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First weigh, then dare: 6 success factors for cooperation with start-ups

The structure and orientation of the German engineering sector is and remains compatible with the German start-up landscape only to a limited extent. The mechanical and plant engineering world, traditionally dominated by SMEs and companies with a long tradition, collides to some degree with the unorthodox, often somewhat playful, but always innovative and dynamic world of ideas and dynamism of the start-ups.

Extensive experience in both scenes is needed to be able to recognize a (company or industry-specific) benefit of a collaboration, and to separate the wheat start-ups from the chaff. The goal must always be to define truly beneficial and sustainable project and synergy potential. Then it is important to structure the matching, the depth of the integration and the type of cooperation as a process, or at least to sketch it as an iterative path – a challenge that the VDMA also sees itself up against with its "Start-up Machine". 

In my view, it is essential to scrutinize one's own goals if one wishes to lastingly benefit from the dynamism and digitalization of German start-ups. In doing so, the following steps should definitely be included in the process: 

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1. Define the selection criteria.

Investing in a start-up is not an end in itself. Clear selection criteria are needed for when it is relevant for a company to cooperate with a start-up. At the same time, the company's M&A competencies have to be reorganized for the deal – because assessing the value of a start-up is entirely different to doing so in customary M&A transactions. There are also short-cuts for how to integrate know-how at the right places and for the right purposes, and it is important to define the right set-up, for instance by nominating and binding a (co-)founder for the long term, and embedding that set-up properly in the overall organizational structure. 

2. Take cultural differences seriously.

The corporate cultures of established companies and start-ups differ significantly. At the same time, a merger and the scaling it involves can considerably improve the professionalism of a start-up, as such a transaction is a game changer. But the different cultures and speeds should remain, because both companies bring their own strengths with them into the equation, and these are linked to the respective corporate cultures that they came about in. Accepting and integrating these differences, and not just balancing them out, is a key to the new enterprise's future success. You cannot simply force the structures of the established business over the delicate little shoot that is the start-up. 

3. Establish bridge-builders.

The start-up is a form of organization geared toward growth and the verification of business models. A start-up has its own methods for doing so. But when scaling up, some of the structures and also the founding team's leadership competence break apart. Here, a stable and efficient existing organization can bring its strengths to bear to help reach the next growth stage of the business model for the start-up. What sometimes lacks in these companies, however, are the bridge-builders between the company and the start-up, who campaign for mutual understanding and expose synergies for both sides.

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4. Quantify value contributions.

If you don't master operational excellence, you can’t garner the desired benefits of a digital transformation, least of all by acquiring a start-up. But if you wait until a top level of operational excellence is achieved throughout the entire enterprise, it can quite easily be too late. The potentials and possible value contributions have to be identified and exploited quickly.

5. Close performance gaps.

According to the Deloitte study, only 36% of SMEs and just 22% of start-ups call the process and results of their cooperation satisfactory. Performance gaps in the existing organization have to be closed with the right experts and clearly defined pilot and further-development projects. The implementation and transformation also have to be structured. A thorough rethink is also required. Companies should prepare their organization as early on as possible for the change that comes when integrating a start-up. Pilot projects that bring together traditional and more digital-savvy employee groups and varying skill sets provide important impulses for change in the structure. 

6. Weigh-up alternatives – depending on the goal of the digitalization.

There are numerous ways to execute a digital transformation and increase innovativeness: internal projects, investing in start-ups, joint ventures, consulting or interim and implementation management. Establishing a digital advisory committee can also help structure the road to digital transformation. In a nutshell: What is needed most of all are innovative minds that have the right networks to link tradition up with the digital world.

Especially in today's world, anyone who buys a start-up merely out of panic actionism will, in an extreme case, destroy his company. But watching from the sidelines as others take over the game is not enough either. The changes are so complex that every company needs to react and find its own unique solution. 

And that means, with all the hype surrounding the topic of start-ups and the numerous opportunities arising from cooperation: it is worth looking at the alternatives too.Sascha Hackstein explains the challenges of “The Start-up Machine” in a previous article: 

Is the start-up scene the miracle solution for developing digital transformation?

Atreus is the leading interim management provider in Germany and one of the largest in its field in Europe. We solve difficult operational management and transformation problems quickly and reliably. Contact us and find out how we can help you master your situation with management expertise that is available at short notice and that is the perfect fit for you.

Atreus is a co-founder of Globalise – the market’s leading and largest provider of international interim management. Accelerating change and delivering success. Worldwide. Structured as a global group of leading interim management firms, Globalise has the reach to support you in solving your company’s most important issues around the world.