Cultivate the Seeds of New Businesses from Inside and Outside the Company
Interview with DAIKIN Technology Innovation Center CVC Office
Daikin Industries, Ltd. (hereinafter “Daikin”), a leading global comprehensive air conditioning company, continues to innovate and create new value in the fields of clean air and environment. In order to integrate internal and external wisdom and technology, Daikin established a CVC Office in the Technology Innovation Center (TIC) in 2019 as an organization to promote collaboration with startups with an investment budget of 100 Million USD in 2019. Plug and Play Osaka interviewed 2 Champions* about Daikin’s efforts to accelerate co-creation with startups by joining Plug and Play Osaka as a Founding Anchor Partner in 2020.
Mr. Mitsumasa Okada (photo at left)
After working in the Air Conditioning Sales Division, Global Operations Division, and Corporate Planning Department, he assumed his current position at CVC Office in May 2020.Ms. Haruka Kinoshita (photo at right)
After working at TIC and Daikin Open Innovation Lab Silicon Valley (DSV), she assumed her current position at CVC Office in August 2020.
＊What is a Champion? — Representative of the corporate partner, who participates in the accelerator program provided by Plug and Play Japan. As the contact point for the program, champions take charge in business matching between startups and business divisions such as exploring collaboration needs of business units, and being in charge of PoC project management. Usually, two champions are selected from each corporation.
“Searching, Connecting and Nurturing” — Three Steps of the CVC Office
— Could you tell us about the activities of the CVC Office?
Mitsumasa: In the CVC Office, we are engaged in 3 main steps: searching, connecting, and developing. We are involved in the search for startups, investment, coordination of collaboration with business units, and business promotion.
— How do you look for startups?
Haruka: We mainly search for startups that can introduce or co-develop technologies and solutions to solve current internal issues raised by business units, but we also value serendipities where we can find unexpected new synergies.
Specifically, we use Plug and Play Japan’s DealFlow* to request the sourcing of startups that possess the specific technologies and solutions we need to solve our internal issues. At the same time, we participate in accelerator programs* and external events or co-host events with VCs in search of encounters with startups that create unexpected new synergies. As for the various support organizations that facilitate encounters with startups, we have access to Leave a Nest, which has strengths in R&D and deep tech, Plug and Play, which has an extensive global startup network, and other platforms with different areas of expertise. We also have an industry-university co-creation agreement with the University of Tokyo, so we utilize information on university startups and technology seeds.
*What is DealFlow? — Plug and Play researches and selects a number of startups to meet the individual needs of our corporate partners and then arrange 1-on-1 meetings with these startups.
Mitsumasa: In terms of internal network, we have a network called “aVentures,” which is a network for sharing venture information among internal volunteers. We can easily chat, exchange opinions and gather information on the startups or technologies we are looking for. We also get information from DSV (Daikin Open Innovation Lab Silicon Valley) in Silicon Valley and from our overseas team in Shenzhen.
How to connect startups in Daikin
— How do you coordinate information with business units?
Haruka: I conduct interviews with each business unit, including sales, production, logistics, and services. Basically, I make proposals for areas where there is potential for startup collaboration in each business division, in line with the nine key strategies set forth in FUSION 25, our mid-term management plan for 2025. In addition to this, I also approach business units that are in need of digitalization and gather information by utilizing my connections with the departments I have belonged to in the past.
Mitsumasa: From the perspective of “connecting” with business units, TIC, our core technology development base where the CVC Office is also located, plays a very important role. TIC is home to engineers not only in the air conditioning field but also in the chemical and information communication fields, and we can collaborate with them on a daily basis. Our engineers were originally dispersed in several locations such as Shiga and Sakai in Osaka, but the TIC enabled us to gather engineers in one place and the TIC functions as the control tower of technology. Thus we are able to accumulate the knowledge within the company which I find is a unique factor to promote open innovation.
Haruka: It is true that the office environment is designed in a way that makes it easy to talk to each other in terms of the infrastructure, such as the lack of partitions and airy space design, but I also feel that the collaborative environment has been created thanks to the mindset of the people who gather at TIC. Since the establishment of TIC in 2015, we have been actively collaborating with major companies and universities, thus many people here are open to exchanging opinions with outsiders, and many people are not afraid to start something new. Because there is no need to explain or persuade people of the significance of promoting open innovation, we can smoothly share information. As the next step, I feel that it is also essential to create a culture of open innovation in the business divisions outside of TIC in order to link innovation to business results.
Mitsumasa: From the perspective of raising awareness within the company, we have an activity called COIN (Channel of Open Innovation News), which is an online distribution channel for all Daikin employees to learn about internal and external collaborative creation at TIC and the CVC Office. More than 100 employees, including executives, participate in the event every time, and we sometimes connect with new people in charge of business divisions through the Q&A sessions or by receiving emails after the event. Even within the company, it is difficult to see what kind of activities the CVC Office is engaged in, so I try to touch on actual situations that are not disclosed to the general public. For example, we invited the CEOs of WASSHA and Baridi Baridi to share the real situation in Tanzania about the collaboration project with WASSHA, which led to the establishment of Baridi Baridi Corporation, a joint venture company in Africa that sub-subscribes to air conditioners. We sometimes invite people who are involved in collaborative projects as lecturers, so it seems that we can also cultivate our culture* through Plug and Play Japan.
＊Culture cultivation through Plug and Play Japan: An initiative for fostering a corporate culture that promotes open innovation. Open innovation seminars, new business ideation, and advanced technology study sessions are held individually according to the internal needs of corporate partners. In the case of Plug and Play Osaka and Daikin, a workshop was held in August 2020 on the theme of Improving Business Development Capabilities Based on Customer Issues in the Healthcare Field.
The perspective of “nurturing” is not limited to startups
Mitsumasa: Some medium-to-long-term issues need to be solved not only through individual collaboration with startups but also in cooperation with multiple major companies. I would like to maintain a balance between our efforts with current businesses to solve current problems and our initiative in addressing medium-to-long-term issues in the CVC Office.
Haruka: Management expects the CVC Office to actively explore and promote carbon neutrality and other environmental fields. I would like to build up an awareness of “nurturing” and “growing together” while maintaining the image of a consortium-type collaboration. Personally, I think this approach of “nurturing” is the most important.
— Please tell us about your investment scheme and post-investment communication.
Haruka: There are two main criteria for investment decisions; (1) When we are already collaborating with a startup and decide to invest because we expect fast growth. (2) when we invest in a startup based on expectations for medium-to-long-term future business synergies.
In either case, we carefully report on the synergies expected, the business plan, and the background of the investment, etc. In the year and a half since the establishment of the CVC Office, we have invested over 3 billion yen in more than 10 companies.
Examples of (1) accelerated collaboration include Fairy Devices, with which we are collaborating on DX in the field of air conditioning, and OCSiAl, with which we are collaborating in the chemical business and in which we recently invested. A good example for (2) is Locix, a startup with high-precision location detection technology that can help us long-term.
Regarding communication with startups after investment, in addition to following up on collaborative projects, we also try to share updates on our own company, such as Daikin’s vision and medium-to-long-term strategies. In addition, since opportunities to meet directly with startups have been decreasing recently, I like to place importance on soft communication, such as sending congratulations on the anniversary of the startups’ establishment or at milestones in their business.
Mitsumasa: Investing in a company is just the beginning, so I think it is important to set goals for how we should set and achieve subsequent milestones.
Future Prospects
— Looking back on the activities of the CVC Office so far, what would you like to work on in the future?
Haruka: Currently, there are four of us in the CVC Office, and we are naturally dividing our responsibilities into different areas, such as business unit promotion, overseas operations, and environmental technology.
Mitsumasa: Last year, while experiencing the full range of investment operations, I thoroughly conducted interviews with business units. This year, I am focusing on the projects with business units while making use of the information I have obtained so far. My goal is to create new businesses with startups while increasing the number of business unit members engaging in co-creation.
Haruka: I am mainly in charge of investing in overseas startups. Investment in overseas companies tends to become medium-to-long-term projects, I tend to oversee multiple projects at the same time. We used to require face-to-face meetings before investing but now, due to the impact of COVID-19, we mainly consider investments through online interviews. Since I cannot meet with startups in person, I try to visit their website and read about them as much as possible, carefully listening to their needs in order to provide support to help them build a trusting relationship with the business units.
When we introduce startups to the business units, I believe that we should play a key role in communication support, such as carefully explaining the reasons for our recommendation and replacing the technical terms of overseas startups with words that are easy for the company to understand. As a result, we have received consultations from business divisions and have been invited to meetings with external parties, and we are gradually seeing an improvement in the recognition of the CVC Office and its cooperative system. I hope that we can create opportunities to promote a wide range of external collaboration by continuing to communicate carefully.
（Translation: Doina Zavulan, Intern at Plug and Play Osaka）
Japanese version of this article is available from below link;
https://note.com/harukaichikawa/n/nc87c38dd7f1e
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