How Corporations and Startups Should REALLY Collaborate

Large corporations are engaging with the early stage startup community as a means to innovate and obtain results that their process driven companies alone could never achieve. However, corporate engagement with the startup community is often criticized. The motivation behind such engagement can get clouded. What’s the end goal? Is it to obtain good PR with little actual innovation or end value? Or perhaps a publicity stunt in order to stay relevant? A casting call to attract new talent, or worse, a last ditch effort at staying “cool”?

But at SAP.iO, the focus is on the right objectives.

SAP’s origin is textbook startup: a team of 5 genius founders, a crazy idea, a big leap of faith, and a commitment to technology and innovation before either was made cool by men wearing turtlenecks and hoodies. The only anomaly? Location, this story was not set in the Valley. SAP was born and raised in Germany, where function over style reigns supreme, where 9:01 a.m. is already too late. SAP.iO is an initiative bringing back the spirit of SAP’s founders and looking to lead innovation by partnering with the brightest entrepreneurs.

A commitment to innovation grounded in vision and strategy is the driving force behind this multifaceted effort, which encompasses 4 accelerator programs (Foundries) in San Francisco, New York, Berlin and Tel Aviv, and a $35 million fund to support innovation ecosystems around the world.

Who better to address the strategy implications and reveal the real reasons behind SAP.iO than SAP’s Chief Strategy Officer, Deepak Krishnamurthy, who is a New Yorker, runs on five different time zones and despite being one of the busiest people in the world still made time to have a one-on-one candid chat about why “Getting SAP.iO off the ground has probably been the proudest accomplishment of [his] career.”

Q. What is SAP’s goal for the SAP.iO Foundry accelerators? How much of the internal focus is about PR vs. actual innovation?

A couple of years back when we were looking at our 2020 strategy, one of the things that jumped out was how SAP has been successfully transitioning our apps to the cloud. It also became clear that one of the biggest things that we still needed to do was to carry out a similar transition to the SAP platform.

For SAP to become the most innovative cloud company powered by HANA, we had to introduce a whole new ecosystem on SAP’s platform. Now, this could be powered by SAP’s technology, APIs and the data that is sitting inside of SAP’s applications and technologies such as HANA and Leonardo.

So we asked ourselves, “if it’s going to be a key element of success for us longer term: how do we go about building out this ecosystem?”

There are two ways to build an ecosystem: doing it organically or doing it in a way that is a little bit faster and a little bit more hands on. Organically, it would have taken us 5 years to build so we decided on a more hands-on approach through the SAP.iO Fund and Foundry. We can’t invest in hundreds of startups each year but we can incubate hundreds of startups in the Foundry locations.

Long story short, the intention was never about PR, but has always been about: ‘how can we create value for our customers?’. Having startups that can build on the power of SAP data, APIs and technology, can expand the value of SAP to our customers. That is the intent and that’s what we’re trying to do.

Q. But why now? By comparison to other corporates SAP is a relative latecomer to the startup engagement game.

That’s very true. We could’ve launched sooner, but it had to fit in with the strategy. It goes back to plans to build a whole integrated platform and a thriving ecosystem. By tying this closely to our corporate strategy and tying this to our innovation vision, we made sure that this is the right timing.

Q. An Entrepreneur news article criticized corporate programs, stating that “they can force companies to focus development on areas that benefit the parent company more than the startup itself.” How is SAP.iO avoiding or mitigating that? What’s is the corporate agenda and in your opinion how can startups and corporates work together to create mutual value through accelerator programs?

We wanted to make sure that doesn’t happen in SAP.iO. We are explicit in stating that we will be open for the startups to build on SAP technology but we are not going to force any of them to build on SAP HANA or any other SAP platform. Now, if they believe that SAP’s cloud platform or Leonardo is a good fit for what they want to do, we will actively encourage and support them. At the same time, we will still work with them, help them, encourage them and be supportive even if they are building on other platforms. The whole reason behind why we are doing this is: we want to be OPEN. We want to be a player in an ecosystem that’s a lot more heterogeneous. And we want to ensure that we support the startups with whatever technology they chose to work with. This was the motivation of the program from the get-go and we want to stick to it.

Q. How are SAP’s core values reflected in its startup investments and accelerator philosophy?

It’s something that we don’t speak much about and would rather ‘do than speak’. What we are trying to do with SAP.iO is aligned to SAP’s Vision: to help the world run better and improve people’s lives. Now I know this sounds like an empty tag-line, but what it actually means is that we want to be able to impact the world across three dimensions.

First, we want to help the world’s economy by creating jobs and by helping people to learn new technological skills. We want to help both technologists and people that are not usually served by technology. We want to help those people learn new technological skills and we also want to be instrumental in increasing the diversity in the workplace.

Second, we want to do a lot in terms of impacting society, be it in improving healthcare by personalized medicine, or by building sustainable or smart cities that are going to reduce carbon emissions and improve the lives of people living in them.

Finally, we also want to impact the environment by driving sustainable sourcing and enabling lowered carbon footprints in supply chains.

This is the impact that we want the products and technologies we are building to have.

Vision behind our strategy is paramount. We want to make sure that we execute innovation. We want to help the world run better and SAP.iO will be instrumental in delivering both on our Vision and Strategy.

Q. But how does that specifically translate to SAP.iO?

(Deepak is hesitant, he is obviously more of a doer than a talker and would much rather have SAP.iO’s accomplishments speak for themselves but I press on — eager to understand how corporate vision and strategy align. How words become facts and how annual goals become real life change.)

Now clearly women entrepreneurs are particularly challenged in the industry. The number of studies about Silicon Valley and the world show that women entrepreneurs find it harder to raise money and go public. It’s a known fact in the industry and it’s part of the problem for women in tech in terms of getting to top management jobs and becoming tech CEOs and that’s also represented in women-led startups.

(I was not expecting this. The troubling news about women in tech have not been promising this year. The scandals erupting right and left made them a recurring topic on blog posts, panel discussions and conferences but usually the issues boil down to HR practices and policies and not necessarily corporate strategy. So for the CSO of a multinational corporation to have that on his mind and part of vision for the whole ecosystem is unexpected. He points to the facts.)

2 out of the 6 investments that we made so far are led by women CEOs, (the companies have not yet been disclosed publicly).

All of the 7 participating startups at the San Francisco Foundry summer cohort have a woman cofounder. 6 out of the 7 have a woman CEO. This is a big focus for us…to make sure that we support women entrepreneurs in the ecosystem. It’s something that we’d like to do more in EMEA, through our Berlin Foundry. That’s what we want to do. That’s what we’re going to do.

Q. Who, in your opinion, is a credible start-up advisor? And how does SAP’s team of experts/mentors reflect those qualities?

Different types of startups need different mentors. The kind of startups that we are attracting in the Berlin Foundry are typically first-time entrepreneurs and founders. They probably have a great idea, and a great product. Where they need help is: focus. Most startups die before they reach from zero to a 100 EUR. We want to help support the startups to go and get their first revenue. Some mentors can help the startups find product market fit, and more than that, find focus, and reach a specific customer market segment.

You can’t typically launch something and run a SEO campaign, or a social media ad campaign to get people to use your product in the enterprise market. That works in B2C but B2B it’s a little bit harder. You need to understand which customer segments you need to sell to and to start focusing on future customer acquisition which might be limited given the size of your niche industry. You also need to figure out a sustainable business model and a go-to market strategy. A mentor can play a big role in helping explain the industry dynamics. Let’s say you’re in the industrial machinery field, or B2B electronics, or B2B automation, all of those segments need a high level of industry specialization and mentors can provide a lot feedback around sales and marketing. This is an area that startups don’t typically have a lot of experience in.

We help the startups solve complex challenges: How do you sell effectively? How do you go to market effectively? How do you build up an effective sales force? Those are all areas where experts at SAP and SAP’s long list of partners can help.

Q. Do you think women entrepreneurs need specific help?

Women entrepreneurs probably need the most help when it comes to raising money. I think raising money is something that’s important for all entrepreneurs, but it is also a place where women entrepreneurs specifically have been probably a little bit more challenged, just because there are fewer women VCs, and have experienced documented difficulties in raising Angel Funding or Seed Funding. With the SAP.iO Fund, we are starting to build a strong community on the VC side. We don’t just want to co-invest, we are also bringing a lot of the VCs to the Demo Days and making it our priority that the startups within our ecosystem are making the right connections.

Q. What are the immediate benefits to the entrepreneurs? What are the benefits to SAP?

In the enterprise space, the focus of startups is very diverse. Whether they focus on infrastructure, data platforms, or machine learning and intelligent enterprise, the biggest challenge that many startups face, is getting access to the right data. By building those accelerators across the different Foundry locations, we are enabling founders to work with SAP technologies and get access to SAP data (through APIs). As a result, startups can actually build smarter and better products that can add more value for our joined customers.

The value of the initiative goes both ways for the startups and for our ecosystems. SAP.iO startups can deliver immediate value to our customers without the need to go and build complex integrations. SAP customers get access to innovative solutions from these startups. That’s the differentiation factor these startups have from connecting to SAP’s data source, and having access to proprietary APIs.

Q. What do you think should be the focus of startups within the SAP.iO accelerators — innovation culture or commercial viability?

I don’t it’s not ‘an either or’, it’s an ‘and’ answer. You need to have the innovation culture and you need to have the drive. You need to be able to do things faster and at the same time innovative. Without commercial viability, you are not going to be successful. We’re looking for startups that can come in and have an innovation culture, commercial viability, plus a focus on customers.

Q. What is your formula for success? Can it be applicable to both startups and big corporates?

My formula for success: whatever you do, be the best at it. Make sure that you have passion for it. It has nothing to do with large companies or small companies. If you’re the best at what you do and you have passion for it, then things will fall in place.

As we are wrapping up the interview, we realize we ran 15 minutes longer than scheduled. Deepak needs to jump on his next phone call but not before remarking that in addition to his exhilarating day job of running strategy for SAP, he is continuously energized by his night job: running SAP.iO Fund & Foundry.

Getting SAP.iO off the ground has probably been the proudest accomplishment of my career and I look forward to taking it to greater heights.*