What can corporations learn from startups? It may come as a surprise, but the answer is a lot. For on closer inspection, the connection is perfectly logical, because these days, if we do not innovate, we will not succeed against the competition. At the German-Czech Chamber of Industry and Commerce, Lenka Šolcová is responsible for innovations and startups. We spoke to her and Christian Rühmkorf, who looks after PR at the organisation, about the Intelligent Infrastructure project and about why, in a nutshell, open innovation works.
How long have you been focusing on startups?
Lenka: Since last year. In 2015, we started concentrating our efforts on innovation, when we launched the Industry 4.0 project. Industry 4.0 means means digitally connecting the entire manufacturing chain, from development and prototypes and customer engagement, to manufacture of a specific product and such. We sparked a lot of debate in the Czech Republic on the matter. Initially, we could not find anything in Czech language about it – not a single article. At the end of 2015, there were several thousand articles online. It really developed fast, attracting the attention of former Minister of Industry and Trade Jan Mládek, despite his initial scepticism about the topic. He formed a group tasked with drafting an Industry 4.0 Strategy for the Czech Republic, because if Czech industry wants to succeed against the competition in the future, it has to follow the Industry 4.0 trend.
Christian: Business relations between the Czech Republic and Germany are very important for the Czech economy: one third of Czech exports goes to Germany. We figured out what could happen if Czech businesses did not prepare for this change as thoroughly as their German counterparts. Essentially, it would mean a digital disconnection of Czech-German relations in the future. That is also why we decided on Industry 4.0 as the topic of the year.
What role do startups play in this process?
Lenka: As the German-Czech Chamber of Industry and Commerce, we bring together all the big German investors on the Czech market which work with us on our projects. We had already involved industrial companies such as Škoda Auto, SAP, Siemens and many others in Industry 4.0. The project included various discussions and conferences, and we were trying to get people thinking about the consequences of digital development on Czech industry. In the following year, we wanted to push the project a little further and offer our partner companies specific innovations. In the meantime, we had seen tremendous dynamics build up among them in the pressure to innovate. In response, we organised the Connect Visions to Solutions startup competition which was designed to connect large well-established corporations with the ideas of innovators and startups. We launched a partnership between big and small; this year, we are continuing with the Intelligent Infrastructure project.
Christian: We also see that it is no longer important for our large member firms simply to introduce themselves to the public and discuss more or less interesting topics. Rather, they needed some innovative added value in the transformation process.We thought that the whole of the Czech Republic is now talking about Industry 4.0, which is closely connected with innovation. We know how much our member firms are engaging with the changes required, both in terms of internal structures and the pace of innovation. Therefore, we wanted to connect two worlds that so far had not been communicating with each other. They spoke different languages, had different internal structures and approaches. A startup run by one person often works differently than a large corporation made up of thousands of departments and long decision-making processes. We wanted to help large and medium-sized enterprises create startups with innovative synergy.
Why exactly should a small startup innovate for large corporations?
Christian: The way of thinking and the flexibility of dynamic startups are so different that they can come up with one idea that will, to some extent, revolutionize the sector. Sometimes, someone who can essentially think digitally suddenly creates an algorithm that causes an exponential growth of client relationships. For example, the classic automotive industry is used to thinking “we make cars”, but intelligent transport and mobility have completely different dimensions. This may mean that the classic business of large corporations is going in the wrong direction. But such partnership can be very inspiring for both parties. Large companies also have the advantage of years of experience, the workforce, financial resources and international expertise, which is usually lacking in startups. So both sides benefit from working together.
Lenka: Exactly. I would say that the main difference is in thinking and speed. A startup that does not involve any decision-making process is able to implement things quickly. What is also important is that a startup can look at the problem unburdened by having spent many years in the same industry. The startup can take a fresh look at things. Corporations are increasingly facing competition from sectors entirely different than they are used to. When we talk about the automotive industry, Google and its cars are a classic example: direct competition that the car companies have not taken into consideration. In short, time is quickly changing and everyone is trying to adapt to the increased pace of innovation to be competitive.
What does the Intelligent Infrastructure project involve?
Lenka: It partly ties in with last year. We are organising the second Connect Visions to Solutions competition and will again link partner companies, E.ON, Bosch, Prague Energetics, T-mobile, Siemens, and Škoda Auto, with startups. The project has two parts and two main objectives. Firstly, to create a platform for partner companies, boost companies in efforts to discover innovations in their fields, and to connect them with municipalities, from large towns to small communities. This is because we see intelligent infrastructure in a broad sense – ranging from mobility and energy to IT. There are also topics such as the “smart city”, but we are not thinking just about Prague and Brno. We are also trying to involve smaller towns and villages. Large companies with solutions and technologies are trying to sit down with cities and towns that also have particular needs and problems at their local levels. After discussions with both parties, we got the impression that sometimes they are not really communicating with each other. Companies lack accurate information about the real needs and problems of municipalities, and a city authority does not know exactly what companies can offer, and what technological opportunities are available. The second part of the project relates to the second year of the startup competition. The most important issues the firms are currently addressing will be communication with startups in the Czech Republic and Germany. And because our chamber is a member of a worldwide network of German chambers of commerce abroad, with offices in 90 countries around the world, we will also address startups and invite them to participate in the competition.
Christian: And we want to create a space where large companies can also discover new business models among themselves. For example, a mobility model, where your car drives itself and you do your banking online, communication, or whatever else. We hope that this platform will be an opportunity for partnership that our partners have not yet considered. It is like stumbling across something and finding that we can take something new from it.
How and when can startups sign up for your competition?
Lenka: We will, of course, identify and contact specific startups that we think might be interesting, but the competition is open to everyone, and relates to anything connected with intelligent infrastructure. You can sign up in August and September, on www.inteligent-infrastucture.cz, and either in the form of a short video or presentation introduce your solution, product, or business model. We will then match it with a company for which the project would be relevant. Each partner then chooses the best startup, and then we will contact the six finalists. On 23 November 2017, we will hold the Winner’s Night at the Mánes Gallery, where the jury will choose the overall winner. We are still considering whether to pick an addational winner, chosen by the audience.
Can you compare Czech and German startups? What are the specifics of Czechstartups?
Christian: There are definitely some differences. Generally, I would say that German startups are more focused on the global market than their Czech counterparts, which is sort of the “Czech basin” effect – the Czech Republic being cut off by hills.
Lenka: I feel that all the European startups have absorbed an American way of doing things. There is definitely a difference in communication and in how the German startups are able to present themselves. In my view, they also have a great advantage in being part of a huge market with great potential – eighty million people and the strongest European economy. Czech startups must look beyond the Czech borders and go further. The potential for scaling up locally is not particularly large.
Christian: The focus of the Czech startup is B2B, specifically Industry 4.0, which is a similar to the situation in Germany, it is not about business miracles such as Facebook or Google. They do not necessarily focus on the wider public in B2C, but fulfil their manufacturing roles,in communication with the customer, etc. Lenka has briefly mentioned that we regard Czech startups looking mainly to America as a mistake. Silicon Valley is the dream of every startupper, who tends to forget that Germany is the Czech Republic’s most important business partner. Only now are they increasingly aware of the need to have a presence in the German market. CreativeDock has recently opened an office in Munich, which we think is a smart move. Additionally, IBM has its European headquarters in Munich because the firm knows that its products are used there.
Thank you. Wrapping up, what will be your next focus when the Intelligent Infrastructure project ends? Do you know?
Lenka: About 50/50. We do know that we will continue discussing innovation and startups. We will try to open up the chamber to startups, not just during competitions. One of our main goals is to bring companies together and help them make connections, which has good potential for future partnership.
Christian: It is clear. The classic function of the chamber, networking, and people meeting at our place will always be important. We are adding the value of specific innovative issues. The speed of innovation is so high that nobody knows what things will be like in six months. Perhaps an algorithm or business model will develop so quickly that we transfer the whole branch somewhere else. In such an environment, long-term planning is not entirely possible and large companies know this. The long-term strategy, which was a key issue before, will no longer work. Instead, there has to be greater flexibility and a rebuilding of internal structures to cut the response time and open up to the outside world – because the changes are happening outside.