Panelists
Evelyne Pflugi – CEO & Co-founder, Singularity Group, Zurich, Switzerland
Dr. Aleksandra W. Gadzala Tirzlu – Head of Research, Singularity Group, Zurich, Switzerland
Dr. Armin Diez - CTO/COO/Managing Director, EXPO Fuel Cell Technologies (Elring Klinger), Stuttgart, Germany
Interviewer
Dr., Dr. h.c. (mult.) Peter Lorange - Chairman, Lorange Network, Küssnacht am Rigi, Switzerland
Questions
Per F. Lorange – CEO, S. Ugelstad Invest, Sandefjord, Norway
1) What makes a technology an exponential technology?
An exponential technology is one which is not only unique in its own right, cum technology, but also is seen by the market as useful and desirable, and therefore experiences rapid exponential adoption. This strong growth comes about through a given technology’s adoptation into the particular market-given progress that this application experiences.
Thus, exponential technology implies both that a technology is useful as such, and that it is applied in a setting which is growing through the satisfaction of customer needs.
2) What main trends in the area of technology and innovation do you see for the near future from a macro and sector perspective? And how can these trends help companies to accelerate growth?
Dr. Gazala pointed to three macro trends fueling growth: A) Massive digitalization, the acceleration of technological adoption. Macros like IoT, robotization, AI, and general digitalization fuel growth or provide growth possibilities. B) New Markets. Growth can be fueled by spreading digitalization to new markets, like China, or Korea (massive semi-conductor investments). C) De-centralization. New blockchain technology can fuel growth through disruptive decentralization. So-called on-shoring due to Covid-19 disruption to supply chains can lead to growth for local players and niche strategies. Payment systems and educational technologies can also be understood in decentralized contexts.
3) Is ESG enough to solve the problems of our time? What is needed to transform “dirty” into “clean” industries? How can clean industries help companies or investors to achieve growth?
(ESG is environmental impact investing, see our interview with Mirjam Staub-Bisang)
Successful companies tend to pursue several trends here, often through cooperative arrangements with other parties of various sorts (joint ventures, options to purchase later, etc.). These niche ESG business opportunities tend to be linked in some way to a firm’s existing business, i.e., not being completely new. Neste (Finland) for example, transformed around 50% of its energy business from fossil to biofuel! And Dong (Denmark) is delivering electricity through offshore windmills (the company is number one is this, and has cooperated with Siemens), rather than through conventional oil exploration and production. Dong is now completely out of oil!
4) Can you explain why ElringKlinger decided to look into the future of mobility and invest in new technologies and their development?
ElringKlinger is a major supplier of components to the automotive industry, with a traditional focus on petrol-driven combustive engines. The firm’s strategic processes highlighted that this implied a strong risk exposure to air pollution, i.e., CO2 emission. This led to a new focus: fuel cell technology. An additional shift for the firm was to build up its competences in the area of battery technologies. EXPO looks at its business through its components, modules and systems, with all three as innovation areas.
Speed was key here. These significant shifts thus also took place in a way that allowed ElringKlinger to continue to stay close to the automotive industry, the firm’s DNA. Also critical was the fact that the innovations considered and chosen were linkable to the company’s own existing strengths. Any entirely new innovations would have been too slow. And it was not just about tech, but rather about development strategy, competence and industrialization.
5) How has this impacted your business and how will this impact transportation in a broader sense?
It is key to emphasize that there seem to be different “solutions”, that might be seen as “optimal” in different settings. As an example, big/heavy cars might be driven by batteries on generally flat land. Passenger cars, however, might typically become battery-driven, while big/heavy cars (trucks and buses) might be driven by fuel cells or hydrogen. Thus, the battery and fuel-cell technologies are complementary, not competing!
Why might we run into problems when applying battery technology to large, heavy vehicles? First, the batteries in themselves might tend to become excessively heavy. But probably more problematic: charging. This would require such heavy recharging stations for typical electrical grids, that these might tend to collapse. To recharge several such heavy vehicles at the same time would indeed be next to impossible.
It is interesting to observe that ErlingKlinger’s product portfolio started out being quite broad, often supported by joint ventures with other more complementary technologies, but has generally become more focused through strategic pruning, i.e., with specific new special products now with time becoming the firm’s portfolio. In general, applied innovation is most successful not only when the innovations are close to and apply to core company business but also when multiple technologies are considered at once. Identifying the right “suite” of technologies is critical (monoculture of tech vs. a focus on different solutions). Also important is the extent a technology or innovation is truly efficient.
6) What are the next “moves” in mobility? What will the automotive industry look like in the near and far future? Where is future growth going to come from?
New materials seem to become key – in cars, in batteries, in tires, etc. New technologies will also play a larger role: self-driving cars, fuel cells, electric vehicles and hydrogen are examples. And technological cooperation with others that might also be crucial.
One example might be to adapt automotive products to, say, an African context. Cooperation with locals players might be lead to accelerated growth. And cooperation must match the company’s core business, as well as be with the “right” players and people who understand the market.
Other examples might be the “Internet of Cars”, ie connected cars that link payment or media systems into mobility. Even new services can arise from connected cars, but an important question will be if consumers willing to pay? The market will decide!
7) What’s to story behind The Singularity Group and especially its flagship The Singularity Fund? You mention the concept of applied innovation. Can you elaborate how one word – applied – makes a difference? How can applied innovation yield steady growth?
We now and then experienced “problems” when we communicated with some banks when it came to financing some technology-prone projects: the lack of understanding a given technology’s scalability dimension was a “problem”. We felt at times that this prevented us from being doers, instead of merely being talkers! So, we started our own fund, above all so as to be exactly the doers that we aspired to be!
In contrast to ETFs, which have a passive approach, we seek out companies that not only are innovative today but can stay innovative (innovation continuity). We also look for more traditional companies that might be starting out on a new more innovative trajectory. Investing this way requires research, due diligence, an understanding of the value chain, being doers not talkers, and an innovation philosophy or mindset, as mentioned.
8) You said that your investment strategy is centered around global Innovation Think Tank, your Expert Advisory Board. Can you explain further what it means to have an expert-led approach. And how in tune to growth such a Think Tank and Board be? What type of mentality is necessary to achieve growth?
We benefit from a high caliber advisory board. The members help us to keep eyes on key developments, more in the sense of “how to look” rather than “where to look”. Trust seems to be key, i.e., to be able to believe in advisory members’ recommendations. Extensive interactions seen key here.
Research and due diligence is not only a matter of being on top of technological developments, but perhaps also regulatory issues, so that we might be first movers, not only fast followers.
We look to invest in companies that build on established strengths to come up with new products. This is a way also to be able to manage risk, i.e., avoiding too much risk! We advise companies to use their existing strengths and technologies, then go to market but look for various ways at the start. When the fog clears later, then consolidate and focus, and remember the investor mindset.
9) Your advice to business owners and decision makers when embracing technology, innovation and, as a result, change – no matter is SME or blue chip?
It seems to be key to be proactive, and not to be reactive. And big, established companies may often benefit from acquiring smaller companies that might have come up with certain technological advantages that can relatively easily be integrated into what a big company does. M&A to pick up on smaller companies’ innovations can thus be key for the many established players.
Technology should thus be seen as an eco-system, calling for smart innovations, holistic thinking, a set of tools and a growth mindset. Technological universities, such as ETH or EPFL are clearly important players in the innovation eco-system.
Additional Questions
1) Tell us more about the Singularity Fund
The fund is globally diversified, but with a US tilt. The fund is obviously tech heavy, however, there are also some investments in so-called fast moving consumer products firms also. These types of firms may also apply cutting-edge technologies (e.g., Loreal – logistics).
2) What about the 4th Industrial Revolution?
We are in the middle of the 4th Industrial Revolution but the panelists see no need to stress this term as such. Just a clarification.
3) What about air and sea transportation?
We might be seeing electric-driven planes and helicopters, particularly on shorter routes. ErlingKlinger has a joint venture with Airbus! On longer routes, synthetic fuels might be the solution. The amount of hydrogen for fuel cells might simply be too large to allow for economic long-distance flying. Ammonium-based fuel may also be quite well suited for longer distances on maritime transport. And, by the way, there would be no safety issues here. All relevant technologies seem to be completely safe when it comes to air applications. Regarding marine applications a lot might have to do with the degree to which core harbors might require “clean” ships. Ammonium, hydrogen and fuel cells will play an important role for ships transporting to and from Western European harbours!
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