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Startups in an enterprise environment - how companies can profit from startups

Many of the most valuable, relevant and successful companies at present are only just a few years old. We can observe almost every day how new economic miracles arise.

At the same time, other established companies which have been in existence for many years or decades are facing major difficulties or are completely disappearing from the marketplace. These are not only exceptions but comprise a clearly obvious trend. Analysts predict that about 40 percent of the largest 500 companies will disappear over the next ten years. Hard to imagine? In this case a glance in the rearview mirror would help. Since the year 2000, 50 percent of the companies on the same list have already vanished. One example is streaming services, which revolutionized the entire music industry in just a few years. Newspaper publishers are fighting for the attention of customers and against social media or messaging services, whereas online payment providers such as PayPal and countless cryptocurrencies have emerged as public enemy number one of the traditional banking system. This is reason enough to more intensively focus on the issue of enhancing competitiveness through innovative strength. 

Startup accelerator programs

Startup accelerator programs support growth-driven startups in their early phase by providing further education, mentoring and financing. Many large firms are joining such programs or setting up their own accelerator programs. These companies have a wide range of motives, and most of them involve very high expectations. Naturally, from the perspective of startups, there are still other possibilities to drive their business forward outside of accelerator programs. Depending on whether a startup tends to pursue a sustainable or an “exit-driven” strategy, incubators, business angels or hybrid forms are useful alongside the financing options for startups which traditional banks are more frequently offering in the meantime (e.g. convertible loans, mezzanine financing, subordinate loans.

Danger of slipping up

A growing number of innovation labs or accelerator programs are coming into play due to the fact that innovations developed by startups are becoming increasing popular. Nevertheless, it is important to exercise caution in the selection process. The bottom line is that there are usually considerable differences. It is also particularly important to focus on offers which best fit one’s own company. A clear definition of one’s own expectations of accelerators and a realistic review of these expectations (and their feasibility) are crucial to success. A large number of companies and corporate groups in the German-speaking area frequently see themselves as being optimally positioned and in the front ranks when it comes to their own innovative strength. However, even if one’s own innovative culture is on the right track and ideas are generated for the benefit of the company and its future, quick implementation may be missing, or else processes are not as agile and open as with startups. In addition, the measures taken my many companies are either insufficient or actionist. A field study conducted by the University of St. Gallen states that about two-thirds of medium-sized German companies are currently in line with the motto to „wait and see“. Moveover 62% of the investigated companies do not have yet a comprehensive digitalization strategy. Numerous projects (innovation, transformation, disruption, valley safaris, startups, hackathons tack place under the cloak of simple actionism but end up leading to uncertainty and firms being overburdened due to the lack of a strategy or a coherent strategy. Large companies are often world champions in the field of evolutionary innovations, but they lack speed, a suitable startup culture and a successful way of dealing with disruptive innovations.

Established companies face the following challenges:

  • Growth imperative
  • Disruptive attackers
  • Dependence on American technology platforms
  • Customer centricity as a success factor
  • Attracting qualified employees
  • Missing interfaces for cooperation
  • Exponential technology development
  • Complexity and accelerated cycles

The main thing is to stay in motion

Without doubt a good culture of innovation in the company is the starting point for any type of getting ahead on the market. The backing of and connection to management levels is the pre-requisite and not less important. Even if companies already appear to operate innovatively (or at least think that they do), they should be open to new approaches. It is not without reason that startups are successful. They try out things, decide quickly and generally implement ideas in agile teams. If companies do not want to directly implement this approach, they can still profit by enabling project teams to take action and give them the requisite flexibility, or else get involved in innovation labs. The particular path to take is an individual decision. However, the important thing is to be courageous, remain professional and try out new approaches. The main thing is to stay in motion!  To quote Marlon Brando, “Only the one who walks his own way can’t be overtaken.”

Please do not hesitate to contact us if you would like to exchange views and compare notes on your possibilities or the issue of startups in general.

Thomas Buchegger

Managing Director

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