Coupled-Open-Innovation-Cooperations between medium-sized companies and Start-Ups (Guest article)

What influence does the organisational climate have on the success of the cooperation and how should it be designed?

For many people, the term “Mittelstand” (medium-sized) is a symbol of Germany’s economic success and is also globally regarded as one of the drivers of innovation in our business location. In the past decade, however, it has become apparent that many medium-sized companies are increasingly confronted with shortened product life cycles and higher development costs, as well as with young, highly innovative companies (start-ups) entering existing markets. This increased competition and innovation pressure poses enormous challenges for many medium-sized companies.

One way to meet these challenges is to enter into a partnership with start-ups. Such partnerships for the joint development of innovations are referred to as Coupled Open Innovation. For both sides, there are a number of advantages resulting from such cooperations, which go far beyond new sales opportunities and customer relationships, since the characteristics and lacking capabilities of the companies are usually complementary to each other. They can go so far as to achieve competitive advantages and open up new business fields, so that the often lacking strategic orientation of many medium-sized companies can be minimized. There are already many such Open Innovation cooperations in Germany. However, it is all the more surprising that most of them are between corporations and start-ups and only very rarely between medium-sized companies and start-ups. Moreover, not only is the number of collaborations low, but also the level of satisfaction with the collaborations is comparatively low, so that companies have not yet fully exploited the potential of this type of collaboration.

For these reasons, a master’s thesis, written at the Catholic University of Eichstätt-Ingolstadt (WFI Ingolstadt School of Management), deals with the obstacles and barriers in the cooperation of medium-sized companies (50-499 employees) and start-ups. In particular, cultural and climatic differences and factors were examined. As a result, an ideal organisational climate for both sides was defined, so that cooperations of this kind are more successful and satisfying.

To collect data, experts who have a good overview of the cooperation situation of SMEs and start-ups were interviewed. This included so-called digital hubs and start-up hubs, but also so-called match makers, i.e. people who bring start-ups and SMEs together and manage cooperations, who were first asked about what they consider to be the most relevant barriers to the formation of cooperations and subsequent successful implementation. In Fig.1 the most frequently mentioned barriers are graphically represented across all phases. All in all, it can be said that the barriers mentioned certainly give a good picture of why the number of cooperations is still comparatively low, but also why many cooperations are not proceeding satisfactorily. The reasons are very diverse and, in many cases, can also be understood with regard to the characteristics of the company. Nevertheless, it should be noted that many experts see advantages in precisely this cooperation constellation, despite all the obstacles. For example, medium-sized companies often have a greater understanding of the situation of founders due to an often more pronounced entrepreneurial mindset, and communication channels are also shorter than in cooperation with corporations.

 

Fig.1: Overview of the most frequently mentioned barriers of experts for the identification & successful implementation of cooperation between SMEs and start-ups

 

With regard to the implementation phase and the actual topic of the work, it is striking that the most frequently mentioned barrier in the implementation and execution phase is the different corporate cultures of the potential cooperation partners. In addition, all experts confirmed that the corporate culture and the organizational climate are of great relevance for the success or failure of such cooperations.

Therefore, not only on the basis of these results, but also on the basis of supporting results of other studies, attention was paid to the cultural and climatic aspects of Coupled-Open-Innovation relations in the further course of the work. But which climatic characteristics are actually important for the implementation of cooperations and Coupled Open Innovation? Based on an intensive literature research, the following climatic characteristics can be identified as particularly important for companies: Willingness to take risks, external focus (e.g. observation of market trends), reflexivity, as well as innovation and flexibility.

Subsequently, the interviewed experts were asked to draw up an actual state (current average level of the dimensions for start-ups and medium-sized companies) and a target state (ideal state of the dimensional characteristics for the optimal design of a cooperation) of the respective dimensions. This was done by measuring the dimensions using a detailed questionnaire on a scale of 1-5 (1=not pronounced, 5=strongly pronounced). The results are illustrated in Fig.2 in a matrix. It is noticeable that in general the actual state of the SMEs is further away from the ideal state of the dimensions than is the case with start-ups. Looking at the individual dimensions, it can be said that many SMEs have potential for improvement in the area of external focus, whereas start-ups often have some catching up to do in the area of reflexivity.

 

Fig. 2: Representation of the actual and target values (ideal situation) of the individual climatic dimensions for SMEs and start-ups

 

At the end of the thesis three medium-sized companies as well as two start-ups were examined, which can be seen as kind of best practice companies. All companies already have experience or great interest in the field of cooperation of this kind. They were also asked to measure the dimensions and their characteristics in their company using the questionnaire. A large proportion of the companies achieved above-average results and were above the experts’ actual values (i.e. average value of start-ups / SMEs). It is therefore advisable to take a closer look at how the companies deal with the topic in order to possibly discover certain characteristics from this which can also be applied in other companies.

First of all, it is noticeable that all medium-sized companies have a separate contact person or managing director who has given the necessary time to the topic or even only works specifically on this topic. The separation from the operative business can make sense in this respect, so that the climatic dimensions mentioned can be designed and lived in the daily work as necessary for cooperations of this kind. In day-to-day business this is usually difficult to implement due to the usually lean and efficient structures in medium-sized companies, which also applies to start-ups. Of course, special contact persons, e.g. in the form of innovation managers, can only be financed with difficulty by small medium-sized companies, which is why integration is usually only possible from around 200-300 employees upwards. For smaller medium-sized companies with limited financial and time resources, for example, the use of external service providers can be an option. The risks are usually lower due to the great expertise of the providers and costs only have to be borne over a certain period of time. Last but not least, all employees and not only managing directors should actively look for cooperation possibilities and opportunities and be encouraged to bring possible new business fields and innovative ideas into the company.

On the part of start-ups, on the other hand, even more understanding of the situation and behaviour of SMEs should be gathered and applied. One possibility here could be the integration of sales employees who already have work experience in medium-sized companies and therefore know the work processes and how to deal with them. Also realistic estimations regarding the marketability of own solutions and products help to build up a greater basis of trust on the part of the medium-sized companies.

In conclusion, it can be said that the results can be used to help companies to make cooperation of this kind more successful. The values of the actual state and the ideal state that have already been obtained can serve as reference values. In particular, due to the still low number of cooperations to date, it is particularly unfortunate if cooperations do not run satisfactorily and the many potential advantages of cooperation between SMEs and start-ups are not fully exploited.

About Jan Fehlberg

Jan Fehlberg completed his Master’s degree in Business Administration at the WFI-Ingolstadt School of Management (KU Eichstätt-Ingolstadt) with a focus on market-oriented corporate management. In his master thesis he deals with the topic of Coupled Open Innovation between medium-sized companies and start-ups, focusing especially on the component of the organisational climate. During his studies, he completed internships with start-ups (including Homelike), but also with corporations such as Deutsche Bahn, AXA and Allianz. In addition to internships, he also gained insights into research as a research assistant in the field of innovation management. After finishing his studies he started as a management consultant in the Inhouse Consulting of Allianz.

 

About Ambivation

Ambivation connects established companies with startups for innovation partnerships. As an innovation consultancy and matchmaker, Ambivation facilitates collaboration between founders and executives for general exchange, concrete customer, supplier or research partnerships. Ambivation supports companies in the identification of needs, startup identification, startup evaluation and initiation of cooperation. Formats such as research of relevant startups, startup monitoring, strategic cooperation consulting or event formats such as startup tours or Design Thinking workshops serve this purpose. The monthly newsletter also informs curious company representatives about current collaboration examples and events related to these cooperations.