German companies look to Berlin startups for innovation

German companies are beginning to recognise Berlin as a hot spot for technology innovation thanks to the many startups there

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German companies are beginning to recognise Berlin as a hot spot for technology innovation, thanks to the substantial number of up-and-coming startup companies that call the capital city their home.

After the fall of the Berlin Wall in 1989, fashion, music, art and entrepreneurs began to rebuild the city, and it is still known for its relaxed lifestyle and Bohemian culture, which provides a cheap foundation for small businesses looking for a European connection to both the East and West.

While technology startups such as SoundCloud are becoming popular outside the city, the rest of the world is starting to sit up and take notice, including large corporations who are setting up offices at the heart of the innovation.

Both the German railway company, Deutsche bahn, and one of the largest European publishers, Axel Springer, are using startups in their businesses today, as well as the acclaimed Berlin Philharmonic Orchestra.

Deutsche bahn

The German railway company, Deutche Bahn is realising the power of working with startup technology companies to produce more innovative and agile products.

Matthias Patz, business development and innovation manager of Deutche Bahn, says his connection with the startup world has helped create this new way of working. Patz has been familiar with the Berlin accelerator Betahaus since its inception and, thanks to his entrepreneur-roots, he has bought a startup mindset and environment into the large corporation.

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Patz is responsible for in-house IT at Deutche Bahn and is encouraging as many employees as possible to work from Betahaus to experience the startup culture first hand.

“I want our employees to experience a totally different working experience,” he says.

Deutche Bahn is headquartered in Berlin, with a quarter of its ICT offering in Frankfurt. Over the last nine months, 50 developers and marketers from the company have gone to work in Betahaus, but Patz wants to increase this number.

“People are used to working in an office environment with their colleagues,” he says. “But Betahaus has a totally different working environment, you need to mingle with the other startups and it’s disrupting their day-to-day habits.”

He admits Deutche Bahn is not known as the most innovative of companies. And as a large corporation, it is known for efficiency and knowing its customer – but it is not as good at innovation and trying out new things.

He says startups are at ease with taking risks and they change and disrupt markets when developing innovative technology – which is not what large corporations do.

“Deutche Bahn has the market power to reach a million people, where a startup doesn’t,” he adds. “We can take ideas from startups and bring it to a higher level.”

While working with startups, Deutche Bahn has experimented with ticketing machine technology and hand gestures as well as augmented reality through the likes of Google Glass.

“We try out new technologies, and look at how we can make our processes more efficient, or use a totally new product.”

Patz says the company worked with one startup on a product because its existing suppliers were not as flexible in the short term. “It’s a good opportunity for startups to prove they can work with large corporations and get a project done quicker.”

Patz says other big companies in Berlin have started internal startup incubator programmes to incorporate startups into the company, but he is not convinced this is the best way.

“At Deutche Bahn, we haven’t decided yet the best way to interact,” he says. “Whether to internalise or externalise, that’s something we still need to learn.”

Axel Springer

One of the largest publishing houses in Europe, Axel Springer, began to embrace digital business models in early 2002. The company started by focusing on strategic later-stage investments but, in the last two years, the company has started working more closely with the startup world.

Robin Haak, portfolio and operations manager of the Axel Springer Plug and Play accelerator, says the company began its “digital cultural change”  two years ago, by working with digital media entrepreneurs, taking part in technology startup events and building up internal incubators.

It also decided to send one of its chief editors and its chief marketing officer to Silicon Valley for nine months, as well as beginning a satellite program in the US where employees would experience the innovation in Silicon Valley, build networks there and bring knowledge back over to Europe.

A year ago it also started a joint venture with Plug and Play Tech Center in Silicon Valley, which had invested in nearly 2,000 startups to date and was interested in exploring the opportunities of the German capital.

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The three-month programme in Berlin encouraged startups to come up with innovative media-related business concepts and, over the last year, saw 16 companies come through the scheme. Haak says the publisher has worked with at least 80% of them in one way or another.

“Over the last ten years, Axel Springer has changed to become a completely new company,” says Haak. “It will be an interesting time for every entrepreneur now there is a truly digital culture and mistakes are accepted as part of a learning process.”

Berlin Philharmonic Orchestra

The Berlin Philharmonic Orchestra is another German company that has chosen to work with smaller startup organisations for its Digital Concert Hall, to become more agile and make cost savings.

The content producer is working with the startup Novoda to produce the Android version of its custom media player for tablets and mobile devices. Subscribers use the Digital Concert Hall to watch all of the Berlin Philharmonic’s live streams in high definition, as well as archived footage of orchestral performances.

Alexander D. McWilliam, director software development of the Berlin Philharmonic Orchestra, says: “We're not a software development company. However, in this digital era, you can't succeed without a great user experience – which happens to manifest itself in the form of software – so we had to seize control of that too.”

Due to the breadth of platforms the company's systems support – including smart TVs from Sony, LG, Samsung and Panasonic as well as mobile apps for iOS, Android and Windows 8 – they all require constant improvements. The Berlin Philharmonic Orchestra decided to work with several smaller suppliers based in Berlin.

McWilliam says he needed teams which were available for a long-term partnership and affordable, because they had no external shareholders, little management overhead and no travel expenses.

“This fragmentation of contractors, as opposed to a single full-service agency, most certainly means more responsibility and more work for us, but it is an inherently agile approach, and much more cost-effective,” he says.

Kevin McDonagh, CEO of the Android consultancy startup Novoda says: “Novoda is an established name in London and through some tech circles in the US but was, until last year, unknown in wider Europe. We hope that being associated with the success stories of German household names such as Arte and Berlin Philharmonie will help raise awareness and seed opportunities for Novoda's future Germany expansion.”

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