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5 lessons start-ups have for the “old economy” IoT entrepreneur

rows of seedlings agriculture startup start-up start up Greenhouse Gardening Vegetable Garden Plant Vegetable Source: iStock/urbancow

Perhaps you’re wondering why this post has been written by a company with over 125 years of history, roughly 281,000 associates and sales of 46.1 billion euros – a company the media quite often refer to as a giant. This article is about our conviction that a new era of entrepreneurialism is dawning thanks to the Internet of Things (IoT). Companies, whether large industrial players or SMEs, that want to seize the opportunities offered by the IoT need the same kind of spirit that so often animates start-up companies. To those of you who indeed wondered about the origins of this post, I have a story to share. It is the success story of an entrepreneur, who more than 125 years ago developed truly revolutionary concepts in his backyard, quickly, and far away from any type of hierarchy …

Call for feedback

I have compiled a list of five lessons based on my work with start-ups and on talking to peers in IoT companies and within the Bosch Group. In looking at this list, there are many things to consider. What organizational structures do I need? What type of person makes the IoT successful? And how can I link major entrepreneurial demands with the IoT – which for many is still not fully tangible? Admittedly, a list of five is not as catchy as a list of 10 or 50 – so if there are any I’ve missed, please send me your feedback!

Lesson 1: Start small

You were probably taught that entrepreneurs have to think big. To some degree that’s the right approach; after all, ultimately you want to address markets with high potential. However, in the IoT you need a step in between: rather than trying to predict and plan for “big” scenarios, you should become more adaptable and agile. The connected world (still a vision of the future for many companies) is a volatile one. Your task as an entrepreneur is to actively shape this world and make the most of the opportunities it presents. Even established companies don’t immediately throw themselves completely into the fray – they focus on a few select approaches. There are a couple of different aspects to consider here.

Small = manageable. This is how several of our customers start entering the IoT: mostly with projects of limited complexity and containing smaller numbers of connected devices. These projects then have the potential to grow rapidly.

Comparison of IoT projects Source: Bosch.IO
The chart shows two current customer projects at Bosch.IO. They start as PoCs in year one with a very low number of connected devices and sensors. However, in a short space of time, they scale massively upward for commercial launch and rollout.

Small = unit size. One viable way for Bosch to enter new and generally highly dynamic markets is to use small, agile, and independent units, which then test business ideas outside the normal constraints of established businesses. These are called “innovation clusters.” One of them has already gone commercial: Bosch Connected Devices and Solutions.

Lesson 2: Experts are not made in a day

Imagine you are the proud owner of a Six Sigma Black Belt and that you follow zero‑defect policy. Good job! At least so far – but the IoT will require more. In the IoT, you learn that the path to success becomes walkable only when you balance precision landings and failure. Naturally, if we’re talking about safety or life-critical applications such as automated driving or connected cardiac pacemakers, failure is not an option. But the IoT offers a multitude of other applications that can be approached in an explorative and iterative manner – characteristics that are often assigned to start-ups. We have to have the courage to try new things and to stop if something doesn’t work. It is especially here that we need a “culture of failure” – not my words, BTW, but those of the Bosch Group’s CEO Volkmar Denner. He was once asked if a company with a workforce of almost 300,000 people can really be as innovative as a swarm of start-ups. His answer: “It’s not always a question of that. In traditional automotive manufacturing, the pace will remain a different one than in the IT business. Our automotive technology products, for instance safety systems, have to function without faults. But in the event of a fault with a smartphone app, it is enough to offer an update.” This agile approach of being able to react to changing circumstances, being attentive and receptive to all signals, even weak ones, will help you adjust to the dynamics of the market.

Lesson 3: Tap the start-up gene pool

I recently learned that the editor-in-chief of a major German media outlet moved to Silicon Valley for a year to study digitization in practice. If this is not an option for you, seek out companies on the IoT start-up scene – join them for a drink at an IoT meetup to float your ideas (or, if you’re thinking bigger, to make a nice addition to your portfolio). One of my posts on LinkedIn received this comment from an IoT start‑up: “To be successful in marketing IoT you either need to bring something to the market that is ‘Need to have – NOW’… or have the capability to do very long-time investments (10-20 years). Being a start-up… we have to do the first option.” It is difficult to keep pace with the agility and speed of a start-up, especially for a company with a long history. That’s why Prof. Oliver Gassmann at the University of St. Gallen recommends “establishing a parallel substructure in the company”. This goes hand in hand with an understanding of management facilitated by this substructure.

An example from the Bosch Group: Bosch is encouraging entrepreneurship within the company. Only recently, the company’s own start-up platform went into operation. It provides support to Bosch associates wanting to set up their own company. Denner went on: “Our associates have proved that they are good researchers. Now we want them to be good busines speople as well.” While associates focus on making their innovations ready for the market, the start-up platform helps them with administrative matters such as management accounting and financing. An advantage of this organizational structure is that it provides IoT enthusiasts with fertile ground for implementing new business ideas and models.

Interior view of Bosch Start-up Platform Source: Bosch
Impression from Robert Bosch Start-up GmbH

Lesson 4: “Not invented here” is cool

What was the scope of your last business plan? Five years? Planning for that time frame is a good skill to retain, but it may not work for your IoT ventures. Why? The wheel of innovation is spinning faster and faster. The connected world requires you to find novel ways of creating new business models or adapting existing ones. Also, near real-time data from connected products gives you the extra boost you need to keep ahead of the competition. Regardless of whether they are SMEs or major corporations, customers want to see innovations. Not as a picture on a PowerPoint slide, but as an actual tangible object. As it is simply no longer economically viable for even a larger company to develop everything by itself, more and more (semi-) open innovation programs are being set up.

One possible approach (not just for Bosch) is actively participating in open source communities; for example, sharing or adapting code. Software components in particular are frequently developed by internet communities on a professional level and are constantly being refined. In fact, it’s now impossible to forgo the use of open source software (OSS) in complex products or solutions.

More and more frequently, start-ups are also playing a role in open innovation in the IoT arena. They are known to be good at providing radical new solutions and can close potential innovation gaps. One way they do this is with incubator programs for start-ups, such as IoTPedia or Highway one. Another method uses accelerator programs, which my colleagues at Robert Bosch Venture Capital GmbH (VC arm of the Bosch Group) participate in. These accelerator programs (such as TechCity UK’s IoTLaunchpad, Startupbootcamp, MassChallenge, or PlugandPlay) offer advantages for both sides: Since a program is at the heart of IoT, it can provide more specific and close-to-customer information than any market analysis could deliver. At the same time, the start-ups receive services from experienced professionals, such as mentoring, launch support, organizational development, or retail space for introducing and selling a product.

Lesson 5: Support the truffle pigs

I like using the term “truffle pig” in an IoT context. Truffle pigs have strong instincts. They find treasures close to the ground, and accept that some of their forays into certain areas will be unsuccessful. In a corporate environment, “truffle pigs” are the interdisciplinary thinkers and “intrapreneurs” who have a good overview of what is going on in a company.

hand with truffle Source: iStock/Brasil2

Intrapreneurs are able to drive innovations based on their networks and attitude. They are innovation managers, marketers, strategists, business developers, product or quality managers, etc. These people are your change makers, leading your organization to the IoT – and they will encounter obstacles. Statements such as “We’ve never done that before”, “How do we know this will work?”, or “Do we have proof?” will dog them daily. If they also face opaque corporate structures and processes, they will find themselves robbed of their opportunities. I recently attended a joint webinar by Cisco and SAP on IoT platforms, and a poll during the broadcast showed that most IoT projects have executive sponsors. This is where you come in: you can provide your intrapreneurs with the more liberal atmosphere that is often attributed to start-ups. Encourage them in “forming support groups; finding partners; and enrolling more of their colleagues in their venture.”

The best of both worlds

So that’s my say. I’m sure there is much more out there that we can share with entrepreneurs who are starting to find their way into the connected world (and who quite often hear that the future belongs to start-ups, and that large, established companies will be left in the dust).

What advice or lessons learned do you want to share with an “old economy” IoT entrepreneur?

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