Collaboration with each other, and startups, as the key to survival for OEMs
How automotive OEMs need to understand how to work better with startups, and each other, in order to continue to survive
Just 10 years ago, the idea of two direct competitors combining their efforts in a joint venture would've been unimaginable. Today, we have BMW and Daimler's €1bn combined investment in no fewer than five joint ventures: REACH NOW for multimodal services, CHARGE NOW for charging, FREE NOW for taxi ride-hailing, PARK NOW for parking and SHARE NOW for car-sharing.
We're witnessing the transformation of an individualized industry to a collaborative ecosystem. Dr. Nicolai Schättgen, founder and CEO of Match-Maker Ventures, outlined five different formats of collaboration at this year’s 4 Years From Now (4YFN) conference in Barcelona:
- New business units
- Mergers and acquisitions (M&A)
- Joint venture or strategic partnerships
- New company setup
- Startup collaboration
While this topic has been examined in depth and ad nauseam, it's extremely rare to find an example of successful startup/corporate partnerships scaling past the pilot project. On the surface, putting innovator and market leader together seems like an easy win-win for everyone involved, but the reality is considerably more complicated.
You can't just say the magic word, throw together a dedicated team, and hope for the best. There's a lot of work and a lot of research that corporates need to do before even engaging with a startup.
First, you need to define a clear need and evaluate what type cooperation works best for your organization. According to Luis Fonseca of Match-Maker Ventures, a startup/corporate partnership can take three forms:
- Buyer-Supplier relationship
- Joint Product Development
A partnership between a startup and a corporation is like an iceberg – 90 percent of the work has to be done internally on the corporate side beforehand. The project itself is just the tip.
You have to set specific KPIs, a technological framework, and value-adding outcomes for every startup collaboration or innovation project. These have to be agreed upon and signed off by every stakeholder, including the Board, IT Security, Procurement, Finance, and so on – basically anyone who can later oppose the project because it becomes too much of a hassle – which it will. This requires top management buy-in and a dedicated internal champion who is senior enough to convince stakeholders to be flexible with processes.
Then you need to clearly define the project requirements and staff it with the right people. In order for the pilot project to scale beyond just that, you have to make sure to involve people from the mothership that will be inspired to bring some of the key learnings back into the organization. At Siemens Mobility, its focus is in having an ongoing cultural exchange, according to Karolina Korth. "We integrate people from the core business into startup projects so there's cross-pollination of the entrepreneurial mindset."
For corporates who are just getting started with startup projects, it's vital to lay out the selection criteria for a potential collaborator. Schättgen advised that corporates should only consider working with startups when they're past Series A or B. Before then, they don't have the time or manpower to dedicate to such a time-consuming endeavor. "They should already have paying customers and yearly revenue of at least €1m."
You'll need flexibility in processes, and you're guaranteed to get a lot of resistance from the CFO, CTO, Compliance, IT Security, and so on. The best way to get this wiggle room, and circumvent the naysayers, is to only go for projects that don't affect the core infrastructure of the organization.
On the startup side, be sure to do a lot of research on the corporate:
- Have they worked with startups before?
- What's become of those projects?
- Have they invested in companies before? Ask around for feedback from people that have worked with them in the past.
- Would you have an internal champion with enough leverage to be your cheerleader?
- Have they made the necessary process exceptions for your project to get any and all necessary approvals quickly?
- What are the legal ramifications of the contracts?
- Do they have a technological framework or criteria for the outcome?
Build rapport with multiple stakeholders in the organization and remember that you're a speedboat sailing along with a cruise ship.
On both sides, you need open lines of communication for expectation management and alignment. It's easy to forget that B2B is still a people's business.
What will we see in mobility four years from now?
The future of auto tech is all about collaboration – that was the quintessential line of the speakers at 4YFN. It's important to note that the ecosystem and the players as we know them today will not exist in the same way. Innovators, market leaders, and regulators need to prepare for this uncertainty.
"There will be a consolidation of the market, but cities will ultimately have a say in who remains and who will be allowed to operate in local markets. Mobility providers will need to prove that they are reliable partners for cities," said Mar Pallas Poy, VP of market development at Scoot Networks.
Of course, we cannot leave everything up to the cities. The technology is there; it's just not being integrated or deployed at a large scale. "Working at a deeptech systems integrator for OEMs and Tier 1 suppliers, we're able to understand that collaboration is necessary. That without collaboration, we won't get anywhere," noted Tanja Kufner, partner at MHP – a Porsche Company. Daimler's Philipp Gneiting echoed this sentiment: "Established players and startups both have great strengths. The winner will be whoever figures out how to combine the two."
The biggest investment area for mobility needs to be cybersecurity to protect connected cars and critical infrastructure. "Cybersecurity is never the first concern. We need to make it our top priority," warned Ana Fuster, partner at Deloitte.
While this is certainly true, regardless of how much state-of-the-art protection you put into a car, the fact that it's connected makes it vulnerable. "There's no silver bullet in security. The only 100 percent foolproof protection is to have a completely disconnected car," said Goren. For OEMs, entering into a spy versus spy relationship with hackers is inevitable.
Now, whether it's electric and automated vehicles, security, meta-apps, connectivity, or even mobility-as-marketing, it's a question of scaling and user behavior to define which technologies will be adopted at a large-scale. "We'll be observing how user behavior will change, but it's critical to shorten the time to deployment," said Olivier Lenz, programs director at the Fédération International de l'Automobile (FIA).
Summing up 4YFN
In a nutshell: Once again 4YFN hosted a lively discussion with a lot of food for thought about the future. In regards to the future of mobility, user behavior will be the litmus test for the technologies and models that already exist today.
The collaboration between startups, corporates and cities is the key ingredient for innovation in this sector. The cities also need to step up and take on an active role; not just in creating an ecosystem in which new ideas can thrive, but also laying out regulations. Because somebody has to be the referee – and it better be the cities, who have the well-being of all their inhabitants and the complex connections between all different sectors in mind.