Current Director, Co-Pace, the start-up of Continental
Yaron is currently a Director at Co-Pace, the start-up organisation of large tier-1 auto supplier Continental. Co-Pace’s role is to drive innovation and change within each of Continental’s business units through partnerships or co-investment opportunities with automotive start-ups. Yaron previously worked at Delphi Automotive and was a Director at private-equity firm ZZ Capital where he was responsible for sourcing Israeli-based start-ups. Read moreView Profile Page
Can you provide a bit of context into the mission and structure of the Co-Pace model?
Co-Pace was formed two years ago because Continental understood they could be doing a much better job with start-ups. It’s not only the initial engagement but the whole process. You can’t treat a start-up as a regular supplier in day-to-day negotiation. You have to be more swift and agile to work with them. You have to understand their constraints and where they come from. The idea was to form a group not related to any business unit of the organisation but to service them all, with its own budget, procurement, and legal system, which allows us to be more swift and agile and have some flexibility because we have our own budget for PoC. Our pitch to business units within the organisation is, “We understand your needs, sore points, wide spots — we’re going to find the right technology or start-up that can meet that need. We’re going to build the framework with that start-up, run it for you, innovate, and fund it.” A lot of business units come to us and say, “Where do we sign?” It’s very interesting for them, the fact it’s not coming out of their budget and they don’t have the hassle of engaging with a start-up. They can focus solely on the technology.
Does Co-Pace work exclusively with Conti or also with external businesses?
Ideally, it serves only the business units within Conti, but when you work with start-ups, in some cases, you need to give them added value, even if they don’t work with Conti. When you’re the bridge between start-ups and the business units of Continental, some that approach you aren’t suitable. What do you do at that point? Do you say goodbye? Or do you try to give them value? To create a good reputation, you have to give them some added value or connect them to other groups, so a side-track of this work is trying to help start-ups, even if they’re not suitable for Continental. But I don’t serve international groups not related to Continental, generally.
Can you run through how you work with a business unit within Conti?
Various business units are at different points on the scale of innovation. Some have been working with start-ups for many years and know how to work with them already. Then, your approach is very different compared to a unit that has never worked with a start-up before. You need to educate them and make them understand — what is the added value of the start-up? It’s a different discussion and totally related to which business units you’re working with. How open are they to work with start-ups, and what kind of phase are they at in their innovation?
So, it’s more of a pull strategy for Co-Pace, where the business unit says they have external market pressure or an internal product issue and they’re looking for a solution. Co-Pace bridges the gap between the start-up world of innovation and that business unit.
Let’s be frank. Within a tier-one, it’s not really innovation; it’s product enhancement. OEMs and car manufacturers are driving innovation, and they’re pushing the tier-ones to go and look for that stuff. If they see a very innovative tier-one, they would approach another tier-one and say, “What can you show me like that company showed me? That could be interesting for me.” I think most of the pressure derives from the customers themselves looking to innovate, differentiate themselves, and find new verticals and exciting ideas to engage and attract their customers.
Take the Powertrain Division for these tier-ones, even the OEMs — is it very difficult for them to innovate internally given the shift to EV or different power trade mechanisms? Is it that inertia that prevents that? You need these new models like Co-Pace?
It has a lot to do with the history of the group. Take Continental. This was a group founded in 1871. A lot of the groups within the company have been doing the same process for many years. When you say, “I can find a start-up that can help you,” usually, they say, “How can a five-year-old start-up teach me something I’ve been doing for 100 years or more? It’s a lack of understanding of what a start-up is and what it can contribute to the organisation. Once they’re engaged with a start-up and see the value it can bring, they tend to have “not invented here” syndrome. They say, “Oh, they’re doing that, I can do it by myself.” Big organisations are very sceptical about what new companies can provide to their regular business model, and even if they see the value, they tend to dismiss it and think they can do it by themselves.
Is that quite an ingrained disadvantage for these big institutions? These corporate executives are paid to sell gas or diesel powertrain engines. It’s very difficult for them to spend capital or effort on innovation, even though the change is coming.
I think, when you challenge a business unit to innovate, they usually take it to product enhancement. They will look at how to do the same product they’ve been developing for years for a lower price and with better efficiency. It’s not real innovation. Real innovation is bringing something you’ve never tried before to enhance your revenue stream. And for that, sometimes, you need a disruptive group, separate from the day-to-day operations, who look at what other companies are doing worldwide. They bring knowledge and challenge the business units; “Look at what these guys are doing, this could be interesting,” or, “You have a sore point here that you are not able to address. align yourself with this technology that can help you.” You need this kind of group of people who are detached from the day-to-day business. Otherwise, it just doesn’t fly.
So, Conti owns Co-Pace 100%?
Yes, 100%. They only acquired it as a subsidiary because, in this form, we can run it through another procurement or legal system.
What are the biggest challenges you’re facing, driving innovation within Conti?
There are a lot of internal processes that prevent you moving forward, even if the organisation wants to do something with a start-up. Procurement is a very good example. Procurement departments within big organisations usually treat start-ups as a regular supplier. “Okay, let’s sign the agreement; half a year from now, one year from now…” They don’t understand, a year from now, a start-up will be in a completely different place. For them, it’s just regular day-to-day operations. And a lot of the people we’re working with don’t have KPIs for start-ups. They’re focusing on the day-to-day and say, “If I work with a start-up, it’s an additional workload for me, so why should I do that? I just want to do what I’m paid for, get my bonus. Don’t disrupt me with other stuff that will create more workload for me.” This needs to come from the top. You need support of management to understand it and push forward with innovation. Even if you have a group like us leading in innovation, sometimes, you might find it really hard because procurement is putting up barriers and business units that you’re working with don’t want to engage with a start-up because of the extra workload. There are all these internal policies or bureaucracies that don’t allow you to do the much better, swifter job you would like to do.
How do you encourage business units to spend time on innovation?
The first and most important thing is not to think of this as a full-scale strategy to change an organisation. Look at this as a tactic; gain their trust, help them with the sore points, find what hurts most. Come to the business units and say, “You’ve been tackling this problem for so many years, you’ve not been able to solve it, let me try and help.” If I’m able to solve it, they will be much more open to listen, to do more stuff outside their comfort zone and adjacent to what they’re doing because now, I’m really helping. The way to approach it is, find the sore point, help them in the day-to-day, then get them on board for the bigger stuff you want to do. Of course, you need the support of the management team, giving KPIs for start-ups and innovation and incentives to do so. You need the whole structure to support you in that because, if you’re alone, it’s a really tough job to do.
How do you overcome “not invented here” syndrome?
When I’m working with start-ups and confronting a problem a business unit is trying to solve, you don’t try to challenge it and say, “I can find someone who can do it better,” but you really try to help. And this is the point you need to relate to them, something they need to understand. When you don’t challenge them, but you help and support them, you take down the “not invented here” syndrome. If you find a solution that is an exact fit for a problem they have been facing, they will be very open to listen to that and do something. If you’re looking at a start-up to replace something they’re doing, that will be “not invented here” syndrome. It’s a very delicate line of understanding their sore point, not trying to challenge what they’re doing, but rather, assisting them.