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Written by Gary F. Smith
Publish Date: 2024-11-03

Harvard Case - How Corporates Co-innovate with Startups: The BMW Startup Garage

"How Corporates Co-innovate with Startups: The BMW Startup Garage" Harvard business case study is written by Joerg Niessing, Laurence Capron, Nathan Furr, Pascale Balze. It deals with the challenges in the field of Strategy. The case study is 21 page(s) long and it was first published on : May 2, 2019

At Fern Fort University, we recommend that BMW continue to invest in and expand its Startup Garage program, leveraging it as a key driver for disruptive innovation and sustainable competitive advantage in the rapidly evolving automotive industry. This should involve a strategic approach that focuses on strategic alliances, open innovation, and digital transformation to foster a more robust ecosystem of collaboration and accelerate the development and deployment of cutting-edge technologies.

2. Background

The case study focuses on BMW's Startup Garage, a program designed to connect the company with promising startups to explore and integrate innovative technologies. The program aims to leverage the agility and creativity of startups to address key challenges in areas like autonomous driving, connected mobility, and sustainable mobility solutions. The case study highlights the challenges and opportunities associated with this approach, including the need to balance control with collaboration, manage cultural differences, and navigate the complexities of integrating startups into the existing corporate structure.

The main protagonists of the case study are:

  • BMW: A global automotive manufacturer seeking to maintain its leadership position in a rapidly changing industry.
  • Startups: Innovative companies offering solutions in areas like autonomous driving, connected mobility, and sustainability.
  • BMW Startup Garage Team: Responsible for managing the program and facilitating interactions between BMW and startups.

3. Analysis of the Case Study

The case study can be analyzed through the lens of several strategic frameworks:

1. Porter's Five Forces:

  • Threat of New Entrants: High, due to the emergence of new players like Tesla and the rapid development of disruptive technologies.
  • Bargaining Power of Buyers: Moderate, as consumers have a wide range of choices and are increasingly demanding innovative features.
  • Bargaining Power of Suppliers: Moderate, as BMW relies on a diverse range of suppliers for components and technology.
  • Threat of Substitute Products: High, as alternative modes of transportation like ride-sharing and public transport are gaining traction.
  • Competitive Rivalry: Intense, as established players like Mercedes-Benz, Audi, and Toyota are actively competing in the same market.

2. SWOT Analysis:

  • Strengths: Strong brand reputation, global reach, established manufacturing capabilities, financial resources, and a commitment to innovation.
  • Weaknesses: Bureaucratic decision-making processes, potential resistance to change, and challenges in integrating startups into the existing corporate culture.
  • Opportunities: Leveraging emerging technologies like AI and machine learning, expanding into new markets, and developing sustainable mobility solutions.
  • Threats: Competition from new entrants, changing consumer preferences, and regulatory uncertainty.

3. Value Chain Analysis:

  • Inbound Logistics: BMW has a well-established supply chain, but needs to adapt to new technologies and materials required for future vehicles.
  • Operations: BMW's manufacturing processes need to become more flexible and agile to accommodate rapid technological advancements.
  • Outbound Logistics: BMW needs to develop new distribution channels and strategies to reach customers in a rapidly evolving digital landscape.
  • Marketing and Sales: BMW needs to adapt its marketing and sales strategies to appeal to a new generation of tech-savvy consumers.
  • Service: BMW needs to provide seamless integration of new technologies and services to enhance customer experience.

4. Business Model Innovation:

  • Value Proposition: BMW needs to move beyond traditional car manufacturing and offer a holistic mobility experience that includes autonomous driving, connected services, and personalized solutions.
  • Customer Segments: BMW needs to target a wider range of customer segments, including younger generations, urban dwellers, and environmentally conscious consumers.
  • Channels: BMW needs to leverage digital channels and partnerships to reach new customers and offer a seamless experience.
  • Customer Relationships: BMW needs to build long-term relationships with customers by providing personalized services and ongoing support.
  • Revenue Streams: BMW needs to explore new revenue streams beyond traditional car sales, including subscription services, data analytics, and software licensing.

4. Recommendations

  1. Expand the Startup Garage Program: BMW should significantly expand the Startup Garage program by increasing funding, resources, and the number of startups involved. This expansion should focus on attracting startups with expertise in areas like AI, machine learning, autonomous driving, and sustainable energy solutions.

  2. Implement a Strategic Alliance Framework: BMW should develop a formal framework for strategic alliances with startups, defining clear roles, responsibilities, and expectations for both parties. This framework should address issues like intellectual property, data sharing, and integration into BMW's existing systems.

  3. Foster a Culture of Open Innovation: BMW needs to cultivate a culture that embraces open innovation and encourages collaboration between internal teams and external partners. This can be achieved through initiatives like cross-functional teams, hackathons, and knowledge-sharing platforms.

  4. Accelerate Digital Transformation: BMW should prioritize digital transformation across all aspects of its business, including manufacturing, marketing, sales, and customer service. This will enable the company to leverage data analytics, AI, and other emerging technologies to enhance efficiency, improve decision-making, and deliver a superior customer experience.

  5. Develop a Robust Corporate Venture Capital (CVC) Strategy: BMW should establish a dedicated CVC fund to invest in promising startups and gain early access to cutting-edge technologies. This CVC strategy should be aligned with BMW's long-term strategic goals and focus on areas with significant growth potential.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  1. Core Competencies and Consistency with Mission: BMW's core competencies in engineering, manufacturing, and brand management can be leveraged to enhance the Startup Garage program and accelerate the development and deployment of innovative technologies. This aligns with BMW's mission to provide premium mobility solutions that meet the needs of its customers.

  2. External Customers and Internal Clients: The recommendations address the needs of both external customers (who demand innovative and sustainable mobility solutions) and internal clients (who require access to new technologies and partnerships to drive growth).

  3. Competitors: By embracing open innovation and digital transformation, BMW can gain a competitive advantage over rivals who are slower to adapt to the changing landscape.

  4. Attractiveness: The recommendations are expected to generate significant value for BMW through increased revenue, reduced costs, and enhanced customer satisfaction.

  5. Explicit Assumptions: These recommendations assume that BMW is committed to innovation and is willing to invest in the necessary resources to make the Startup Garage program a success. It also assumes that BMW can effectively manage the challenges associated with integrating startups into its existing corporate structure.

6. Conclusion

The BMW Startup Garage program represents a valuable opportunity for BMW to drive innovation and maintain its leadership position in the automotive industry. By expanding the program, fostering a culture of open innovation, and accelerating digital transformation, BMW can unlock the potential of startups to develop and deploy cutting-edge technologies that will shape the future of mobility.

7. Discussion

Alternatives:

  • Internal Innovation: BMW could focus solely on internal innovation, but this would likely be slower and less agile than collaborating with startups.
  • Acquisitions: BMW could acquire promising startups outright, but this can be expensive and may not always be the best way to integrate new technologies.

Risks:

  • Integration Challenges: Integrating startups into BMW's existing systems and culture can be challenging and may require significant effort and resources.
  • Intellectual Property Concerns: BMW needs to carefully manage intellectual property rights to protect its own innovations and ensure that startups are fairly compensated for their contributions.
  • Cultural Differences: BMW needs to bridge cultural differences between its employees and startup founders to ensure effective collaboration.

Key Assumptions:

  • BMW is committed to innovation and is willing to invest in the necessary resources to make the Startup Garage program a success.
  • BMW can effectively manage the challenges associated with integrating startups into its existing corporate structure.
  • The automotive industry will continue to evolve rapidly, with new technologies and business models emerging at a rapid pace.

8. Next Steps

  1. Develop a Strategic Plan: BMW should develop a detailed strategic plan for the Startup Garage program, outlining goals, objectives, and key milestones.
  2. Establish a Dedicated Team: BMW should establish a dedicated team to manage the Startup Garage program and provide support to participating startups.
  3. Develop a Selection Process: BMW should develop a rigorous selection process to identify and evaluate promising startups.
  4. Pilot Projects: BMW should launch pilot projects with selected startups to test the feasibility and effectiveness of their solutions.
  5. Scale Up the Program: Based on the results of pilot projects, BMW should scale up the Startup Garage program by expanding its scope and resources.

By taking these steps, BMW can leverage the Startup Garage program as a key driver of innovation and growth, ensuring its continued success in the rapidly changing automotive industry.

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Case Description

At the BMW Group, Gregor Gimmy, a serial entrepreneur and former consultant, introduces the Venture Client (VCL) model to engage with start-ups and boost corporate innovation. The case discusses its initial success at BMW and the rationale that drove Gimmy to establish a new model of external corporate venturing (ECV). It also provides background information on the key forces shaping the auto industry today, the challenges faced by legacy automakers as technological developments accelerate, and the emergence of new rules and new players.

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