Few large conglomerates got to where they are without some M&A activity. Thomas Kostka is Head of Corporate Venturing at German chemicals group ALTANA. He has extensive experience thinking about where M&A with startups fits most strategically into corporate strategy and growth, especially as the #SustainabilityTransition becomes an ever-greater challenge for industry.
In this video, Markus Moor picks his brain for key insights into startup-corporate collaboration:
- Make sure the initiative is aligned to future growth pathways of the company. This could relate to existing business lines or sit in adjacent markets the conglomerate wants to break into.
- Make sure to understand the entire landscape of potential players in the field, to ensure you’re picking the right partner.
- Link back to the bigger picture—fostering a culture of innovation that can help the firm contribute to a greener future.
Transcript:
Markus Moor:
Hello, and welcome to this conversation hosted by Emerald Technology Ventures. Today’s episode is focusing on startup collaboration and how it supports the impact on open innovation. I’m Markus Moore partner with Emerald Ventures and I’m joined today by Thomas Kostka. Thomas has seen it all. He’s been on the startup side. He has had multiple different roles in big corporations, mainly chemical corporations.
Markus Moor:
You’ve worked in business units, led operations. You led for the last 10 years, mainly at the intersection between external technology and internal needs kind of trying to build a bridge. You’ve been with Henkel in that role you have now for the last year led autonomous technology or corporate venture unit. So you’ve been in kind of all the different positions. So welcome today for this I’m sure interesting discussion. Before we dive into questions, maybe you want to share a bit what Altana is looking for when they collaborate with startups?
Thomas Kostka:
Thanks for having me. We look basically for technology that we would or could not develop ourself, but where we see a strategic fit, basically fueling our growth aspirations for future business. And that could be new materials. Advanced materials, chemicals in principal we’re a specialty chemical company, but it also could be around new business models or digitalization where basically new business models come to play, these kind of things.
Markus Moor:
Right. Now, as I’ve said, you’ve seen it like 10 years at this intersection of startups and big corporations. What is your number one lesson learned? What can go wrong?
Thomas Kostka:
What can go wrong?
Markus Moor:
Or lesson learned? [crosstalk]
Thomas Kostka:
Lesson learned? I would probably have two points. One is basically the question where to play. I mean, how do you define the topics that are of interest and the other one is basically with whom to play, right? So to the first point, you need a strategic alignment on the future growth topics of the company. And that obviously isn’t something you can pull off instantaneously. This is an alignment process, but for example, at Altana, we have two kind of search fields. One is very close to the operating businesses, basically directly hooked onto the strategic plan of the business units, where they want to grow. And I can support that with external ideas. And the other type of search fields is in adjacent markets or in new markets, like 3D printing, printed electronics. And if you have an alignment about those kind of topics, that’s the entry ticket that you know what you’re doing.
Markus Moor:
That’s actually what we hear from a lot of people. You have to build this alignment on the strategy, otherwise you’ve probably lost from the beginning.
Thomas Kostka:
And the second point is basically, I mean, nothing against an opportunistic approach when an opportunity is there, but in the end you will always ask yourself, do I work with the best partner for the given challenge? And to answer that kind of question, first of all, you have to know what are the players in the fields, right? And then you can make your choice or have basically a discussion what approach would be the best to make. And this is where basically the partners in an open innovation system then also are very valuable, just like Emerald helping us with deal flow, seeing not only one startup, but having the sector knowledge and what other startups are in that same kind of plane.
Markus Moor:
So if you have your strategy kind of tied down, you’ve found partners, or you’ve found a partner which you like, you want to explore. The next step is finding the right home within Altana. Not just the right home, the right anchoring point, the right team, the right people, the right champion to actually work, to make the collaboration successful. What are your considerations when you think of who should work with that startup internally?
Thomas Kostka:
I think it goes a bit back to the point of the search field theme. Because if you start that discussion from scratch at a given opportunity, then it’s like you have to have the underlying strategy piece in place for that. So for example, if it’s something that is very close to the operating business, that’s an extension of a product line where they see time to market in half a year or a year max, then it’s a product development unit in an operating business.
Thomas Kostka:
If it’s for a topic that is related to 3D printing or printed electronic, where we talk maybe about a couple of years longer, patience you have to have, then the operating business is definitely not the right partner. So you have to have a sponsor more in a corporate function in R and D in a team there.
Markus Moor:
So you give them quite some consideration to make sure you have the right place at the right time.
Thomas Kostka:
Exactly. And that is part also of that preparing discussion, how do you want to play this strategically? So which topics do you want to play and then it’s also already like half of the answer to your question with whom internally you will set up this kind of corporation.
Markus Moor:
Then ultimately to move it forward, it needs people, right. And the people need to have the right motivation, the right incentive. Beside more extrinsic factors, monetary factors, do you see intrinsic motivating factors which are important for people or employees today to play that champion? Or how do you motivate the people to move it forward?
Thomas Kostka:
I would, first of all, say Altana has a very good innovation culture. There is for a chemical company, really a 7% plus spending of revenue in R and, which is pretty high. So there is an innovation angle basically to all the projects we are doing anyway, but people like to move things forward, see the new products, supporting our customers in the market. And so I think there’s an intrinsic motivation just to do something innovative and obviously sustainability, circular economy also play a very big role because we’re all aware that society is changing dramatically right now, because there is pressure on all fronts to… Well, we’re just aware we can’t continue how we did continue the last decades of handling resources on this planet.
Markus Moor:
Yeah. So it’s a good purpose.
Thomas Kostka:
Absolutely.
Markus Moor:
It fulfills a good purpose.
Thomas Kostka:
And basically every project we do has an angle on sustainability.
Markus Moor:
Sometimes, or when you look at why certain collaboration projects fail, what people also often mention is very simple things like missing time and missing budgets. Do you have ways to overcome this from the very beginning?
Thomas Kostka:
Well, I wish I had a silver bullet there. Actually, the one thing and it goes back to that strategic alignment topic, if you have that search fields, that strategic commitment for topics where you hope to have over proportional growth, then you might have also a chance to have a bit of over proportional patience in, that kind of time and money discussion. If you hop on an opportunistic corporation opportunity and build the strategy as you go you might not find that kind of patience.
Markus Moor:
And moving on to the types of… We now looked at a single project, where to anchor it, how to move it forward, how to incentivize people. There’s a broad variety of different types of innovation, business, small product process, and so on, do you see that certain types are clearly simpler to make a project successful? Or do you see that it’s simpler with maybe more mature startup companies or even the other way around with earlier stage companies?
Thomas Kostka:
Well, in principle, every big chemical corporation has an M and a history, right? So the closer you are to the market, the easier the project becomes. So if a startup is very close or actually with first revenue already in the market, then it’s clearly easier to mitigate the obstacles internally than if you start with a very early project.
Thomas Kostka:
On the other hand, an early startup for us, it needs to have the potential to become a technology platform. So a platform that goes then in not only one application, but in multiple application ideas and there it’s always good to be early in the game because you need to prove yourself as the right strategic partner. But that’s obviously also internally, I mean, the longer project goes the more justification that you have to deal with.
Markus Moor:
So there’s lots to do, especially with sustainability and sustainability, transition, energy transition, circular economy. If we would be sitting here in 10 years from today, what topic would we discuss then?
Thomas Kostka:
We would probably look back and be amused about all the opportunities we didn’t see coming. All the startups, the new ideas, the things that came into existence that we didn’t think of.
Markus Moor:
So we should think harder.
Thomas Kostka:
Exactly.
Markus Moor:
Well, thank you very much for the discussion today and thank you to the audience for listening in. Thank you.
Thomas Kostka:
Thanks for having me.
Markus Moor:
Thanks, Thomas.