INNOVATION IS MORE THAN EUREKA

After 13 years, the Daimler Group sold its innovation platform Lab 1886, from which ideas such as Car2go or the apps Moovel and MercedesMe had emerged, in December 2020. From Stuttgart, Berlin, Beijing and Atlanta, up to 180 employees had worked on digital mobility services. In future, the group will focus again on its core business, the construction of luxury cars, as desired by CEO Ola Källenius.

Entrepreneur Dietz converts Daimler Lab into a start-up accelerator

So is the Daimler case an indication that digital labs are no good for developing innovative products and services outside the core business? Ulrich Dietz provides answers to this question. The seasoned Stuttgart entrepreneur once founded the IT service provider GFT, which generated a good 444 million euros in 2020 with just under 6,000 employees, and bought the innovation lab from Daimler for a high double-digit million sum.
Top 500 company profile for Daimler

Dietz knows that it takes time for an idea to become a marketable product: "It often takes years before this product can generate significant sales and profits. Many companies lack this patience." When a lab is founded, the euphoria is great, and many only see the eureka moment: "Smart people put their heads together, and suddenly a new product is there or a new business field is opened up. But that doesn't correspond to reality.

From the idea to the start-up

In reality, the Daimler Lab therefore became the company 1886 Ventures. The new name indicates the changed orientation. It operates as a technology holding company that deals with future technologies and brings them to market maturity. "Entrepreneurship is moving to the centre, the Lab idea more into the background," says Ulrich Dietz. On its campus in Stuttgart, 60 experts work together, coming from Daimler but also from GFT.

The interdisciplinary team, which combines IT and mobility know-how, focuses on two main areas. First, it advises other companies on idea generation and business innovation. "These can be companies that already have a so-called Digital Lab today or those that want to set one up," Dietz explains.

On the other hand, projects that have gone through a ten-step process are to be spun off as separate companies. This process includes, among other things, brainstorming, designing the product, analysing the market, working with initial customers, building prototypes or finding external investors. According to Dietz, this venture phase can be compared to a start-up accelerator.

The projects that Dietz's team has taken over from the Daimler Group are also to be pursued and developed further. Some of them are already in very advanced phases and also in prototype status. One example is fuel cells that generate electrical energy from hydrogen and can be used to power small vehicles such as forklift trucks. The newly founded company Globe Fuel Cell Systems GmbH has already been formed for this product.

Expectations of digital labs are too high

For Dietz, the reason why some companies have such a hard time with digital innovation over time after a hopeful start is also due to expectations that are too great and too different that are associated with such an organisational unit: "In reality, people often forget to ask themselves at the beginning: What do I actually want to achieve with the digital lab? How do I define its success?" The latter can have very different connotations. For the people working in a digital lab, the very idea for a new product often represents success, while the other departments of the company have completely different expectations.

"The organisational structures and mindsets of the two sides are very different, as is the speed of decisions and subsequent implementation," Dietz sums up. At 1886 Ventures, he and his management team, which also includes Susanne Hahn, former head of Lab 1886, and Kai Siebert, previously chief controller at Daimler, pay attention to an open culture: "We ask questions and bring together different competences: IT experts and mobility experts cross-fertilise each other."

EagleBurgmann relies on a mix of experienced and young employees

Before the Wolfratshausen-based machine manufacturer EagleBurgmann set up its digital lab, CIO Tobias Lange paid attention to certain parameters. In the lab, the company relies on a mix of experienced and young employees from different disciplines. "The Lab is part of our organisation, not too far away in terms of space either, as we see the strong dovetailing with the core organisation as a basic prerequisite for success," says Lange.

The interdisciplinarity is also reflected in the leadership: Lange heads the organisational unit with Matthias Schmitt, who represents the business side as Vice President Strategic & Digital Business Development. Schmitt is convinced: "The most effective transformation of our digital product roadmap will only succeed with a strong interlocking of the specialist departments involved." Product management, sales and IT worked hand in hand from the very beginning; digital product development requires close integration with the IT landscape.

The subsidiary of the Freudenbergs Group generates sales of 850 million euros with almost 6,000 employees worldwide and produces mechanical seals, which as critical components in pumps are often monitored with sensors in order to avoid failures and thus production downtimes. The goal is to develop digital products in the lab at the interface to the customer that go beyond the classic portfolio and bring added value to the customer.

Is there a market for the product?

According to CIO Lange, one must always ask oneself whether there is a market for this. As a seal manufacturer, EagleBurgmann is only one of many manufacturers for operators of large industrial plants. "With smart seals whose operating status can be measured and checked via sensors, we want to acquire the 'right to play'," says Lange.

Realistic expectations of a digital lab are just as important as setting a certain direction, he says. For each sprint, it is important to think about what and where you want to go. "Before building a house, I also have to decide whether it will be a family home or a factory building," illustrates Lange. It is important to prevent employees from jumping on every technological bandwagon. To prevent defocusing, you need a balance between agility and proven methods.

Customer portal with overview of purchase and service contracts

In a roadmap, EagleBurgmann set out its goals for three years: In addition to smart products, a portal for customers is to be built. They should be able to see at a click which operating status a seal is in, but also have an overview of purchase and service contracts. "We want to link the commercial information with that on the operating status," explains CIO Lange.

Another success factor for the lab is that all new developments comply with governance structures and that security and data protection are considered from the very beginning. In addition, one has to ask how digital services, such as the service portal for technicians, can be integrated into the backend architecture, the PLM and the SAP world. It should also be clarified who will operate the solution or provide support for the customer. However, the CIO still sees this task in the area of classic IT.

Copper producer Aurubis relies on innovation laboratory

The Hamburg-based copper producer and recycler Aurubis, which generated revenues of € 12.4 billion with about 7,400 employees worldwide, has the claim as European market leader to also be a pioneer in the digitalisation of processes, production and business models. "Especially with regard to digital business models, customers expect more from us than we have offered so far," admits Marcus Sassenrath, Vice President IT. It is true that the rest of the industry is not far away digitally either. But that didn't stop Aurubis from founding a Digital Innovation Lab outside the plant premises. Here, work can and must be done methodically differently and faster.

With Sassenrath, Aurubis has brought in an IT boss who had already built up a creative workshop at his previous employer BPW Bergische Achsen and was awarded a prize for it in the "CIO of the Year" competition. For him, interdisciplinarity is also a basis for successful innovation. The seven-member team includes IT specialists, methodology professionals and experts in customer relations and purchasing.

Innovation process in five phases

The innovation process is divided into five phases: The idea generation is followed by customer interviews and initial mock-ups, and then the prototypes. These then develop further after renewed feedback into Minimum Viable Products (MVPs), which are already ready for use in a limited environment at the customer. Then the decision is made to invest in a scalable, complete product. This is the handover point to IT, which takes care of development and then support.

In Sassenrath's experience, it is crucial to continuously show the board the progress of an innovation lab: "Management support is one of the four most important success factors in my eyes." The other three parameters, he says, are the right team, the agile approach and the close connection to internal customers such as purchasing and sales as well as external customers.

Virtual workshops with clients

In the Innovation Lab, Aurubis wants to find out what digital services customers want and what they could look like in concrete terms. "We are no longer in the high-flying phase of digitalisation, but are grounded to earth today," says Sassenrath. In the case of Aurubis, this attitude is expressed in regular virtual workshops with customers. In such formats, customers contribute ideas, but also their feedback, so that concrete, realisable digital services can be created. "They think that's great," says the IT boss.

The fact that digital labs sometimes don't work so well in companies is also due, in Sassenrath's eyes, to expectations that are too high: "Apples are not compared with pears, but with screws. Often, only one department in the company is allowed to make mistakes: in a research and development department, it is learned that experiments are carried out, that only some of the projects also lead to success, i.e. become process innovations or marketable products. "Innovation labs must be compared with R&D, not with IT," Sassenrath demands. In contrast to a research department or a digital lab, IT must always deliver, because otherwise the company will stand still.

In front is where no one knows their way around

Whether EagleBurgmann or Aurubis, many companies operate in an engineering-driven environment. What counts here is what is predictable and plannable. "But innovation doesn't happen if you always stay where you already know your way around," Sassenrath points out. You also have to venture boldly where not everything is clear, known and practised, where there is no blueprint, no best practice. "The front is where no one knows anything! If I know my way around everything I do, then I'm not in front," was the Aurubis manager's conclusion.

This article was originally posted by CIO