David with Goliath — Cooperation Between Startups and Corporates

Digitalization is progressing at breathtaking speed and, slowly but surely, the German economy’s heavyweights have also realized that innovations are a must. The development of new technologies has never accelerated so quickly, which has corporates seriously interested in making sure they stay one step ahead. But what can they do if their own innovation department is not able to deliver what is needed? They look for and collaborate with startups that already have access to a variety of new technologies. That gives large enterprises a significant competitive advantage while also giving young companies a boost. We took to the Munich startup scene and talked to both sides to find out how corporates and startups can find common ground and benefit from one another. We also learned which advantages and obstacles can come along with collaboration.

We spoke with the three Munich-based startups Boheme Digital, Konux and Mystery Lunch. With their Bohème app, Boheme Digital GmbH provides a service for reading newspapers and magazines digitally for free at participating locations. The founders work with partners like Süddeutsche Zeitung and Red Bull Media House. Deutsche Bahn (DB) is also one of the Munich-based startup’s partners.

That means Boheme Digital and Munich’s successful startup Konux have a partner in common. The IoT company offers its clients smart sensor systems and analytics based on artificial intelligence. For instance, Konux supports Deutsche Bahn with monitoring their national high-speed network switches and implementing preventive maintenance. The aim is to lower costs for inspections and maintenance while also increasing network capacity.

“Eat, drink and be networked” could be Mystery Lunch’s motto. The startup offers large companies a cloud service that uses an algorithm to match up and network employees from different departments. The networking happens during a shared lunch to which the employees are invited. The aim is to get ideas flowing across department borders and keep everyone thinking outside the box. A few of the company’s many high-caliber clients include Allianz, O2, DHL, Deutsche Bundesbank and PAYBACK.

Establishing contact: How to do it?

Many young founders rightly ask themselves the decisive question: How can we catch the big fish? After all, you can’t just waltz into a CEO’s office in Germany and start pitching your idea.

Standing out: sales, events, competitions

As already mentioned, large companies are indeed looking for startups that can help them in terms of innovation and development. Yet you still have to stand out from the competition to receive the necessary attention. One important factor is to talk about your idea! It does nobody any good if you’re working on a groundbreaking idea that no one will ever hear about. That means it is essential to constantly talk with people, gather feedback for continued development and participate in pitch events in order to make a name for yourself instead of losing touch with the market. Startups often neglect PR work, which results in them being completely disregarded.

Mystery Lunch established initial contacts with large firms by gaining those firms’ attention through newspaper articles, word of mouth, and not least with strong sales activities.

How simple and fast the process can be was demonstrated by Bohème. Co-founder Amadeo Gaigl commented on first coming into contact with DB:

“Initial contact with Deutsche Bahn was established by the marketing agency Serviceplan. They saw us at the Munich Medientage and immediately recognized the potential for DB. So they simply introduced us to the Deutsche Bahn regional subsidiary Südostbayernbahn. The Bahn colleagues were immediately on board and we got right to collaborating on the implementation of a digital reading service for train commuters.”

That shows how being at an event like the Medientage with high-caliber attendees can definitely be worthwhile. It also highlights the fundamental importance of being seen and sharing your idea with as many people as possible.  You never know who might be watching your pitch or wandering past your exhibition booth.

Faster implementation of innovative ideas

Participating in competitions or accelerator programs can also increase public awareness and, in the best case scenario, make the right people notice you. That was the case with Konux. CEO Andreas Kunze remembered how their cooperation with DB began:

Andreas Kunze
Andreas Kunze. © Konux

“DB first called for startups to work with them in 2015 for a period of several months to develop and test new digital solutions involving ‘Railway Infrastructure 4.0’. As a part of the accelerator program, we were able to successfully apply our technology in the field of railway infrastructure. That cooperation gave rise to further projects with Deutsche Bahn in 2016.”

Another example for why collaboration with large enterprises can be so attractive for startups: If you impress from the very beginning, the chances of working on subsequent projects are quite good, plus you gain a customer with a large network. Of course both parties benefit from that kind of cooperation. Kunze commented:

“Cooperating with startups allows large firms to implement innovative ideas and technologies more rapidly and to drive digitalization more efficiently than would otherwise be possible with ‘digital’ initiatives in their own company. Startups can also learn a lot from large companies and grow based on their cooperative work. Another factor is that market entry for startups in most B2B industries is only really possible if they gain corporates as clients.”

Deutsche Bahn has commented that collaborating with startups is definitely not a one-way street. DB has equally benefited from the innovative and agile working methods as well as the new corporate values and culture that startups bring to the DB Group through the conduit of collaboration. It has become all the more important considering that customer needs are changing at an increasing pace, making it necessary to act quickly. Working with startups is also about recognizing trends, testing and using technologies early on and developing new business models with shared risk.

Let companies know why they need you!

In addition to their own startup programs, DB also makes a point of attending events relevant to the industry where they stay on the lookout for interesting young companies. A bit of advice from Onno Szillis, Head of DB mindbox, for startups at that type of event:

“To successfully collaborate with larger companies, it is important to impress the decision makers at the event with your idea. (…) It is also important to already think about what both sides have to share and to clearly showcase the value of your product for the larger company.”

To drive innovation, however, young companies need to have the necessary latitude and opportunities for development. That is nothing new to Manuel Gerres, one of the two CEOs and Head of New Digital Business at DB:

“Startups, just like our DB colleagues with a strong emphasis on entrepreneurship, require a wide scope of freedom and the right network to quickly turn their ideas into market-ready prototypes and new offers for customers.”

Christoph Drebes
Christoph Drebes. © Mystery Lunch

For Christoph Drebes, CEO of Mystery Lunch, it is very appealing to work with large companies over the long term:

“Our impression has been that smaller companies are very flexible and change course quite often, while ‘big tankers’ move slowly but very consistently. That allows us to get on board and travel with them for long stretches. So far, not a single client has ended our collaboration.”

It’s not always sunshine and lollipops

The fact that the world of cooperation between Old and New Economy should not always to be viewed through rose-colored glasses is probably obvious. After all, large enterprises differ from startups in more than just revenue and numbers of employees. Structures, hierarchies and company philosophies are just a few elements where the big and small often butt horns. It does not necessarily have to be negative, but it can be challenging.

Amadeo Gaigl agrees:

Amadeo Gaigl
Amadeo Gaigl, Co-Founder Bohème.

“There are certainly differences in terms of working speed. Large companies often have to act within the framework of existing processes, whereas startups can usually move quickly. That is not actually a problem, as long as a joint timeline has been agreed upon and both sides know how long decisions and developments can take.”

Mystery Lunch has gathered first-hand experience with the long decision paths of large partners. Then add bureaucratic hurdles as well, which can also take quite an amount of time. That is why Christoph Drebes has one wish:

“It would make collaboration much easier if employees and management in large companies were able to make decisions themselves instead of having to double check 100 times to avoid making any possible mistakes.”

That is certainly easier said than done.

Startups need to assert themselves as partners

Andreas Kunze at Konux named another challenge for startups: The need to rise above their greenhorn status and become recognized as serious partners who are not in need of coddling and are not to be underestimated:

“An additional barrier that needs to be overcome in cooperation between startups and corporates is the misconception that startups are ‘unexperienced.’ It can be an advantage for startups to be considered innovative and to be chosen specifically as partners for digitalization strategies by large enterprises. That can get their foot in the door. But startups still have to impress with their product and have to do so in an extremely short period of time. Otherwise, they will never be considered as potential partners for longer term cooperation.”

Always room for improvement

Bòheme founder Gaigl recommends that startups bring as much attention to themselves as possible and to go ahead and try out the unpopular “cold calling” if necessary. Commitment and staying power are required if you want to get involved with the major players. Big companies have been trying to be open to startups and their ideas for quite some time — which is expressed by offers such as incubator programs. Of course, there is always room for improvement according to Gaigl:

“Corporates could definitely be a bit more open to startups. The large number of incubators and innovation programs offered by corporates are certainly a good first step. But in our opinion, there is often a breakdown in continuing and implementing that work in the core company. Departments and startups should start working together much earlier in the process.

Corporates can also be surprising

The best advice for startups is to tackle your goals head on, take advantage of opportunities and stop being afraid of large enterprises. They in turn should remain open to new ideas, approaches and structures and perhaps make themselves a bit more approachable. All in all, the examples offered by Mystery Lunch, Konux and Boheme Digital demonstrate that cooperation is indeed rewarding and worthwhile for both sides and that it can sometimes happen much faster than you might anticipate. Amadeo Gaigl reported:

“The fact that corporates can also act quickly is proven by our experience with Süddostbayernbahn. Before we met up for the first time, we thought a decision about working on a project with Deutsche Bahn would take at least six months. Then the decision was made to work a pilot project during that first appointment, and we were all very positively surprised.”

So take courage and forge ahead!