Shaping the future together: cooperating with start-ups and scale-ups

Collaborating with start-ups and scale-ups can be an inspiring and valuable way for insurers to make even more progress in their own digital transformation journey. These upand-coming companies can provide insurers with invaluable impetus regarding new technologies, markets or business models. In turn, partnering with established providers gives start-ups and scale-ups access to sector-specific expertise, resources and networks. With the right approach, cooperations like these have the potential to boost innovative strength and competitive standing for both sides. 

How many of you still listen to cassettes, use analogue slide rules or send film cartridges away to have photos developed? Probably hardly any of you. Cassettes made way for CDs, MP3s and streaming services over the years; slide rules were replaced by electronic calculators, mobile phones and computers; if at all, people have their photos “developed” using their smartphones at self-service kiosks at the local chemist’s shop. While products and trends of yesteryear might stage a comeback every now and again, they largely remain confined to the history books.

For a company to survive in our dynamic world, it needs to constantly adapt. New markets, technologies and changing customer needs call for ongoing, proactive development. Technological advances are emerging in ever-shorter cycles in an environment where standing still is tantamount to taking a step back. No company, no matter how big, can afford to rest on its laurels. To adopt a successful position and remain competitive in the digital age, market players have to reinvent themselves time and again. This is where start-ups and scale-ups can provide key impetus.

What is the difference between start-ups and scale-ups?

These companies – whether they are still in their infancy (start-ups) or are already established (scale-ups) – are synonymous with a culture of constant change. They are the very epitome of innovation, agility and the courage to venture down new and unconventional avenues. As well as being tech-savvy, start-ups and scale-ups are exceptionally customer-centric and feature disruptive business models. In short: they are key drivers of digital transformation. This is something that insurers should exploit for their own gain.

After all, their size, structure and the established nature of their processes mean that insurers, specifically, continually come up against particular challenges when it comes to digital transformation. They are traditionally known for their consistency, with systems and processes that are geared towards stability and efficiency. Any change requires extensive planning, testing and integration, which costs time and resources. What is more, insurers have to meet a whole host of legal and regulatory requirements before they can test or use new technologies.The insurance industry is ultimately one of the most tightly regulated in Germany. This is compounded by the fact that digital transformation always comes hand-in-hand with cultural transformation, a process that also needs time and continuity.

Insurers should consider collaborating with start-ups and scale-ups to nevertheless continually receive the input they need to evolve as companies. This could prove to be a key strategy for them, because these up-and-coming companies can help insurers to offer straightforward, innovative and customer-centric solutions, introduce new technologies to relieve their employees of routine tasks and workload peaks, or introduce new solutions to boost efficiency, effectiveness or generate better growth opportunities despite the restraints imposed on them by their environment.

Testing new trends and technologies

Why? Because start-ups and scale-ups allow insurers to try out the latest trends and technologies before they launch all of the testing processes that need to be completed within their own companies, saving time and resources. If a pilot project has proved to be successful and is compatible with all of the regulations, the period required for in-house implementation, or the “time to market”, i.e. the period between the development of a project idea and its market launch, can also be reduced. Start-ups and scale-ups also allow insurers to tap into specialist knowledge that would take years to build in-house. It’s a classic “make-or-buy” decision: will a company buy a solution or develop it itself? As up-and-coming new companies have often spent many years of hard work specialising in a particular area, it would take a disproportionate amount of resources, effort and expense for insurers to develop similar products and services under their own steam. So, in many cases, the decision is a very easy one.

But collaborations don’t just benefit insurers: start-ups and scale-ups stand to gain a lot, too. Partnering with major insurance groups gives them access to a broad customer base and successfully established distribution networks on both a national and international level. This allows them to scale their business models more quickly and expand with their products or services. Start-ups and scale-ups that collaborate with insurers benefit from extensive specialist knowledge on topics from risk management, compliance and regulation to market strategies. The cooperations also give them stability and security in the long run, and also bring them into contact with other potential partners and investors, an asset that is not to be underestimated in times of economic uncertainty.

It goes without saying that both parties in a cooperation also have to be prepared to encounter challenges. These might include cultural differences or different ways of working, complex decision-making processes, regulatory requirements, different priorities or hurdles associated with technological integration. Particularly where start-ups are involved, there are specific requirements that need to be met before a collaboration can take off, including ISO certifications, valid penetration testing and data protection conformity, to name but a few. But all of these hurdles can be overcome and allow a productive partnership to flourish that delivers a boost to innovation capacity and competitive strength on both sides. ERGO’s experience has already been very positive.

Introducing: the ERGO ScaleHub

The insurer created a dedicated Innovation Strategy & Scouting unit back in 2016. The unit is constantly on the lookout for the latest digital solutions on the German and international start-ups and scale-up market so that those solutions that make the cut can be used within the Group. This helps ERGO to keep improving its products, processes and services. The insurer has already worked successfully alongside more than 80 national and international start-ups and scale-up, including Celonis, Air Doctor and Miss Moneypenny. And ERGO entered into a new cooperation only recently, unveiling its own “ERGO ScaleHub” scale-up programme at the start of this year’s Start-Up Week event in Düsseldorf. The programme sees the ERGO Innovation & Digital Transformation unit, the Düsseldorf Office of Economic Development and the community space provider TechHub.K67 join forces to offer targeted support to Düsseldorf-based scale-ups going forward. The idea is to use a whole range of services such as access to national and international expert, business and investor networks, arranging contacts for visas or providing workspaces to help German and international scale-ups in the healthcare, finance and insurance sectors to continue to grow successfully. The scale-ups are selected by the partners based on criteria such as product maturity, business model or growth potential. The first scale-up to participate in the programme, CamCom, has already been selected. The company from Bangalore, India, offers an AI-driven solution for visual self-inspection and assessment of damage to vehicles on virtually all surfaces.

ERGO expects the programme to give it even faster access to new technologies and innovations and to shorten the time-to-market. Both aspects should deliver an additional boost in the insurer’s digital transformation journey. The programme is also striving to make Düsseldorf a more attractive location for scale-ups in the future.

There are already numerous examples of how collaboration with start-ups and scale-ups can provide insurers with decisive impetus when it comes to developing products and services that are in tune with the times. Up-and-coming young companies can shine a spotlight on trends and developments long before they appear on the horizon. This can, in turn, be exploited by insurers to secure competitive advantages and efficiency gains. Start-ups and scale-ups give insurers a continual supply of renewed vision and strength as they move towards the future, a future that they shape together.

Text: Mark Klein, CDO ERGO Group AG