Mercedes-Benz AG produces over 2 million passenger cars annually for a global market in the throes of transformation. Automakers are meeting new demands for electrification and connectivity, new competitors are arising, and customers have new expectations, such as the desire for sustainable mobility. All of these trends are driving the need to speed innovation in every facet of the automotive industry.

In 2016, R&D and digital business managers at Mercedes’s headquarters in Stuttgart, Germany, realized that their efforts to collaborate with startups — a valuable source of external innovation — were being hampered by the company’s existing innovation processes. Those processes were overly focused on internal development and ready-to-implement solutions provided by the company’s established base of suppliers and weren’t well suited to uncertainty-ridden collaborations with promising technology startups. The company needed an innovation pathway capable of more effectively integrating startups earlier in the R&D process and significantly reducing the time required to identify, develop, test, and implement their most promising technologies and solutions.

In response, a new team within R&D was formed to build a better bridge between the promising ideas of external startups and the innovation needs of Mercedes’s internal business units. The team joined forces with partners from academia and industry to cofound Startup Autobahn, what we call an open corporate accelerator (CA). Unlike a conventional corporate accelerator — typically established by a single company for its own benefit — an open CA welcomes multiple sponsor companies and can attract a broader array of more mature startups. This model, also known as a consortium accelerator, improves sponsor access to external innovation and enhances the overall competitiveness of regional ecosystems.1

Startup Autobahn is operated by the Plug and Play Tech Center on the ARENA2036 research campus of the University of Stuttgart. Since its founding, it has attracted 30 large corporate sponsors (clients for startup solutions), including automotive OEMs and suppliers, as well as companies from other industries, such as IT, logistics, and chemicals. It has enabled Mercedes, in its role as a sponsor, to screen thousands of startups, execute more than 150 pilot projects, and implement 17 innovative solutions.

For instance, Mercedes worked with a startup named What3Words to jointly develop a voice-activated navigation system that guides users to precise locations by dividing the world into 57 billion 3-meter squares. It took less than a year to move from the first interaction with What3Words to the integration of its system into Mercedes’s A-Class car models, a process that usually takes multiple years and complex iterations.

The need to expand and accelerate innovation is not unique to Mercedes or the auto industry. Incumbent companies in retail, financial services, health care, and many other industries are well aware of the competitive risks posed by the limitations of their innovation chains and startups’ ability to rapidly exploit digital technologies.2 They, too, are searching for new models of innovation that can transform startups from competitors into partners. Mercedes’s experience shows how the open CA model can enable effective integration of startups into corporate R&D processes and accelerate innovation efforts.

An Upgraded Approach to the Corporate Accelerator

The open CA design differs from a conventional CA in two principal ways. First, it emphasizes and accelerates the strategic fit between sponsors and startups by nurturing only innovations that fill a gap in a sponsor’s products and processes, instead of making a less-focused equity investment in the startup itself.3 Second, it harnesses the network effects of open innovation and platforms by inviting the participation of multiple sponsors, startups, and other stakeholders rather than establishing exclusive sponsor-startup relationships.4

The emphasis on the strategic fit of sponsor and startup makes it more likely that a startup’s solution will be successfully adapted and integrated into a sponsor’s business.5 To achieve this, Mercedes has adopted a venture-client approach, which uses a proof-of-concept (POC) project funded by a business unit (BU).6 In this way, BUs validate and adopt startup solutions at low risk and cost, and startups receive the funding needed to develop and adapt their solutions without sacrificing an ownership stake.

To further streamline the innovation process, Mercedes grants startups supplier status from the beginning of their collaboration. This accelerates the passage of startups through the internal protocols that can slow engagement with external partners as well as the integration of the solution, if and when POCs prove out. For instance, startups are asked to sign only a narrowly tailored nondisclosure agreement, which reduces the legal friction that attends broad-based agreements. The expedited supplier pathway also eliminates some of the in-depth evaluation parameters that are designed to de-risk collaborations with established suppliers. This significantly reduces the time needed to get the collaboration started and sharpens the focus on assessing the potential of the startup’s technology.

The network effects inherent to the open CA design offer sponsors greater access to innovative solutions: Multiple sponsors attract more startups. Because multiple sponsors share the cost of running the open CA, they all save money compared with establishing individual, conventional CAs. Conventional CAs need to invest in creating a strong scouting team and in building an excellent reputation to attract the best startups, whereas an open CA shares at least part of that burden among all platform partners. Additionally, if they choose, sponsors can enhance their startup partnering outcomes by exchanging best corporate practices among themselves.

There are downsides to an open CA model too, however. As in any open innovation scheme, individual sponsors have less control over the program structure and thematic focus of the platform. Individual sponsors also do not garner as much brand visibility in an open CA as they might in a traditional CA, because sponsorships are not exclusive. To ameliorate some of these disadvantages, Startup Autobahn actively follows open innovation principles. It encourages sponsors to influence the selection of themes and technologies for each program and to share their ideas on how to organize and further improve the platform. Additionally, to compensate for the absence of individual visibility, it publicizes project successes to generate greater brand visibility for sponsors and startups.