The ultimate battle of AI between corporates and startups

Innovation takes courage and creativity. The word itself – innovation, is used way too often and mostly in situations when it shouldn’t be used. For me, innovation is a bold idea supported by thoughtful actions that take the risk of failure, but which in the end pays off and creates something incredible about which others can only think of. This means that innovating might not work and it definitely comes with a possibility to lose all.

Artificial intelligence is only one form of innovation. But currently, it’s the one that has the most talks around. Applying AI and creating tools for that requires money, people and commitment. But as it’s a form of innovation, more importantly, it also demands courage and creativity. We are all aware of the fact that corporates have much more money than startups. And with that money, they can buy people. Most probably if they already start something and nothing major comes up as a deal-breaker, they are also committed. But what they usually don’t have is the true courage and creativity.

Most people do their jobs not to maximize the chance of something wonderful happening, but to minimize the chance of something bad happening.

— Tom Goodwin, from the book “Digital Darwinism”

While all companies want to have the best and open-minded employees, the process of approvals, corporate rules and long meetings destroy the creativity. Products are assigned with huge budgets with the ability to spend millions or even more on marketing to ensure that the product is bought by people. As Goodwin has also said, thinking is too cheap to be taken seriously. When people have enough money to spend, they tend to get comfortable not to think too much as there’s nothing you cannot cover with money.

Corporates have usually a decent M&A strategy in place. If a startup grows big and adds value with either it’s technology, talent or client portfolio, the corporate can probably acquire that and merge the startup with its business. That’s one way how to minimize the risk of launching something not market-worthy on their own. Why break something that works? Why invest millions or even billions to test out something for which market might not be ready yet, while your products or services already have very nice revenue streams and generate a decent profit to the company? Well, it’s a great strategy as well and it works – but when it comes to the battle of AI, they might not win it – as they trust the fate of the company to the others. One day, companies creating products based on AI, might not be any more called start-ups, but they become a normal way to operate.

Startup vs corporate.jpg

While I was interviewing financial services corporates and startups regarding their usage of AI in Estonia, a clear contrast emerged – startups were much more open both strategy and action wise to develop solutions based on artificial intelligence. Corporates have so many other projects where to invest money as historically their core services or products didn’t rely on technology and therefore, they need to keep their existing products and solutions in good shape and focus mostly on that rather than to innovate and try something new out. Startups, on the other hand, are from the very beginning relying on technological solutions as if they wouldn’t, they couldn’t offer good prices, keep up with the well-established corporates and win the market from them.

Startups know how to take the best from innovation – they need to be really bold and creative to make something great happening with the small budgets. Even if they raise a lot of money in their later stages, they need to manage with tiny or no amounts in the early beginning to create the initial product. With their flexibility, they attract the top talent who help to build the first machine learning models, gather the data from nowhere and scale up afterward. A lot of startups fail, and apparently, according to the late research, almost 40% of AI startups in Europe essentially have no AI. However, the overall culture established in the startup sets better conditions to start off with building products leveraging on AI rather than in the corporate world.


The corporates can self-disrupt themselves as Netflix did in 2011 while becoming from a DVD rental business to world-leading media-services provider by leveraging from data science. Not all companies operate like that and it’s good – if all would try, our whole economy would collapse as not all are able to play it out. This means that corporates need to improve their game and ensure that their services and products are fit for the market also 5, 10 and 50 years afterward. A continuous strategy assessment is needed for that and hopefully, corporates recognize the risk of non-innovating earlier than it becomes critical.

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