When Goliath fights with David’s weapons

7 January 2016
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Reading time: 5 minutes

Established companies are in a paradoxical position: They have to run their traditional business efficiently while simultaneously fighting off attacks from digital era startups with radical innovations. These conflicting demands cannot be resolved effectively in a large organization. Which is why Zühlke came up with “Rent a Startup”, a solution that implements innovations outside the organization in a minimum of time. This project model exploits the innovative drive and clout of a startup while the traditional organization remains focussed on daily business.

New technologies and the “innovator’s dilemma”

The digitization of entire value chains is forging ahead relentlessly: “Software is eating up every industry.” This revolution has been in full swing for over 15 years already in the retail sector, in media and advertising. Power companies have been battling with it for 10 years, and the banks for about 5. And now industry is really letting rip with “industry 4.0”. Tomorrow it will be every other sector’s turn!

But how can you steer a company towards completely new products, markets and business models without jeopardizing the established core business? You can’t. Not if Harvard professor Clayton Christiensen is to be believed. Back in 1997 already, he dubbed this conflict the “innovator’s dilemma“. His verdict: New, so-called “disruptive” technologies, that later turn entire markets and industries on their head, are initially much worse and more expensive than established technologies. As a consequence, established businesses can’t benefit from them immediately and ignore them for too long. It’s only small, young niche companies, whose business model isn’t based on old technology, that immediately profit from using and further developing such new technologies.

However, the technologies develop so rapidly in these niches that they surpass existing technologies far quicker than expected on price and performance. All of a sudden, they are the mainstream, and former market leaders lose their position – see Kodak, Sony or Blockbuster (no one knows Brockhaus).

Nowadays, “new entrants” create greater pressure to innovate

So is every traditional SME and corporation in Germany doomed? Certainly not! Companies have always had to constantly reinvent themselves. One good example is the established steelmaker Klöckner & Co in Duisburg that is currently in the throes of transforming itself into a kind of “Amazon for the steel trade”. However, these upheavals are taking place in an ever shorter period of time.

Once again, this is down to digitization and the Internet. Numerous technologies and ecosystems have appeared that significantly lower the entry barriers for new players on the market.

Seizing the opportunities digitization offers is much easier for startups than for traditional large enterprises, who have often invested in “Shared Service Centers” and have few “digital natives” in their leadership teams. This is why the greatest threat to incumbent companies is no longer competitors within the same industry, but new, specialized startup firms and large digital-born companies such as Google, Amazon, Apple, Facebook and Co.

That there is growing concern in company boardrooms over rivals from unrelated industries is also confirmed by an IBM study, which shows that CEOs have recognized the problem, but don’t know how to deal with it. One attempt at solving this dilemma is to set up an innovation lab within the company. Such labs, however, are not only very costly, they also fail in about 80% of cases, according to a study by Cap Gemini.

Rent a startup – the agile speedboat for new business models

Andy Ridder, Zühlke Days Stuttgart 2015

Zühlke designed “Rent a Startup” to meet customers’ needs for entirely new business models. It enables established companies to utilize the innovative strength, speed and pragmatism of a startup to implement new products, services and business models outside of the existing organization. “Rent a Startup” provides a complete team, which operates for a few months as a lean startup together with domain experts from the customer. The team members have all the necessary skills in the areas of business, technology and project management. The package includes suitable premises and technical infrastructure, innovation development methods, and team-access to a further 700 outstanding engineers so that details can be clarified quickly. Every “Rent a Startup” project is accompanied in an advisory capacity by Zühlke Ventures – the company’s venture capital subsidiary – in order to minimize the risk for both sides.

The customer has a number of options to continue development after the “Rent a Startup” phase: either spinning-off the startup into a separate company, or transferring the product into its own organization. Here as well, Zühlke Ventures’ experts provide advice and practical help in order to secure the long-term success of the joint project.

Crucial to success: The right people in the team

The team is the pivotal element of a startup’s success, and guarantees successful project work. “Rent a Startup” provides an effective, implementation-oriented team in an environment that attracts outstanding talent. Zühlke employees come equipped with a spirit of innovation and technical expertise for successful product development. After all, they are passionate about inventing new things for their customers, day in, day out.

“Rent a Startup” combines the experience from numerous innovation projects conducted with large and medium-sized enterprises, and proven approaches from project work, such as Stars to Road and Lean Startup. To get an idea of ​​how Zühlke teams implemented a fully functional demonstrator for a networked coffee machine in just a few days, watch this short video from the Zühlke Training Camp.

If you want to know more about Rent a Startup, just send me an email.

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