Managing Startup Suppliers CIPS-Event "Supply Chain Startups: - - PowerPoint PPT Presentation

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Managing Startup Suppliers CIPS-Event "Supply Chain Startups: - - PowerPoint PPT Presentation

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Managing Startup Suppliers CIPS-Event "Supply Chain Startups: Reality Check" Zurich, October 29, 2019 Prof. Dr. Stephan M. Wagner Chair of Logistics Management Swiss Federal Institute of Technology Zurich 1 Agenda 1 Introduction

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Managing Startup Suppliers

CIPS-Event "Supply Chain Startups: Reality Check" Zurich, October 29, 2019

  • Prof. Dr. Stephan M. Wagner

Chair of Logistics Management Swiss Federal Institute of Technology Zurich

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Agenda

1

Introduction to ETH Zurich and our Research Group

2

Interaction between Corporates and external Startups

  • Why and how

3

Startups in the Supply Chain and as Suppliers

  • Journey of our Research on Startups in the Supply Chain
  • Managing Startup Suppliers
  • Startup Programs
  • Implications for Purchasing Managers
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Agenda

1

Introduction to ETH Zurich and our Research Group

2

Interaction between Corporates and external Startups

  • Why and how

3

Startups in the Supply Chain and as Suppliers

  • Journey of our Research on Startups in the Supply Chain
  • Managing Startup Suppliers
  • Startup Programs
  • Implications for Purchasing Managers
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Areas of Expertise and Research

Entrepreneurship Sustainability Strategy Networks Digitalization Relationships Innovation Humanitarian Supply Chain Management Supply Chain Management Suppliers Logistics Service Providers Customers Purchasing and Supply Management Logistics and Transportation Management Business Marketing Management Supply Market Logistics Market Product Market

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Current Research Topics taken up in Projects

… in Supply Chains Sustainability and Ethics Startup Firms Digitalization (e.g., 3D printing, blockchain) Humanitarian Logistics and Operations Understanding …

Examples

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Just launched – The HumOSCM Lab

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Impact of our work: Research Output over Time Research output and recognition increasing over time

Sources: Web of Science Citation Report; Databases considered: SCI-Expanded and SSCI; timespan – 27.10.2019 Google Scholar; timespan – 27.10.2019

(27.10.2019: Σ 10.686, h=51) (27.10.2019: Σ 3.757, h=33)

100 200 300 400 500 600 700 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Number of citations (Web of Science)

200 400 600 800 1000 1200 1400 1600 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Number of citations (Google Scholar)

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Agenda

1

Introduction to ETH Zurich and our Research Group

2

Interaction between Corporates and external Startups

  • Why and how

3

Startups in the Supply Chain and as Suppliers

  • Journey of our Research on Startups in the Supply Chain
  • Managing Startup Suppliers
  • Startup Programs
  • Implications for Purchasing Managers
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Why collaborate with Startups (1)? Startups as Sources of Innovation

Artificial Intelligence

Tracking und Tracing Technology: Blockchain, Low-Cost- Sensors, IoT, 5G

Big Data Analytics Automation und Robotics

Trend I: Disruptive and faster changing technologies

Digitalization Adjustment and replacement

  • f traditional technologies

Alternative Drives

H2

Health technologies

  • Prosthetics
  • Blood pressure monitoring
  • …

Environmental technologies

  • Power to gas
  • Energy storage
  • …

Source: Wagner (2019); Olsen & Tomlin (2019)

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Increased Innovation Pressure

Why collaborate with Startups (2)? Startups as Sources of Innovation

  • Increasing product variety and customization
  • Increasing product complexity
  • Shortened product lifecycles
  • Platform economy and sharing economy
  • Demand for sustainable value chains and products
  • Entrance of new businesses/competitors
  • …
  • Open Innovation (External sources to complement internal innovation activities)
  • Startups as sources of external innovation

Trend II: Changing Ecosystems

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Corporate Venture Capital

Investment in Startups Startup's Maturity Stage

Corporate Incubator

Startup Developing

Corporate Accelerator

Startup Developing & Pilot Project

M&A

Acquiring the Startup and its technology

Startup Supplier/ Venture Client

Integrating Startup in Supply Base or Co- Development

Startup Events & Competitions

Network and Ecosystem Building Corporate Involvement

Financial Investment No financial Investment Source: Fink (2018)

Interaction of Corporates & external Startups

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Agenda

1

Introduction to ETH Zurich and our Research Group

2

Interaction between Corporates and external Startups

  • Why and how

3

Startups in the Supply Chain and as Suppliers

  • Journey of our Research on Startups in the Supply Chain
  • Managing Startup Suppliers
  • Startup Programs
  • Implications for Purchasing Managers
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Journey of our Research on Startups in the Supply Chain

… 2019 2018 2017 2016 2015

New New Ventur Venture Partnerin e Partnering Capab Capabilit lity

Zaremba, Bode, & Wagner (Case Study)

Startup Supplier Programs Startup Supplier Programs

Kurpjuweit & Wagner (Case Study)

Sel Selectin ing Innovat g Innovative ive and Startup and Startup Suppl Supplier

Constantin Brachtendorf (Experiments)

Managi Managing Startup g Startup Suppliers ppliers Startup Supplier's IP Startup Supplier's IP Protection Protection

Fink & Wagner (Case Study)

Lever Leveragin ging Suppl Supply Chains y Chains for for New New Ventur Venture Growth e Growth

Ingmar Zanger (Case Study)

Strateg Strategic and and operat

  • perationa

ional l det determin rminants ants of

  • f relation

relationsh ship ip

  • utcomes
  • utcomes with

with new ventur new venture e suppliers suppliers

Zaremba, Bode, & Wagner (Survey) Wagner, Kurpjuweit, & Choi (Case Study) CAPS Research, Arizona State University

Toward a Toward a bett better understanding er understanding

  • f
  • f corporat

corporate accelerator models e accelerator models

Moschner, Fink, Kurpjuweit, Wagner, & Herstatt (Case Study) Collaboration with TU Hamburg

Lever Leveragin ging Startup's Startup's Suppl Supply Chains y Chains

Feng & Wagner

A Typolo A Typology gy of

  • f Establis

Established Firms' Supp Firms' Suppli lier Sel Selection ion Approac Approaches hes

Kurpjuweit & Wagner (Case Study)

Logist Logistic ics Acceler s Accelerator tor

Fink, Räder,& Wagner (Case Study)

Originated Originated at at ETH Zuric ETH Zurich's 's Chair of Chair of Logis Logistics Management ics Management

New New Kids on Kids on the the Block: Block: Sel Selectin ing New New Ventur Ventures as es as Supp Suppli liers ers

Zaremba, Bode, & Wagner (Survey)

Logist Logistics Startups ics Startups

Kurpjuweit, Klöckner, Seeßle, & Wagner (Case Study)

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What do we consider as a Startup Supplier?

Younger than 8 years (Song et al., 2008) Possesses a self-developed product or service which might improve the established firm's core business Aims to have a (or has an existing) B2B sourcing relationship Focus on creating innovation, growth, and a scalable business model More than one employee or founder, i.e. we do not include single entrepreneurs or inventors Independent from the buyer

Source: Fink & Wagner (2019)

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A Startup Supplier (1)

Startup Supplier

Established Buying Firm

Example

Source: https://www.deutschebahn.com/en/Digitalization_new/startups/db_startups/weichen-3520602

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A Startup Supplier (2)

Startup Supplier

Established Buying Firm

Example

Source: https://aito-touch.com/

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Not a new phenomenon: Innovation and Productivity Suppliers at Siemens

Technologies/ideas "Start ups, spin offs"

Innovation suppliers + Productivity suppliers Productivity suppliers 1 2

Solutions

Innovation suppliers 3

"Established firms" Products

Example

Source: Wagner (2010)

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Differences between established Suppliers and Startup Suppliers

Established Suppliers Startup Suppliers Resources

  • Affluent in resources
  • Short of resources

Relationship with Buyer

  • One of many
  • Matter of survival

Decision Making

  • Slow, decentralized
  • Speedy, flexible

Organization

  • High degree of formalization
  • Low degree of formalization

Communication

  • More levels, barely horizontal,

infrequent

  • Fewer levels, more horizontal,

frequent Legitimacy

  • More
  • Less

History/Track Record

  • Sufficient
  • Scarce

Routines

  • Routines exist
  • Lack productive routines

Need to adapt purchasing processes and relationship management

Source: Wagner et al. (2017)

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Competitive Priorities: Firms seek from Startup Suppliers Flexibility and Innovation

Goals: Start-up vs. other suppliers

n=123

Cost (reduction) Quality Delivery Flexibility Innovation

Equally emphasized More emphasized Less emphasized 14% 25% 61% 13% 47% 40% 8% 17% 75% 9% 16% 75% 12% 37% 51%

Firms expect more from startup suppliers in terms of flexibility and innovation compared to established suppliers

Source: Wagner et al. (2015)

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Product Type for which Startup was selected as Supplier

"Product- priority" "Product- complexity"

36% 36% 14% 23% 20% 19% 41% 44% 68%

0% 20% 40% 60% 80% 100%

Profit impact Criticality for production Importance for firm Very low/low Medium High/very high

32% 30% 26% 27% 21% 22% 41% 49% 52%

0% 20% 40% 60% 80% 100%

Technical requirements Complexity Innovativeness Very low/low Medium High/very high

n=96 (start-ups selected)

Startups are selected as suppliers for important products Startups are selected as suppliers for innovative and complex products

Source: Wagner et al. (2015)

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Characteristics of successful Startup Suppliers

The start-up-supplier...

69% 55% 42% 44% 36% 28% 32% 33% 23% 19% 16% 7% 10% 14% 14% 13% 8% 8% 5% 9% 18% 25% 18% 21% 26% 22% 19% 24% 18% 17% 21% 16% 13% 9% 8% 8% 8% 7% 22% 27% 33% 39% 43% 46% 46% 48% 53% 64% 68% 72% 74% 74% 77% 79% 83% 83% 88% 0% 20% 40% 60% 80% 100%

...was explicitly recommended by trusted business partner of ours ...had good relationships to a partner who provided financial support ...had an established firm as supplier ...has been successfully active in the market/industry for a… ...had an established firm as customer ...was able to provide comprehensible, documented relevant proof… ...had a very professional corporate design or similar ...committed a considerable portion of resources in the course of the… ...already possessed the essential (most important) administrative… ...already possessed the essential (most important) technological… ...had employees who possessed relevant experience in the… ...provided requested information in a timely manner ...had employees that left a good impression in personal meetings ...was a good fit to our corporate culture ...complied with the established standards and norms in our industry ...had (at least) one founder who possessed relevant experience in… ...constantly communicated with us in a transparent manner ...constantly acted openly (“played with open hands”) ...did signal great interest for the supply mandate

Does not apply/weakly applies Applies Strongly/fully applies

n=96 (start-ups selected)

There is a hierarchy among startup characteristics that favors being selected as supplier

Source: Wagner et al. (2015)

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Capabilities to manage Startup Suppliers (1) New Venture Partnering Capabilities

Evaluation and Selection

  • Assessment agility
  • Criteria fulfillment flexibility

Development

  • Specificity of development effort
  • Timeliness of development effort

Communication

Quality of communication in terms of frequency, content related quality, and immediacy

Governance

Buying firm's choice of governance mechanisms that promote cooperation and collaboration

New Venture Partnering Capabilities Variables

Source: Zaremba, Bode & Wagner (2017)

Pilot projects

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Capabilities to manage Startup Suppliers (2) Buying Firm Archetypes: Startup Selection

Source: Kurpjuweit, Wagner & Choi (2019)

  • Do not adjust their

supplier selection process to startups

  • Completely

unstructured evaluation process

1

  • Do partially adjust

their supplier selection process to startups

  • Somewhat structured

evaluation process

  • Relaxed standard

criteria

2

  • Do fully adjust their

supplier selection process to startups

  • Structured evaluation

process

  • Predefined startup-

specific evaluation criteria

3

Skeptical Buyers Realistic Adapters Systematic Selectors

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  • Startups move into an official

supplier status

  • Focus on mid-/later stage

startups, e.g. alumni of renowned accelerator programs or existent VC funding

  • No equity or exclusivity taken
  • Instead instant purchase orders

for Proof-of-Concept

  • Simplified access to the business

units

"Startups need three things to grow: capital, coaching, and clients. Private VCs and other professional investors can provide the first two. But only large corporates can offer the last one."

(Gimmy et al., 2017)

Capabilities to manage Startup Suppliers (3) Startup Supplier / Venture Client Programs

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Stage 1 Stage 2 Stage 3 Stage 4 Identification Internal matchmaking Pilot project Transfer into the supply base Product development Sourcing Alternative routes:

  • Pilot in another business unit
  • Acquisition
  • Asset purchase
  • Licensing
  • Joint venture
  • CVC
  • Collaboration with tier-1

supplier

  • …

Gate 1 (Preselection) Gate 2 (Market fit) Gate 3 (Pilot evaluation)

Systematic Selectors

Source: Kurpjuweit and Wagner (2019)

Capabilities to manage Startup Suppliers (4) Startup Supplier Stage Gate Process

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Implications for Purchasing Managers (1)

  • Develop a holistic strategy for your startup engagement and make

sure to synchronize all activities

  • Specify the types of collaboration (M&A, Accelerator, Startup

Supplier etc.) that fits best to your company's overall strategy

Implications – Step 1: What are you aiming for?

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Implications for Purchasing Managers (2)

  • Integrate procurement as early as possible in the startup

management process

  • Improve your knowledge about startups and their requirements
  • Adapt, simplify and speed up your processes, contracts, and

tools in order to be startup-friendly

  • Create New Venture Partnering Capabilities.
  • Benefit from experts in the ecosystem with respect to startup

financing (VC) and startup developing (independent accelerators)

Implications – Step 2: Buyer Supplier Relationship