Big European companies talk a lot about startups and innovation. But it’s mainly just a show.

Or at least that’s the main takeaway from a Deloitte survey about corporate innovation, where the accounting firm talked to 760 large companies across 16 countries.

The survey found that 76% of companies believe that “new players and disruptors” are a very important influence on their own business activities, and the same percentage say that startups trigger innovation within their company.

Chart showing what triggers innovation at large European companies, from Deloitte's Innovation in Europe Survey 2018-2019

In short, Europe’s large companies are paying a lot of attention to what startups are up to.

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But the survey also found that in practice, this is not transforming into concrete action, with corporates talking a lot more about engaging directly with disruptors than actually doing it.

Companies prefer to run workshops with experts from within their own industry, or even browse social media for innovation resources, rather than invest in startups, cooperate on projects with startups, or provide venture capital to startups.

Chart showing how large European companies tap into external innovation sources, from Deloitte's Innovation in Europe Survey 2018-2019Scott Campbell, director of Deloitte Ventures, calls this “innovation theatre”. Many companies run workshops and events which seem innovative, he says, but fewer companies have a clear strategy for innovation and are really open to disruption.

“Working with startups is hard – it requires a total shift in how a company approaches data security, human resources and company policies,” he says. “Innovation theatre is much easier.”

More than half of the companies surveyed across all sectors are currently trying to implement new technologies, like the Internet of Things, robotic process automation, artificial intelligence, virtual reality and blockchain.

Experts in disruptive technologies are more likely to be found at tech startups than within traditional industries, and companies do seem to recognise the need to look further afield to really make use of these tools; almost all the respondents (92%) said that external influences at least as important as internal capabilities, with a third saying external resources are more important.

Yet most companies in Europe are pushing ahead on their own.

“Without a clear strategy, it’s just innovation for innovation’s sake. It’s misleading, and startups are going to get burned out.”

“European companies are yet to realise the relevance of ecosystems,” wrote the report authors, chief innovation officer of Deloitte Germany Nicolai Andersen, chief economist Dr Alexander Boersch, and Deloitte’s sustainable innovation expert Dr Julian Blohmke.

“No method or process is used heavily by European firms to tap into innovative sources from outside the firm. This means European companies are yet to realise the relevance of ecosystems to the future of their business.”

How does it vary across country and sector?

Appetite for working with startups varies by country; French companies put more emphasis on co-creating with startups than other countries, while UK companies are the most likely to invest in or acquire startups, even though they are less likely to cooperate on projects with them.

Startups hoping to work with big healthcare or construction companies are at a significant disadvantage, since these sectors are the most reluctant to collaborate with startups, support corporate accelerators, launch a venture capital arm or acquire startups.

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Unsurprisingly, technology companies (17% of the respondents) are more engaged with startups than companies in other sectors, like travel, retail and asset management.

Tech firms have the highest use of corporate accelerators (45%), cooperation with startups (35%) and investment in or acquisition of startups (36%) – all well over the overall averages for these activities.

Deloitte’s researchers said that Europe’s companies need to recognise that “the best talent does not always work in the company”.

“Digital ecosystems provide richer connections that enable companies to gain access to new knowledge faster and incorporate change more effectively,” they said.

“Failing to access outside inputs fully means European businesses are not realising their full potential.”

But Deloitte Ventures’ Scott Campbell says it is vital for companies to have a clear strategy if they are going to engage startups.

“Many companies say they are increasing their spend on innovation but without a clear strategy, it is just innovation for innovation’s sake,” he says. “It’s misleading, and startups are going to get burned out.”

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