Otto Group in 2014 (and since acquired by retailer Zalando in 2025), is widely regarded as one of the most successful venture-building projects in the German-speaking market. It offers a compelling example of a successful CVB initiative focused on adjacent business models.

While Otto was traditionally a mail order and e-commerce company, About You represented a modern, digital extension of its core business—not a radical departure from it. Both offered fashion and lifestyle products, but About You targeted a younger, digital-first audience and adopted a marketing strategy centred on personalised shopping experiences and influencer collaborations. Otto, by contrast, continued to provide a much broader mix of categories—including homeware, electronics, and furniture—with About You largely focusing on fashion and beauty. This positioning makes it a textbook case of an adjacent business model.

Crucially, the venture carved out its own identity and growth path, while benefitting from Otto’s existing infrastructure, brand reputation, and industry knowledge. This means About You wasn’t a moonshot but a springboard, using Otto’s deep experience in e-commerce and logistics to accelerate growth without straying too far from the core. The example highlights how the CVB approach can be especially effective when new ventures are close enough to the core to tap existing strengths but still have autonomy to innovate.

In the venture clienting model, incumbent companies collaborate with start-ups as specialised solutions providers, helping the former integrate advanced technology—or even new business models—without taking on the full risk of investment.

This form of collaboration is increasingly valuable for unlocking innovation potential, particularly in the context of rising consumer expectations, competitive pressures, and shortages of skilled labour. It lets companies deliberately integrate start-ups as external sources of innovation—not through investment or acquisition but via a relationship more akin to that of a customer and supplier.

At the core of the approach is the idea that when a start-up develops a product or technology that can solve a specific problem a company faces, it comes in early as a supplier—often before building references or a large customer base of its own. This allows the larger company, as a key customer, to influence the ongoing development of the product. The incumbent player gains a technological edge without buying equity, and the start-up builds revenue and receives early market feedback and access. It’s a classic win-win scenario.

Venture clienting is seen by many as a no-regret move for companies seeking incremental innovation. A key advantage is the relatively low investment required compared to other forms of start-up engagement, such as CVC or CVB. By acting as a customer rather than an investor, companies can still gain early access to cutting-edge technologies and tailored solutions within their ecosystem, without committing significant capital.

This approach can also deliver a fast return on investment, as start-ups typically help solve concrete operational problems by, for example, enhancing efficiency, reducing costs, or digitising processes.

Venture clienting through a strategic partnership between Germany’s Krone and Recalm

What does venture clienting look like in practice? Driver’s cabs in construction, agricultural, and forestry machines are often exposed to high noise levels that impact operator comfort, health, and communication. Krone, the German agricultural machinery manufacturer, faced this challenge as it sought to reduce in-cab noise while improving communication options and overall working conditions for drivers.

Enter Recalm, an early-stage start-up that was part of PwC Germany’s Startup Programs initiative. Recalm had developed an active noise-cancelling system to reduce noise in the driver’s cab. One of the founders, Marc von Elling, came up with the idea when living in a flat in Hamburg-Altona, where he was regularly exposed to noise from the fish market and the city’s entertainment district, the Reeperbahn.

What’s unique about Recalm’s noise-cancelling technology—ANCOR—is that it works without headphones and creates a quiet zone of 20 to 30 centimetres in diameter around the driver’s head.

Krone and Recalm entered into a strategic partnership to adapt the ANCOR technology specifically for the requirements of agricultural machinery. Thanks to the partnership, Krone benefits from an innovative solution that can improve comfort in driver’s cabs by up to 50%, and Recalm gets access to capital and validation of its technology in a real-world setting.

While venture clienting is efficient and practical, it does tend to have a more incremental than transformative impact. It’s an excellent tool for optimising the core business and embedding external innovation capabilities. But because it focuses on solving existing problems within established structures, it rarely leads to the kind of market disruption or strategic reinvention that CVC or CVB can unlock.

When it comes to choosing between the approaches, there are three questions leaders of established companies should ask:

1. Do we need to look outside our company for new business models, or do we have innovation internally that we could take to market? Companies with product or service lines that are largely stable and have existed for decades will benefit most from looking outside for innovation, typically through a CVC or venture clienting approach. Conversely, companies with a radically new product or service in mind don’t necessarily need to have a fully developed offering in hand but could use a CVB approach to place strategic bets on nascent ideas or early-stage concepts.
2. How compatible is the new offering or innovation with our core business? Where the new offering or innovation is largely compatible with the core business, a lower-risk, more incremental venture clienting approach or the CVB model might work best.
3. How much money are we willing to invest, and for how long? Companies interested in (or in need of) radical reinvention are most likely to benefit from a CVB or CVC approach. Both approaches work well for larger-scale, high-impact opportunities and demand large investments and patience. In contrast, venture clienting lets companies test and adopt innovations quickly through commercial partnerships or pilot projects, without requiring major upfront investment.

The ways in which established companies are thinking about collaboration with start-ups are evolving. Rather than launching isolated moonshots, today’s forward-looking organisations are participating in the wider start-up ecosystem, drawing on its energy, talent, and ideas to accelerate their own growth—and successfully solve the self-disruption paradox.

_{¹ Bower, J., and Christensen, C., 1995. “Disruptive technologies: Catching the wave,” Harvard Business Review, January–February 1995.}