Pathways to (digital) innovation

This article has been translated for your convenience using machine translation. Reasonable efforts have been made to provide an accurate translation. The official text is the German version of this content.

Digital innovation thrives where companies create the right foundations for ideas to emerge. This can mean structures and freedom for employees to explore new approaches. When people feel safe, valued, and supported by a culture of learning from mistakes, innovation processes can accelerate. Another path is building partnerships or joining networks such as Maschinenraum.

The Mittelstand holds enormous potential: loyal employees with years of experience, close customer relationships, and entrepreneurial spirit. The key lies in choosing the right pathways to unlock this potential. In this article, we highlight some of those options.

1. Intrapreneurship: innovation from within

Intrapreneurship means employees become entrepreneurs inside their company. Internal programs and workshops provide opportunities to develop and quickly test ideas. Incubators and labs add coaching, resources, and access to experts. The advantage: companies combine the agility of a start-up with their own resources while leveraging their established market position.

2. Internal innovation management structures

Innovation shouldn’t be left to chance, structures make it repeatable. Examples include idea platforms, pitch days, or internal accelerators. Equally important are dedicated spaces for creativity. A well-known example is Google’s “20% rule,” allowing employees to spend one day a week working on projects they believe will benefit the company.

Another approach is allocating targeted budgets for pilot projects. Incentive systems also help, whether through bonuses, recognition, or career opportunities. This way, innovation becomes a natural part of daily work.

Companies can also open up projects internally, inviting employees from unexpected areas to contribute ideas. Instead of relying solely on R&D, innovation can also come from legal, customer support, or quality assurance teams.

For details on the programs we run at the Possehl Group, see our article on Open Innovation.

3. Spin-offs and new business models

Not every idea fits the core business. In such cases, internal start-ups or spin-offs can provide the answer. With company builder approaches, new digital business models can be developed and tested quickly. The advantage: risks and volatility are separated from the core business, enabling companies to explore new markets more flexibly. One example from our own experience is the spin-off of Possehl Digital Services GmbH.

However, this approach isn’t feasible for every company. Spin-offs come with challenges: smaller Mittelstand firms may lack the talent or expertise to build and support start-ups effectively. They also require investments and clear governance to ensure resources aren’t stretched between the core business and the new venture.

4. Innovation partnerships

Collaborations with universities and research institutes provide access to emerging technologies. Cross-industry networks such as Maschinenraum or Possehl’s own cluster ecosystem foster knowledge transfer and offer insights into the innovation processes of other companies—valuable for benchmarking.

Start-up collaborations are another effective tool, ranging from pilot projects to equity participation. Together, these create an ecosystem that accelerates innovation.

5. Investing in digital innovation

Companies can also drive innovation through targeted investments. By taking stakes in start-ups or venture funds, they secure access to new technologies and markets. One example is Possehl Digital: we invest in fields such as artificial intelligence, cybersecurity, process automation, and our digital factory, with the goal of bringing innovation both into the Possehl Group and the wider industrial SMEs.

Conclusion: finding the right mix

There are many ways to foster digital innovation: from intrapreneurship and internal structures to partnerships and investments. The most successful companies are those that find the right mix for their strategy, culture, and market environment. Culture plays a decisive role here. Only companies that actively embrace innovation and create the right structures will truly unlock the creativity of their employees. In this way, innovation becomes part of the corporate DNA rather than a matter of chance.