Alpha Strauss

An interview with Dagan Eshel, VP innovation at Strauss Group

Alpha Strauss and the creation of Israel's food-tech industry

TELL US ABOUT ALPHA STRAUSS AND THE WORK THAT YOU DO

STRAUSS HAS BEEN INNOVATING FOR MANY YEARS BUT STARTED DOING SO IN A SYSTEMATIC FASHION AROUND THE YEAR 2000. IT HAS TRADITIONALLY BEEN INCREMENTAL INNOVATION OR PRODUCT INNOVATION THAT COULD INTRODUCE ENHANCEMENTS TO THE PRODUCTS AND PORTFOLIO. WHEN WE STARTED LOOKING FOR WAYS OF INNOVATING IN A MORE SIGNIFICANT WAY WE REALIZED THAT WE HAD TO HAVE A NOVEL AND MORE AMBITIOUS APPROACH.

was that it had to be a lean approach since the budgets Our challenge available to us weren’t close to what international conglomerates like Nestle could afford to spend. We decided to leverage our location at the heart of the startup nation and thus, establish a new local market that is labelled foodTech but our unique approach was that we defined it as any technology that could introduce innovation in productivity, quality, product edge and sustainability from field to plate.

The uniqueness here was that we determined that regardless of the field the startup considers itself to be in whether it is a technology originally developed for medical devices or defense, if it could potentially contribute anything to the food industry through one of those four pillars in the process from the field to the home of the consumer then we considered it to be foodTech. When we started looking at the Israeli market through this lens i.e. entrepreneurs, scientists, startups, patents and so on and researched it we discovered numerous opportunities in the market. In addition, we realized that many of those who had potential to innovate in foodTech weren’t even aware of this fact. Also, if these people did have an idea of how to get funding, support and mentoring in other industries there was no such knowledge and experience with regards to foodTech.

And so, the next question was how can we make a move that will cause all of those actors to want to connect and start working with us. In traditional open innovation, companies formulate some sort of a brief about what they’re looking for, publish this brief in various channels and invite relevant actors to connect and work together on their ideas. What we said was that since we were making a long-term move to create a new industry and that since it did not exist at the time and we couldn’t really define something specific we were looking for we simply invited the various actors to come talk to us so we could create this market together.

We asked startups to not just tell us what they could potentially do for us but also to let us know what we could do for them. There are various ways in which a corporation can help startups in ways that do not incur direct costs and at the same time are very valuable to the startup. For example, an entrepreneur can be a technical wizard with zero marketing talent. In such a case, we can get this person some time with a marketing expert from Strauss and that creates real value for the startup. We can give them access to our factories in order to understand manufacturing processes. We can give them access to our international partners. You might ask me at this point whether my team and I are philanthropists. The unequivocal answer is “No” since we simply wanted to make it clear to the ecosystem that if you had an idea or a technology that could benefit the foodTech industry then Strauss is the company you should reach out to.

So in essence, you created value for startups and made it broadly known so that you would attract actors in this nascent foodTech industry who could benefit you as a corporation long term.

Exactly. This was our first move. The second move we did was to work on the organization itself in order to make it more receptive to these potential innovations. We knew that it would serve no real purpose to do all this work if nothing substantial could come out of these opportunities involving Strauss itself. This involved persuading various stakeholders in the organization that it would benefit them to work with us so that we get higher interest levels and better cooperation. We also had to make certain procedural adjustments with regards to working with startups. One example would be the NDA (Non-Disclosure Agreement) that we had to sign with a startup that in most organizations is very long and with fine print. When entrepreneurs with no resources see such a document they realize that this will require a lawyer which they cannot afford. We were able to reduce that into a page and a half and using a large font. Another example would be payment schedule which can get to 90 days from the date of issuing the request. For entrepreneurs we were able to bring this to almost an immediate payment schedule.

And so initially, we were a sort of a matching service, getting exposure to ideas and technologies and turning them into structured proposals to the various companies of Strauss. We were not looking to invest in startups at the time. We had hundreds of meetings and generated dozens of projects so this was a successful beginning. After about three years of doing this, we realized that a lot of potential was still not being capitalized since many of the opportunities we were seeing were based on early stage startups and at the time, we didn’t have ways of dealing with technologies that were at such early stages.

What we did was to found “The Kitchen” our FoodTech incubator which is part of the same vision of turning Israel into a FoodTech valley. The Kitchen brief is to work with early stage startups with funding that is received from Israel’s chief scientist office. Since the funding involves public sources, the purpose of “The Kitchen” is to nurture foodTech startups regardless of whether they’re creating something that Strauss can use. It also invests in startups in return for equity.

A more recent development is that we began to look for solutions worldwide to broad issues that Strauss is looking to solve. For example, we know that lowering the sugar content of our products is a long term issue and so our CTO scans the globe for early stage solutions that can be brought into Strauss through working with us. In addition, what I do personally is to look for business development opportunities that can be nurtured and then connected to Strauss’s business units.

What would you say were the top 3 things that you didn’t know about startups and had to learn on the go besides what you already mentioned?

The first thing is to realize that entrepreneurs are “free spirits” oftentimes and that when someone from a corporation meets them this person has to have a tolerance level to such communication style and behavior. It also demands a certain level of humility. Our CTO is a professor of food engineering and at times he can step out of a meeting and tell me “This is different from what I have learned but what this person says makes sense”. This holds for the innovation manager but also for other stakeholders that might be involved. It is very difficult, close to impossible actually, to hold the following two questions in our minds at the same time: - Will this really work? - If it works will anyone actually care?

And so we decided to assume that for the first few meetings, everything the startup is telling us is true and that the presented technology is going to work. We focus our attention on the second question, assuming that the technical aspects will be clarified and tested later on. Otherwise, it is very difficult to make an educated decision about the second question because doubts about the first one keep getting in the way. Our second learning is that when startups meet a corporation they usually mix between the technology they have and its application. Our answer right from the outset is: “You created a technology and that is your expertise. Our expertise is the familiarity with the market so focus on presenting your technology and let’s brainstorm together on what its most promising application should be”.

Lastly, as in most entrepreneurial projects, the nurturing and execution of such joint opportunities with startups usually take more time and require more budget than planned. The corporation should realize this and understand that it is part of how these activities go. For innovation managers this also means that the way they’re measured should be adjusted according to the stage they are in. In the beginning, they should be measured on input i.e. the number of startups that were interviewed and the number that were pursued. This can be sufficient for a year and maybe even two. Then, you should add the number of projects that were generated out of these startups i.e. projects where business units actually dedicated time, funding and attention. Only after that, should you start measuring the impact on business KPI’s.