Not only corporations, but also small and medium-sized businesses are feeling the pressure to adapt to the changing times and to digitalise processes. Anyone who takes a closer look at the topic of digital innovation will quickly see that the necessary know-how about AI is often not located in their own company, but instead in the vibrant start-up scene. But what are the reasons for cooperating with start-ups and how can they be successful, despite the often different mindset?
Medium-sized companies and corporates (hereinafter referred to as corporates) have developed processes and profitable business models over the years and have gathered the corresponding know-how in their corporates. With advancing digitalisation and the exponential growth of data volumes, many analogue and digital processes are reaching their limits because they can no longer cope with the flood of information. In order not to lose touch in our dynamic world and to maintain competitive advantages, many corporates have already realised that they need to digitalise processes. The necessary know-how often consists of deep and machine learning, natural language processing or computer vision. Corporates often know where the shoe pinches, but do not have the necessary human capital to develop solutions themselves. There are usually three options:
- Have software purchased/developed by IT service providers
- Build up human capital and develop solutions yourself
- Use the know-how and dynamics of start-ups
Each of these solutions has advantages and disadvantages. Both IT service providers and in-house development are often hampered by lengthy bureaucratic processes, but also by the high level of uncertainty and lack of know-how associated with such projects. Solutions that go hand in hand with acceptable costs and bring along a corresponding dynamic can therefore be realised by corporates and IT service providers in the rarest of cases. This ability and the willingness to take high risks is reserved for start-ups as small and agile units. Start-ups are then not only solution providers, but serious innovation drivers with the potential to change entire industries.
How do I find the right start-up?
There are various ways to get in touch with start-ups. In recent years, various hubs and start-up initiatives across Europe have been funded or established by the federal government, large companies or other institutions. Accordingly, many start-ups from the most diverse directions gather here. Often the hubs are also very well networked with each other and offer opportunities such as corporate challenges or reverse pitches, in which corporates pitch their problems to start-ups. Start-ups use this stage to apply for the challenge with their solution and thus establish a quick and unbureaucratic contact with the corporate. In addition, some institutes develop so-called start-up landscapes in which start-ups are listed according to specific use cases. These offer a good overview of start-ups with the corresponding know-how. Success stories are another way of attracting attention, as both start-ups and corporates like to use joint successes effectively for PR.
How does the joint project become a success?
1. Make people aware of the motivation
First of all, both sides should be aware of the motivation of the counterpart. Corporates seek proximity to start-ups in order to participate in relevant technological developments and to gain or maintain competitive advantages. Start-ups, on the other hand, want to develop their solutions as close to the user and as efficiently as possible. In addition, both sides gain valuable know-how and experience from which both sides benefit during the further digitisation.
2. Understanding the partner’s mindset
For a successful project, both sides should understand the mindset and the way of working of the counterpart. Start-ups often do not have fixed processes and are willing to work under high uncertainty and with high risks. Corporates, on the other hand, rely on predictable risks and have various processes that need to be gone through to start a project. If both sides are aware of each other’s strengths and weaknesses and develop a certain understanding of each other, the joint project is guaranteed to run more harmoniously.
3. Define goals with flexibility
Furthermore, both sides should strive for a definition of goals that leaves room for flexibility, as the outcome of such cooperation often cannot be quantified in advance. A successful project can be defined by several variables: Process improvements based on KPIs, further development of the corporates’ technological understanding, understanding of potentials and limits of the technology, development of new workflows and an improved external image through the cooperation with start-ups are some of the factors that can be used to measure successful projects. Moreover, many ideas for further development only arise during the project, which cannot even be foreseen during the planning phase.
4. Be aware of your own role
Corporates should be aware that they become one of the first customers and often paying supporters of start-ups, especially in the early stages, and that they therefore have a high value for the start-up. In addition, the development of the start-up can be enormously simplified through valuable insights and with support in the right place. On the other hand, the start-up gets the chance to work together with the corporate and to develop its product on the market. In addition, many start-ups are looking for further financing and are judged by investors largely on the success of the projects they have carried out. The start-up will therefore neither want nor be able to afford to lose a valuable partner and will therefore put all its resources into the success of the project.
5. Minimise risks
Every project – whether start-up cooperation or not – carries risks that can be greatly reduced with the right measures. One of them is the Lean Start-up Approach. This means that start-ups work according to a three-step cycle: Build-Measure-Learn. Prototypes are developed as quickly as possible and made available to the corporate. Then they talk to the users and gather feedback. Based on this, appropriate conclusions are drawn and incorporated into a next version of the prototype. This happens in multiple, rapid iterations and enables start-ups to efficiently find quick solutions. The process serves to minimise risks and to be able to develop a product close to the customer. Corporates should therefore be aware that a start-up collaboration is a collaborative process and requires regular feedback, which minimises risks and greatly increases a project’s chances of success.
Finally, as in any business relationship, trust must be right. Both the start-up and the corporate must be able to count on each other’s support and expertise.
COOPERATIONS WITH START-UPS….
offer extreme potential for both sides that should not go unused.
Corporates should not be afraid to throw old ways of thinking and processes overboard and be brave to shake them up. They should trust in the knowledge and new methods of start-ups and try themselves out in a smaller or larger project with a start-up. Things won’t change overnight, but you have to make sure that you don’t miss the boat the day after tomorrow.