Corporate Innovation/Innovation Case Studies/How To/ How to run a venture-client innovation model BSH Startup Kitchen is a fast and cost-efficient way for the home appliance maker to find startup partners. Here's how it works. By Maija Palmer 6 April 2021 Photo by Jason Briscoe on Unsplash Photo by Jason Briscoe on Unsplash \Corporate Innovation How CEMEX’s venture arm is building the future of construction By Alejandro Tauber 5 July 2022 Corporate Innovation/Innovation Case Studies/How To/ How to run a venture-client innovation model BSH Startup Kitchen is a fast and cost-efficient way for the home appliance maker to find startup partners. Here's how it works. By Maija Palmer 6 April 2021 BSH is Europe’s leading home appliances brand, encompassing everything from Bosch ovens, to Siemens coffee machines, to Gaggenau wine cabinets. It made €13.9bn in revenues last year and the company spends around 5.1% of that on research and development each year, mostly on digital technologies. But BSH also leans on startups for new ideas. In 2018 it opened the BSH Startup Kitchen, a venture-client unit, through which it scouts potential startup partners and then fast-tracks them to be suppliers for the company. BSH doesn’t invest in the startups or put them through an accelerator programme — it supports startups by giving them business early on in their lifecycle. Often it can become a first reference customer for startups. BSH Startup Kitchen initiated 30 pilot projects since 2018 to validate and adopt solutions across the full value chain — ranging from product development, production technologies and business processes. This includes firms like Labelbox (training data platform), Inspekto (machine vision system) and Mavenoid (online customer interaction platform) to name a few. Sifted caught up with Lars Roessler, venture partner at the unit, to find out more about how it works. 1. Why did BSH decide to use a venture client model to work with startups? We are aware that a big chunk of the technologies that will determine our future competitiveness will be developed by startups – and that we need a dedicated venture vehicle to identify, validate and onboard the most relevant startup solutions. “The whole model is capital efficient [and] fast.” With BSH Startup Kitchen we help to speed up development cycles and increase the overall performance of BSH innovation activities. The venture client model is the ideal vehicle for that, as it identifies and onboards new, external innovations from the startup ecosystem. The whole model is highly capital efficient, fast and it is focused on creating maximum impact on our core business. 2. How does this sit with other innovation efforts at BSH? We are the only open innovation vehicle used by BSH. But in general, I would say that venture client doesn’t compete at all with other innovation efforts, and it can coexist and cocreate value with other corporate venture activities. 3. How does the venture client model work in practice? Can you give an example of a project where this approach worked? For the venture client model to work efficiently, it’s key to understand the specific innovation need or opportunity in depth. A business unit will approach us with a need and describe their challenge in detail. We then prioritise it based on its total business potential. We search through our startup ecosystem to find external innovations that would fit the need. All startups and their solutions are evaluated and benchmarked carefully — and then a pilot is set up with the best fitting one. If the solution fulfils BSH expectations during the pilot, we adopt the solution. Eventually, we identify and onboard future suppliers of innovative solutions, which is a win-win: we get to work with an excellent new partner, and the startup grows its customer and revenue base. “We treat startups as equal business partners from the very beginning, and we pay startups a fair price for the pilot.” The pilot project is usually the start of a long-term business relationship between a startup and BSH. This is why we treat startups as equal business partners from the very beginning, and we pay startups a fair price for the pilot. The length of the pilot project depends on the complexity of the topic, but our rule is “the shorter the better” — on average this means something between two to four months. Currently, we have seven full-time resources working in the BSH Startup Kitchen team. The team’s focus is to identify innovation challenges across the organisations, scout startups, support pilot projects and drive adoption of validated solutions. 4. Why not just work with conventional suppliers/more mature businesses? Can startups really give you solutions that are worth the extra hassle? First of all, what do you mean by extra hassle? In many cases working with startups is much easier than with conventional suppliers. The growing startup boom has led to an incredible selection and variety of amazing solutions. We want to be the early-adopter of these solutions and leverage the speed and agility, which is inherent to startups’ DNA. On the extra hassle: most often, startups are very responsive and very flexible to cater to our specific needs — you typically do not find this with conventional suppliers! 5. What have you had to change about BSH processes in order to make the venture client model work? It’s been quite a push internally — but for a venture client unit to be efficient and have impact you need to build some fast-track processes. We simplified and standardised the purchasing and onboarding process for startup pilots, as well as the path for long term adoption. “We can move very fast, with not more than one month between the first startup interaction and purchase order” Eventually, we can move very fast with not more than one month between the first startup interaction and purchase order — if we want to move forward. 6. What have been some of the biggest learnings in this process? Any advice for companies that might be thinking of adopting this model? The venture client model is a very effective tool to drive the transformation in your company. But there some rules that proved important for us: First, act as a service agent to enable company strategy. Be clear that your corporate venturing strategy needs to support your corporate goals and priorities. Second, be part of the corporate — but don’t act like it. This means that you need to simplify certain processes (mainly legal and purchasing) when it comes to interacting and onboarding startups as a new ‘suppliers’ in a pilot project. This is key to ensure speed and efficiency along the process. Third, create value — and prove it. This means that you need to put a clear set of KPIs into place to prove that you as a team are creating relevant value for your firm, and communicate them transparently and openly. 7. How do you measure success for venture client projects? What does success look like and how does it compare to other initiatives you have seen (either at BSH or elsewhere?) We have three main KPIs to track our performance: The number of proof of concepts — a “not too big, not too small” target number of PoCs helps us to get the right balance between exploring various new technologies and focusing on high-impact projects. Adoption rate — what share of pilot projects lead to a long-term business relationship between a startup and BSH? Economic impact — This is the aggregate business impact of the partnerships that we initiated, meaning additional profit generated through additional revenue or efficiency gains. We are very strict about measuring success –—and I define them mainly along the two dimensions of “reach” and “impact”. Reach means that we need to address the most relevant topics within the company. Impact means, that we track the economic benefit and achieved quantitative KPIs for each completed project. To measure overall success, we take a portfolio perspective on performance: Acknowledging that some project might fail — which still carries a lot of important and priceless learning — we need to deliver a significant return on all efforts and cost put in. Eventually, every corporate venture vehicle needs to live up to the test and create positive economic returns. Maija Palmer is Sifted’s innovation editor. 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