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Partnering with Startups, a Resilient Pathway to Explore Growth

Partnering with Startups, a Resilient Pathway to Explore Growth

Reading time: 5 minutes

Learn more about the knowledge we accumulated from working with startups, how they navigate the uncertain times through proactive action and build resilience, and how we can benefit from collaborating with startups building corporate business resilience.

Corporates are slow, and the goal is stability not disruption  
Do you often ask yourself “why do corporates face challenges with the speed of innovation”? It’s not just us, but all corporates with predominantly hardware businesses that are slow to react or proactively take decisions. From our interaction with other comparably large cooperations, we know that they all have similar concerns and questions. That’s because big companies look for stable scalable, incremental solutions rather than fast and disruptive solutions, which did pay off in past years, but not anymore. Companies often use the Three Horizons model of innovation for decision-making and resource prioritization.  
The Three Horizons model1 has been a foundation of innovation strategy for corporates for the last 20 years. This model helped leaders to identify and prioritize innovation on a company’s radar. To remain competitive in the short and long term a company must distribute focus, resources, tools, and money consistently in each horizon. While the Three Horizons model is still extremely useful as a prioritizing tool, it is no longer watertight. Today, many disruptions can be rapidly implemented by redesigning existing Horizon 1 technologies or resources into new business models — and that speed of deployment is disruptive and asymmetric by itself.  
With free software and infrastructure support, access to limitless capital and passionate talents, startups have an edge over corporates to disrupt the status quo. In the 21st century, the attackers have the advantage, as the incumbents are burdened with legacy.  
What can we do to build resilience to counter disruptive forces?  
The only way to build resilience is to keep a proactive state of mind and keep on innovating. Focusing on innovation while dealing with operational challenges can be difficult. The first step is accepting this challenge. Then comes the second step of embracing the challenge as an opportunity. Building business resilience means efficiently running existing businesses while effectively building a second engine of business growth. This is known as “Engine 2”, a term coined by Bain & Co, and the process is known as ambidexterity.  
Corporations need to explore the new “Engine 2” or an alternative business growth engine to prepare for future growth in the era of macroeconomic uncertainty. When building this kind of business, it is highly tempting to start a new business from scratch, from Research & Development (R&D) to Sales etc. Evidence shows that it is more effective to buy existing growth-stage start-ups or scale-ups, or to partner with or license services or products from scale-ups. Let us consider an in-house example from our parent company Robert Bosch. Bosch decided to build and explore the solid oxide fuel cell (SOFC) market. With a strategic direction, Bosch started to invest in R&D, business model innovation, and FTEs (full-time equivalents). Nevertheless, the success and breakthrough momentum came from a partnership decision while running all the other activities. Bosch decided to collaborate with the scale-up company Ceres Power. Bosch licensed the 5kW cell stack technology of Ceres Power for large-scale production. This accelerated SOFC business and reduced the time to market while leveraging the core competence of large-scale manufacturing.  
Building resilience 1.0 by enabling an agile and experimental mindset  
When it comes to a business model or technology, corporates seek efficiency, while startups seek effectiveness. Our role as the startup partnering unit of BSH is to harness the best of both. Startups are deeply engaged solely in innovation and scaling activities, and we can directly access this holy grail of innovation with limited risk. The low-risk and highly capital-efficient partnerships make us more resourceful even in crisis. Let's explore a few cases:   
Story of Tulu – Sustainability, rapid urbanization, and complex living space challenge the Home Care business to deliver innovation made for the future. Seeing the mega trends, our small home appliance colleagues collaborated with Tulu (an on-demand appliance rental service), which successfully helped us understand consumer demands for vacuum cleaners under realistic conditions, and validate the pay-per-use business model in a few months with minimum resources. This short and impactful pilot created brand awareness within the group of sustainability-conscious consumers and helped BSH to validate business and behavioral hypotheses for future business.  
Story of Horizon – You may have heard of prototyping, but have you ever heard of pretotyping? Pretotyping helps us understand consumers, providing behavioral insights for new products and services without completely building the product or service. Horizon helped BSH to design and run pretotyping campaigns for three different business-specific hypotheses. The SmartGrow team tested the willingness to pay and consumer response to different designs. The Laundry Care team tested consumer interest in a new innovative washing concept, while the Brand Bosch Innovation team tested a new sustainable business model and validated consumer acceptance and price points. With the support of Horizon, all three teams performed pretotyping tests in a professional way that was as close to reality as it gets, reaching and offering our target consumers the best price points and value for money. This partnership saved money and improved consumer centricity.  
Story of Milkymap – While addressing BSH’s Annual Press Conference 2023, CEO Matthias Metz mentioned that we are using software to better understand all our consumer touch points. He was talking about our partnership with Milkymap. Milkymap is a consumer experience journey mapping and management tool that helps BSH increase consumer satisfaction and loyalty.  
These are just a few examples from several projects where BSH entrepreneurs made use of open innovation to innovate, focusing on consumer centricity, sustainability, and resilient business. In the last five years, we have evaluated more than 10K startups, executed more than 70 projects, and successfully adopted more than 30 startup solutions.  
Together we thrive for resilience 2.0  
Resilience 1.0 is about resourcefulness, and resilience 2.0 is about becoming better from a crisis, also termed the “antifragile” state (a term coined by Nassim Nicholas Taleb). Over the past decade, the process of working has evolved drastically, but nothing as dramatic as during the COVID-19 pandemic, which simply accelerated the adoption of online technologies for building a new era of work. 

Lars Roessler, Head of Startup Kitchen, explains:

“Resilience is about remaining flexible and adapting to new situations fast and efficiently. Working with startups and adopting their solutions for BSH’s benefit is a key element in this: In the past years, we have adopted new startup solutions such as the online collaboration tools MIRO and Mentimeter, which allow our teams worldwide to work together seamlessly with colleagues."

These adoptions not only made us productive at the time of the COVID-19 pandemic but also made us future-proof, “antifragile”.   

Conclusion: We will always be subject to resource constraints and uncertainty  
What’s important is that we don’t stop ourselves from innovating under these constraints. In our journey from being resource-constrained to being resourceful, we can always leverage the effectiveness of startups and scale that with our corporate efficiency.  
Dipjyoti Deb (aka DJ), Venture Partner at BSH Startup Kitchen, commented: “Peter Thiel, the founder of PayPal, once said, 'competition is for losers', and startups understand that very well. Hence, they focus on market opportunities that none would dare to seize the way Tesla or Space X did. If we can partner with these spearhead startups, we can also take a quantum leap from a competitive mindset to a role model mindset with minimal risk of losing.”  
Failure is necessary for innovation, but life is too short to make all the mistakes and learn from them. Being open to external partners helps us learn from their mistakes and success, and implement them in our innovation journey in a short space of time.  
1)Horizon 1 ideas provide continuous innovation to a company’s existing business model and core capabilities in the short term. 
Horizon 2 ideas extend a company’s existing business model and core capabilities to new consumers, markets, or targets. 
Horizon 3 is the creation of new capabilities and new business to take advantage of or respond to disruptive opportunities or to counter disruption. 

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BSH all over the world.

BSH Hausgeräte GmbH, with a total turnover of some EUR 15.6 billion and 62,000 employees in 2022, is a global leader in the home appliance industry. The company’s brand portfolio includes eleven well-known appliance brands like Bosch, Siemens, Gaggenau and Neff as well as the ecosystem brand Home Connect and service brands like Kitchen Stories. BSH produces at 40 factories and is represented in some 50 countries. BSH is a Bosch Group company.