Innovation through collaboration

In the face of the increasing pressure of competition and digitalization, collaborations are becoming increasingly attractive. But working together is only successful if there are clear targets and strategies for avoiding lopsided dependencies – two guiding pillars of the WEISS collaboration strategy.

Machine and plant manufacturing is one of the most innovative industries in Germany. In the past, small and mid-sized enterprises (SMEs) in particular have repeatedly had success refining existing technologies and marketing them globally. However, recent studies like the Industry Report on Innovations in Machine Manufacturing for 2022 from the Leibniz Centre for European Economic Research (ZEW) (available in German only) show that spending on innovations has stagnated since 2019 and has increasingly gone towards improving processes. In contrast, investments in new products, services and business models are declining for the first time in ten years.

There are good reasons for this. The coronavirus, wars and other flash points have led to interrupted supply chains and export restrictions, alongside rising costs of energy and raw materials. Those who want to remain competitive have to reorganize their internal processes and become more efficient. A one-sided focus on process innovations also entails risks, however. Fewer customer-oriented innovations can endanger technological leadership, hamper future growth opportunities and put mid-sized business models at risk. To prevent this, machine manufacturers have to address all areas of innovation equally. The question is how this can be made possible if a company's own resources are not enough for this. It's simple: through collaboration – even though working together is not always that simple in practice.

More room for research and product development

Collaborations are nothing new in the machine manufacturing industry. In a VDMA study published in 2020 (available in Germany only), 58 percent of member companies surveyed said that they had already collaborated with start-ups more than once. One major reason for this is the fact that some old value chains and networks are being completely redefined by digitalization, causing traditional core skills and unique selling points to lose importance.

In light of this, collaborations with research institutes, business partners and especially start-ups are becoming increasingly important since financial straits and personnel shortages are greatly limiting the capacity of individual companies to do expensive R&D projects. At the same time, as leading innovators in digitalization, start-ups offer encouraging points of contact for established companies, especially SMEs, whose in-house expertise is often less broad than that of global corporations.

No opportunity without risks

Are collaborations going to be the model of success for German machine and plant manufacturing? There is good evidence to say so. In a world shaped by rapid changes in technology and global challenges, the resources and knowledge of an individual company are often no longer enough to create game-changing innovations. But working together, they can be. By working with strategically relevant partners, companies can tap into new technologies, new expertise and new customers. This can result in valuable synergies, especially in machine manufacturing, which is facing growing customer demands for usability and digital services. In the best cases, collaborations offer:

Access to strategically valuable knowledge, resources and technologies

Faster innovation processes and a shorter time to market

Expertise in implementing and monetizing new business models

Valuable ideas for improving the company culture

Shared risks

New business potential through additional market shares and outlets

A new study by the VDA in 2023 on collaboration in the automotive industry with start-ups (available in Germany only) proves that many of these advantages are not just theoretical but also occur in practice. When asked to what extent they met their collaboration targets, in whole or in part, 74 percent of automotive manufacturers said that they were able to further develop their product range. Access to new technologies was possible for 70 percent, while 67 percent saw an increase in their innovative ability. More than half reported major advances in the modernization of their business model as well as in improvement to their company culture.

However, the chances for success are offset by potential disadvantages. Collaborations require a significant investment of time, personnel and communications. Apart from that, the partnership is not always beneficial. Undesirable compromises must sometimes be made, and coordination processes sometimes take far too long. Another disadvantage is the risk of wasting valuable resources by choosing the wrong partner. It often only becomes apparent months later that two company cultures are at odds and that it is not possible to work together productively. Frequently, collaborations are simply rejected – be it out of fear of the uncontrollable outflow of knowledge and data, or because the risk of lopsided dependencies in strategically relevant areas appears too great.

Everyone must be able to win

The disadvantages and risks mentioned should not be overvalued, however. In practice, they can all be minimized through careful planning and implementation – regardless of whether the collaboration is a joint venture, R&D project or a loose community of interests.

Tobias Frank, Director Connect⁵ & Product Line Cube at WEISS, is familiar with the potential pitfalls of collaborations, yet also knows how to eliminate them. "The most successful partnerships are those where both sides benefit, where they can use the collaboration to develop their respective skills," says the manager. If there is not a clear win-win situation, with equally clear rules for intellectual property, data protection, conflict resolution and the distribution of tasks, costs and profits, then you do not have the foundation for successful collaboration. "Creating the right conditions is a lot of work, but it is indispensable, since a silo mentality in the mid-sized sector won't work anymore," explains Tobias Frank.

The strategy: Being a popular partner

Therefore, WEISS has already been working with research institutions and start-ups in a wide range of areas for years.

One example is in fuel cell stacking, a project in which WEISS is collaborating with two research institutes and five companies. "These are topics that we targeting with a purpose, but they also require high personnel costs and organizational effort," Tobias Frank points out. "Despite this, these projects are important because they give us new approaches and valuable contacts for recruiting."

For product innovations, WEISS also relies on partnerships with start-ups. For this purpose, depending on the project, it has used the search platform "Startup Radar Dashboard" of the VDMA Startup-Machine and delphai, with a pool of more than 9,000 pre-selected start-ups. "For years, we have been working on scouting to find innovative technologies which offer us and our customers added value," explains Frank. WEISS relies on long-term partnerships when it comes to strategic issues. On the other hand, WEISS enters into short-term collaborations primarily for clearly defined modules or services that are needed on short notice.

In particular for long-term partnerships, WEISS follows a clearly defined collaboration strategy which accelerates innovations and prevents lopsided dependencies. "Collaborations also always entail not weakening your own position and making sure that you don't lose any expertise," says Tobias Frank. "Ultimately, we have to earn money. This is likely to work better with partners. We value the principle of equal partnership here."

Digitalization hot-spot

WEISS wants to occupy a leading role as a digitalization partner among the medium-sized companies. The goal is to be an attractive partner. "We want to be a leading partner for others by building up our expertise internally or purchasing it externally," explains the Product Line Cube director. An example of this is the acquisition of the Indian IT service provider Ecotech, with which the corporate group secured new skills for implementing digital product and service innovations. But Tobias Frank says that external skill building is just as important, "Especially in the area of simulation, we have become a popular partner because we have a bundle of skills here that can otherwise only be found scattered around."

In the coming years, WEISS wants to focus on expanding and investing in collaborations in the areas of IoT, the platform economy and software development. "Here, we are thinking about strategic partnerships in order to skip several steps at once," says Tobias Frank. The issue of open interfaces continues to be crucial here. "When we go it alone in digitalization, this results in stand-alone solutions that do not offer adequate added value. This does not mean that we at WEISS are no longer working towards our own solutions – quite the opposite. Yet we need open interfaces so that we can always gain access to digital innovations."

For more information on Innovation through collaboration talk to WEISS UK Ltd