If you’ve been around the startup world for more than five minutes, you’ve heard it:
“Startups are innovative by nature.”
It sounds good.
But honestly, half the founders I talk to confuse “innovation” with “randomly trying stuff because I need a new dopamine hit.”
Sometimes that works. Most of the time, it doesn’t.
So let’s clear this up.
Innovation isn’t about doing everything differently just because you’re small and scrappy.
You have to know where to push boundaries, where to keep things simple, and how to steal the best ideas from outside your own four walls.
In this article, I’ll break down why startups really do have an edge when it comes to innovation, what “open innovation” actually means (hint: it’s not just outsourcing), and how you can use it to grow faster than the giants you’re up against.
By the end, you’ll know exactly how to innovate without falling into the traps that KILL most young companies.
Large companies are like cruise ships – safe but difficult to steer.
Yes, they have resources, processes, management layers, and reputations.
But those things also create inertia.
Startups, on the other hand, are speedboats.
(No, I didn’t recently get a boat. I wish!)
Anyway…
They can pivot quickly, test wild ideas, and adjust based on customer feedback. That SPEED is their competitive edge.
Embrace it in your startup.
But at the same time – be cautious. Where’s the fine line between innovation and random moves that end up hurting your biz?
I mean, some things simply work. No need to change them.
Others HAVE to be challenged.
As a startup, you should never be afraid to innovate. To try new things, even if they make you uncomfortable.
Remember, you don’t need everything to go right. You need one breakthrough. One innovative idea where you were right.
In the old days (and in today’s old-fashioned companies), you’d build everything in-house.
No agencies. No freelancers.
But today, you need to admit you don’t know everything, and you must go outside to fill the gaps.
Bringing in external ideas, tech, and talent – THAT’S open innovation.
And for startups… that might be the wisest thing you could do.
This might sound just like outsourcing, but it’s NOT the same…
Outsourcing means you buy tech or services only when you absolutely NEED them.
Imagine you’re running a small SaaS company and your team has zero design talent.
You’ll obviously hire a freelancer to redesign your landing page.
It solves the problem, but only after the gap has already slowed you down.
Of course, this is something you need – and I encourage you to outsource your work.
But open innovation works differently.
Instead of waiting until you’re stuck, you actively go outside your walls to bring in ideas and systems that strengthen your product.
A good example would be a health-tech startup that partners with local clinics to co-develop new diagnostic features.
They’re not just filling a hole – they’re intentionally building with external expertise from the very beginning.
To make open innovation work, you also need…
Open innovation only works if you have connectors inside your company.
These are the people who act as bridges.
For example…
Imagine a founder who’s brilliant at product design but clueless about distribution.
A connector could be the advisor who introduces them to three distribution partners…
Negotiates the first trial deal…
And then translates the lessons from those experiments back into the product roadmap.
Or picture a biotech startup working with a university research lab…
The connector isn’t the scientist or the founder – it’s the business development lead who speaks both languages and makes sure ideas from the lab don’t just die in academic papers but become ACTUAL commercial products.
So, these “connectors”…
They bring in outside expertise to FILL in the gaps your team can’t cover.
Here’s the mindset shift…
Don’t think of innovation as “just build a smart team and lock them in a room.”
Instead, think of it as building a NETWORK.
When should you bring in connectors?
As early as possible.
Pre-seed and seed-stage founders often think they need to “earn the right” to bring in outside expertise.
But that’s a mistake.
The earlier you have someone who can bridge networks, the faster you’ll avoid blind spots.
Even a part-time advisor can play the role until you can afford a dedicated hire.
There are many… MANY ways to innovate.
You can even innovate on your process for innovation. But let me give you a few proven ways to get you thinking:
Most founders think customer research means sending out surveys or asking a few people on sales calls what they want.
That’s fine, but it’s surface-level.
Co-creation means you invite customers into the building process.
Give them early access to features.
Run live workshops where they design use-cases with you. Create a beta community where they can vote on priorities.
Why does this matter?
Because customers aren’t just here to validate your ideas.
You never know…
They might even SURPRISE you with use-cases you hadn’t even imagined.
(Anda after all, you’re building for THEM, not for yourself…)
So stop treating customers like judges of your ideas – they’re also collaborators.
Suppliers are usually underestimated.
I mean, I yawned as I wrote that sentence.
But still… they’re important.
Suppliers often have a bird’s-eye view of the industry because they work with multiple companies at once.
That means they often spot trends earlier than you.
For example, if you’re a DTC founder and your packaging supplier mentions half their clients are moving toward eco-friendly materials, that’s a signal.
You could work with that supplier to experiment with new sustainable packaging before your competitors do.
As a founder, you have to be resourceful. This is a way to do it.
This is one of the most underrated moves, in my opinion.
Two small companies teaming up can look like a GIANT.
If you’ve got tech but no distribution, and another startup has distribution but a weak product, you can combine forces.
Don’t be afraid to pull moves like these.
For example…
A small AI startup partners with a mid-sized recruitment platform.
The AI team brought their matching algorithm, and the recruitment startup brought their audience of HR managers.
Together they launched a new product line in weeks – something neither could have done alone.
Other startups are not always competitors. They might just be your biggest leverage.
Every founder secretly wants to reinvent the wheel.
And while that’s all fine and dandy…
Rebuilding something that already exists isn’t innovation, it’s ego.
If someone else has already built a system that works, license it.
White-label it.
Integrate it.
THEN focus your creativity on the part of the product that actually differentiates you.
Plenty of fintech apps don’t build payment infrastructure from scratch.
They license Stripe (duhh), build their own customer experience layer on top, and spend their energy on growth.
This one is tricky but powerful.
Here’s the thing:
Corporations have reach and startups have speed.
When you combine the two, you can scale faster than you’d ever imagine.
But… only if you’re careful.
A corporate partnership can open distribution channels you’d never get alone.
But beware: corporates move slow, they love paperwork, and they don’t care about your scrappy startup deadlines.
If you’re not aligned on expectations, you’ll burn six months and get nothing.
So if you experiment with them, treat them as experiments – not as something that defines you.
Just my $0.02.
Action step: Identify one “connector” in your network who knows more people than you do, and invite them into your innovation discussions.
Innovation isn’t always progress.
Sometimes it’s just your inability to focus and a need for a new dopamine hit.
Here are the main traps to avoid:
Startups and innovation really do go hand in hand – but only if you approach it the right way.
Which – spoiler alert – most companies DON’T do. Here’s how to be innovative, but strategically:
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