Innovation Sage - August 2020

AUGUST 2020

THE 4.0 REVOLUTION IS CHANGING THE AGRICULTURE LANDSCAPE

38 CUSTOMER SUCCESS,

A New Innovative Organizational Approach for Customer Engagement

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Denmark a Tiny Country Which Produces a Huge Innovative Spirit

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AgriTech

Research And Startups Are Redefining Agriculture And Farming

Editor’s PICK

Editor-in-Chief: Tal Berman Associate Editor: Eran Shlingbaum Contributing Editor: Elizabeth Goodman

Tal Berman Managing Partner, Rinnovation Group In our previous issue, we discussed the challenges of innovating in times of the COVID-19 crisis. Two months later, I wonder whether these challenges, some of which were very theoretical at the time, have become even more of a reality. In which case innovation leaders all over the world are banging their heads on their keyboards as they try to make sense of this new reality. It looks like this pandemic is not going anywhere anytime soon, hence avoiding it cannot be an option.

During this crisis, our world has changed dramatically.

Some industries which we took for granted have proven to be crucial for our survival, while others, which we thought we cannot live without, brought to our awareness the important things in life as they went to sleep, so to speak, indefinitely.

INNOVATION SAGE

We have discovered that agriculture stands as one of these indispensable industries; therefore, we have chosen AgriTech as the main theme for this issue. Agriculture has proven to be essential to the human race, especially in these troubling times. As such, we wanted to explore the powers of change within and expose our readers to the amazing technologies and the ultra-interesting new farming methods which have been developed in recent years.

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Farmers have been dealing with extreme challenges even before the pandemic induced worry about workers in quarantine or any of the other familiar problems we all face these days. Lack of available water, climate change, increasing demand, as well as skyrocketing costs, are just a handful. These and others manifested a clear change of direction as we approach a new decade of refining the way we grow, maintain, pick, and deliver our ultimate source for food consumption.

We invite you to take a seat and ride with us, as we take you on a journey through many of the new aspects for what some call Agriculture 4.0 and others Agriculture 2030.

We interviewed researchers, entrepreneurs, enablers, community leaders and many more, for what resulted in an excellent source of knowledge for anyone who is interested in this ever-developing field.

Moreover, with recent changes in customers’ needs, one thing is certain. Corporates and companies in knowledgebased industries are changing the way they engage with their clientele. The old, laissez-faire mentality of “as long as my customer does not call me, all is well…” gave way to the new, hands-on mentality of “I will call my customer and make sure all is well.” This change in mindset made CEOs convert their customer service or support teams to what is now called Customer Success. In this issue, we inspect this conversion. We seek to understand the reason behind it, the essence of this new function known as Customer Success, and of course, the way forward for this new approach of customer engagement.

Last but not least, with recent dissemination of the 2020 EIS (European Innovation Scorecard) the state of Denmark has been ranked in the Top 3 once again. We discuss the results with Danish innovation experts and get to the bottom of the reason for this Nordic country’s success as an innovation powerhouse.

We truly hope you enjoy this issue and gladly take any comments or requests. Please direct them to: tal@rinnovation.xyz

Associate Editor’s PICK

Eran Shlingbaum Partner, Rinnovation Group Considering the impact of COVID-19 on organizations, the implementation of innovation was and still remains one of the biggest challenges. From a wider perspective, innovation transforms the organization into a kind of live organism, one that keeps changing the way it operates by constantly adding new features to the daily work. For example, the education system facilitates schools from a constant improvement objective. Therefore, it is only logical that corporates may have a facilitator for innovation implementation as well.

sauce is a refined model for managing innovation, which can be maintained in various ways. Don’t get me wrong, corporates may always collaborate with an operating private accelerator; it can open its own and outsource its operations to an accelerator management provider, such as Techstars. Albeit, this is the step that many companies take nowadays mostly - sponsoring a current operating entrepreneurship program. However, all of these methods, and especially the latter, create the impression that someone is just trying to tick a box.

Innovation has become a popular field for research in both academia and business consulting firms in recent years. At its core, innovation is simply a way to solve problems and create new ways to deliver value, as described by Janice Molloy of the University of Michigan-Dearborn’s College of Business. Innovation denotes the process of conscious and upward-moving evolution. Research shows that innovative companies hold 6x the market share, make 3x the profit, and do 50% better during recessions than less innovative companies. McKinsey & Company surveyed 2,240 executives regarding their perception of the importance of innovation. Out of these Type C and above managers, 84% responded that it is essential to their company’s growth.

We here at the Rinnovation Group believe in a new approach, one which has been developed recently and demonstrates an evolution toward the concept of a Labson-Demand type of an accelerator. This buzzword defines the concept that a company outsources its challenges to an external facilitator, who in return incubates startup companies with a technological know-how for solving them.

But why not choose a startup, which has already managed to reach the milestone of a valid proof of concept?

Now that we have concluded that innovation provides a strong value for any company, let us ask, how should it be executed and by whom? Well, some corporates employ innovation leaders, while others include it as an integral part of their strategy or business-development team.

Both methods only seldom prove successful due to work overload. There is not enough time nor enough resources these days it seems. The savvy and usually very big corporates create open innovation platforms. They either own internal incubators, such as HP, or open innovation accelerators, such as Intel. However, these solutions are very expensive to manage, thus they are rather inaccessible and infrequently used.

Considering the setback and challenges of these methods, outsourcing to an external innovation facilitator proves to be a valid option. This strategy is still in its infancy because creative ideas are just not abundant enough. The secret

A major benefit of this concept is its focus on the problem rather than the solution. As always, there are multiple solutions to any given problem and using the Labs-onDemand concept creates multiple values and a win/win situation to all sides involved. Recently, due to the Labs-onDemand concept, innovation implementation has become accessible to SMEs as well. Not only is this method more accessible to a wider range of companies, but from my experience, connecting a company’s challenge to an innovative solution after it has already been successfully tested, makes it much easier to implement. The reason being that it is easy to comprehend, as executives are solving problems daily no matter which company they work for.

To sum up, the access to innovation is much easier today compared to the past, as (thankfully) it is no longer a privilege that only the big multinationals only enjoy. In times of uncertainty when internal workforce is doing its best to reduce damages, cut costs, and keep the boat floating, using an external facilitator to implement innovative processes is the right answer.

CONTENTS The Quest for a New Paradigm for Making Better Farming Decisions A Story of an AgriTech Startup Changing the Landscape of Fruit Farming

From Theory to Practice: New Ways for Ensuring Academic Knowledge Spillover Reaches the Farmers Wine and Grape Farming in the Age of Climate Change

Why Do We Need Customer Success and Why Is Customer Support Not Sufficient?

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The Danish Innovation Muscle

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12

Enabling AgriTech Startups: A Way to Create Global Impact

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28

48

54 50 66

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Pushing Customers to Succeed

Denmark - Great Innovation Farers on Stormy Seas, Getting to the Source of Danish Innovation

Denmark Bets on Innovation

62 74

The Concept of Customer Success as a Psychological Archetype

Customer Success: Owning the Customer’s Journey Ensures Mutual Success

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The Quest to Turn Customers into Partners

“Don’t Call Us – We’ll Call You” - When Customer Service is Just not Enough

The Power of Communities Assists with Solving Global Farming Challenges

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INNOVATION SAGE

AGRITE

ECH

Precision Agriculture: The Quest for a

New Paradigm for Making

INNOVATION SAGE

Better Farming Decisions

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An Interview with

Prof. Olga Walsh

Research Associate Professor, Cropping Systems Agronomy, University of Idaho

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recision agriculture is a superhot topic these days. As the need for a more reliable, effective, and cost-saving agriculture increases, farmers are looking at ways that will enable them to produce more using fewer resources. We talked with Prof.

Olga Walsh, an expert and scholar in the field, to get a better understanding of this concept.

Thank you for spending the time Prof.

Walsh, tell us first a little bit about your background.

My training and background are in soil fertility, plant nutrient management, and precision agriculture. I am originally from Russia and obtained my BS degree in Soil Science at St. Petersburg State University.

I received my MS and PhD degrees at Oklahoma State University. Prior to my appointment in the University of Idaho, I served as a soil nutrient management specialist with Montana State University for four years. I am a published author on a variety of precision agriculture topics and have presented at numerous national and international precision agriculture events. I manage and write for a cropping systems blog (Idaho Crops & Soils) and write and publish articles for Idaho agriculture producers.

May you kindly share your research and its importance?

As I have stated I am an Associate Professor, an agronomist, and an extension specialist at the University of Idaho. I have directed the cropping systems program at the Parma Research and Extension Center since 2014. The

program’s goals are: 1) to develop applied research projects that help to address pressing needs of crop producers in Idaho and the Pacific Northwest region. And 2) to conduct educational outreach to agricultural professionals. The program is currently focused on developing scientifically-based, field-tested unbiased grower recommendations that would improve the sustainability and profitability of farming operations. The current projects are in wheat, barley, beans, corn, sugar beets, onions, potatoes, and hops.

“Precision agriculture tools like crop sensors enable nutrient management decision-makers to refine fertilizer and irrigation water recommendations for crops.�

You have mentioned that you deal greatly with precision agriculture. What is it, what are its benefits, and why is it a hot topic?

In a broad sense, precision agriculture is a concept and a collection of both tools and methodologies that enable the management of agricultural production in a sustainable manner.

This includes aspects such as precision planting (precise seed orientation/ depth placement, precise seed rate, etc.); agricultural inputs (water, fertilizers, etc.); in-season management (weed/pest

monitoring, crop health/nutrient, etc.); harvest (minimizing grain/crop waste) and many more. In the context of our work, precision agriculture tools (like crop sensors) enable nutrient management decision-makers to refine fertilizer and irrigation water recommendations for crops. Remote sensing for variable-rate fertilizer, water application, site-specific nutrient and water management can help maximize crop yield and quality, while improving input-use efficiency.

How is precision agriculture changing the farming landscape? Has it improved it in terms of productivity and cost reduction?

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The major changes are occurring slowly, with a generally greater acceptance of technologies people utilize in their lives.

A lot of precision agriculture equipment and methodologies entail substantial cost inputs especially in the beginning, but the majority of them pay for themselves within the first 2-3 years. Also, growers now are not only seeing the benefits as purely financial (although this is still the primary goal for most). Many growers are required to justify their fertilizers and water use to their stakeholders, as well as provide evidence of their operations’ sustainability (not just economical, but agronomical and environmental).

If certain management tools allow for minimal soil disturbance, preserve soil moisture, and limit compaction, for example, these tools are always welcome by most growers on account of soil health maintenance and improvements.

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“In some cases, technologies may offer advantages of labor and/ or savings to growers, which is very favorable in light of COVID-19.�

Does precision agriculture assist with the current COVID-19 crisis? If so, how?

This is uncertain. In some cases, technologies may offer advantages in terms of labor and/or savings to growers, which is very favorable in light of COVID-19, during which time we should be mindful of how people work in teams, and how many people can complete tasks together. A good example would be sending and receiving vital data remotely. A hop or sugar beet grower can manage irrigation, and even chemical applications, remotely using sensors installed in their fields; they do not have to physically be present at that field to manually control the water applications.

The important data (soil moisture, temperature, crop water loss, etc.) is displayed on their farm computer, and they are able to make changes by simply clicking a button.

What kind of innovations are we witnessing in the field in recent years?

In recent years, the Unmanned Aerial Vehicles (UAVs/drones) are becoming more widely utilized for crop scouting with the intention of identifying potential issues (issues with crop emergence, pests, disease, water and heat stress, nutrient deficiencies, etc.). The drone data is used more consistently for crop insurance purposes, the aerial images are GPS and time-stamped, which can then be used as evidence to substantiate the insurance claims. The drones are also more widely used in nurseries for tree health monitoring, inventory (no need to go out and manually count trees), pricing (tree height can be estimated with drones as tree prices are directly linked to their height), and even marketing purposes (remote nursery tours for clients).

“The technologies become more accepted, and more and more cost-effective solutions are being offered to agricultural professionals every year.”

What is the next stage for precision agriculture?

The technologies become more accepted, and more and more costeffective solutions are being offered to agricultural professionals every year.

The main challenge for most growers in implementing most precision agriculture tools is data management.

For example, it is easy to fly the drone and collect the images. Now the images need to be processed and analyzed, after which decisions need to be made quickly based on the collected data. That is still a big challenge - how to find and keep specialists who can process the data and assist in decisionmaking. Growers are looking for simple, user-friendly, cost-effective solutions; and, because there is demand, these systems will be developed. It will just take some more time, I am afraid.

How does academic research in the field advance it?

Academic research is crucial in terms of developing new ideas. It also provides unbiased assessment of methodologies and products that are being marketed to growers. The universities also offer agricultural education to the general public, crop consultants, and producers as well. The universities help to minimize the “noise” within the vast realm of information coming to growers from all sorts of sources and help them decide what really makes sense for their farming operations. Many on-farm experiments are conducted, serving as an important link between the growers and the scientists. The universities also teach and mentor students and young scientists that then enter the work force and have a lot to offer in terms of their knowledge, skills, and experience.

To sum up this fascinating interview, it seems as if precision agriculture will become the norm, and a mustuse application process of digitalizing agriculture as an industry is far too important. It will be very interesting to keep monitoring the advancement of this field and the new ways it will produce to help the growers.

Trees are as Complex as Humans: A Story of an

AgriTech Startup Changing the Landscape

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of Fruit Farming

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An Interview with

Israel Talpaz

Co-Founder & CEO of SeeTree

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recision agriculture is an emerging field of research and practice. Many startups in this field are changing the agriculture landscape, making it smart, efficient, and profitable for the farmers. One startup doing so is SeeTree, which operates in the fruit farming segment. We sat with its co-founder and CEO, Israel Talpaz, for a chat and discovered a fascinating and inspirational story.

Who is Israel Talpaz other than the cofounder and CEO of SeeTree?

I come from over three decades of working for the Israeli Security Forces in intelligence. I retired three and a half years ago from my role as an executive.

I do wish to touch a very important element though, which is very specific to what I am doing today. My father is an agriculture scholar. Originally, we are from a kibbutz in Central Israel and he was the associate director of Volcani Center (a world-renowned ARO in Israel) for many years. He also taught for a while at a university in Texas in the United States. He still conducts his research, by the way.

“Trees are almost as complex as humans. The variation between each tree is quite large. If you take a corn field for example, the crops and the plants in it are quite constant and similar in their nature and characteristics. But each tree is totally different.”

How did SeeTree start?

Because of my father’s background, the field of agriculture really captivated and spoke to me as well. I wanted to integrate my skills and knowledge from my days as an intelligent expert to agriculture and farming. I partnered with two great people, Barak Hachamov and Guy Morgenstern. Barak is a businessman, serial entrepreneur, with vast knowledge of the Israeli high-tech industry; while Guy, also an entrepreneur, is an experience technologist. We searched for something to do jointly, and we figured that the agriculture landscape may definitely benefit from companies who could significantly leapfrog it forward. So, after we decided to enter the AgriTech vertical, we looked at different segments within agriculture and we found the fruit farming segment almost untouched. Most AgriTech startups chose the segments of field crops, greenhouses, and urban agriculture, among others. The fruit trees were left behind, so to speak, due to their complexity. Trees are almost as complex as humans. The variation between each tree is quite large. If you take a corn field, for example, the crops and the plants in it are quite constant and similar in their nature and characteristics. But each tree is totally different. In addition, the value of each tree is extremely high. A tree lives for decades and decades and it bears fruits year-in and year-out. As a metaphor, it is as if each tree represents a production unit in a huge factory. One cannot imagine a factory with roughly a million machines (the size of fruit farms nowadays) operating in a non-digital way; nevertheless, in the segment of fruit farming that is the reality – everything still remains analogue. Farmers rely on their eyes only as they walk for miles and miles each day to inspect their farms, and

so their decision-making relies on low amount of data and rather a high degree of intuition. In practice, they try to make very complicated and nuanced decisions based on numerous parameters and variables.

So, what is SeeTree?

We aim to digitalize fruit farming entirely and create a huge impact in the process.

If I define it by the terminology of my background, we would like to gather accurate, multilayered intelligence in the lone-tree level, analyze it, and provide it to the farmer in a very high-scale endeavor.

This enables the farmers to make a much better decision each time. We make the data accessible and easy to understand, as we escort the farmers in the process.

I am an expert in creating and building intelligent systems, and that is exactly what we are currently doing.

“We are basically helping the farmers to optimize the quantity and quality of their produced fruits, thereby increasing their ultimate profit.”

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What are you really doing in practice?

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We document and follow all trees remotely and closely. We film the trees; we analyze the health situation of each tree by inserting it into a self-developed health scale; we measure the fruits on each tree during the season, months before the picking; we enter all findings into our system; and finally, we deliver the results to the farmers so that they can easily understand their problematic

areas - who are the weak trees that need assistance urgently and who are the strong trees from which to learn. We are basically helping the farmers to optimize the quantity and quality of their produced fruits, thereby increasing their ultimate profit.

What do the specifics of this process entail?

To simplify, we are a “big-data” startup.

We use the insights we gather at any and all farms to better our data and outputs.

We gather the data by using aerial drones, mini-UAVs, and sorts of ground vehicles such as ATVs. At the moment they are not autonomous, but we hope it will change in time. Drones are the most effective, as they are quite cheap and yet drill down to the tiniest resolution. All the gathered data then goes to the Cloud and gets analyzed with the help of AI (machine learning, computer vision, and all the familiar buzzwords). We employ highly skilled professionals to analyze the data with these technological tools, coming from companies like Mobileye. Moreover, we have highly skilled engineers who “teach” the AI and improve it with time.

This combination enables us to tackle data in high scale, while providing precisely accurate information in the process.

“The real joy is the amazing change and fresh approach we are bringing to such an important segment for all of humanity.”

At what stage of the process are you in?

We have been live for roughly three years. We started in the sub-segment of

citrus. We have been selling our product consistently for the past year and a half, although I can say that we had some sales during our first year. We started in California, we then moved to Brazil, and today we are also operating in South Africa, Chile, and many more. One of the biggest citrus growers in the world is our customer and we are able to cover the entirety of their farms – over a hundred thousand acres, millions of trees if you can absorb that number. We are very proud of that. What is great about AgriTech is the added value of social impact. We help farmers, some of whom reside in developing countries and emerging economies. We do make money and we are currently doing very well financially, but the real joy is the amazing change and fresh approach we are bringing to such an important segment for all of humanity.

What are your future plans?

We started dealing with other fruits: avocados, olives, almonds, and even hazelnuts. Nutella is one of our customers nowadays, as we recently started a joint project with them. We plan to penetrate as many types of fruits as possible and as many geographical areas as possible.

We wish to brand ourselves as global experts of fruit trees. The data we gather with time helps us produce better results.

Our service is not one time but requires a minimum of one year; however, our customers are very content and so most of the time our services are indefinite. As with treatments for humans in the field of medicine, it never really ends. Maintaining the health of the trees is just as important as treating them.

Has the recent COVID-19 pandemic situation affected your startup?

Despite everything that has been going on, our startup is well-operated. We have teams on the ground working with our customers. They fly the drones, film the farms, tour the fields, gather the data, and upload it to the Cloud. I have recently joined our team in California with these efforts. Farming has never stopped; on the contrary it is of extra importance these days. Farmers water the trees, take care of them, and of course pick the ripe fruits. Farmers worldwide have been excluded from all lockdown limitations and quarantine. On the other hand, our data analysts are working from their homes and connected to our system. We provided them with the hardware and resources to do their jobs well. We have roughly 70 people who are doing that in Israel and other parts of the world. We do have a minority of our team who comes daily to our offices in Tel Aviv, but the vast majority are either in the fields or at their own homes. It is not an ideal situation, but it still works. We have to keep our employees healthy, while still providing a second-to-none service to our paying customers.

Did it affect agriculture as a whole?

Brazil, for instance, has been very much affected by the pandemic. Our huge Brazilian customer has been facing quite a number of challenges. Their headquarters are closed, and so the operations manager is finding difficulty in connecting the 25 farms under his umbrella. They are completely isolated.

Therefore, they each operate solely as they lack other options. To our surprise,

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our system helps them with this challenge. This manager can narrow himself to the lone tree level with our assistance. Recently, we joined their virtual headquarter meetings and started providing them with reports to help them more efficiently assess the situation and reach better decisions. We help top management control each component or farm. But if I truly look at it from a macro perspective, our biggest market is citrus, as previously mentioned. The latest research proves that a healthy amount of vitamin C assists us in dealing with this virus, and so the demand for these types of fruit is increasing and with them so do the prices.

“Traditional farming will have to change and rely on existing technological competencies. The COVID-19 pandemic will speed up this much-needed change.�

In times of pandemic crisis, we observe that the need for efficient agriculture grows.

However, in this specific crisis we witness the limitations of traditional agriculture.

How do you feel about this statement?

I totally agree. And again, it is due to the fact that traditional agriculture relies deeply on people. If one of the workers was to be infected by the virus, all other employees would have to go into quarantine. So, who will water? Who will pick? That is a very serious challenge.

Traditional farming will have to change and rely on existing technological competencies. The COVID-19 pandemic will speed up this much-needed change.

“We do not have much of a choice as we need to provide more food at a cheaper price by using the same or fewer resources.

The world population keeps increasing, there is a limited amount of land and water left to use for farming, and of course human resource is slim.�

Where do you see farming in the year 2030?

We are pioneers of a movement which will change agriculture completely. The

future of agriculture is what people call Agriculture 4.0. It is a revolution that is trying to integrate the world of data analysis into the world of farming and agriculture. We are talking about buzzwords such as AI, connectivity, big data, Cloud computing, etc. All these state-of-the-art technologies must be used in agriculture and farming, as there is no other way to advance that field. In practice there is a huge need for smart machinery with vast abilities: customizable disinfecting and pestcontrolling, customizable watering, autonomous trimming, and automated picking. Moreover, we are looking at genetically improved plants and trees.

The improvements will assist in making the plants and trees stronger by more effectual self-handling of pests, weather conditions, etc. What companies like ours do is use data to connect all the dots.

You need to know how to trim the tree effectively, how much water it needs, how much pest-control, and so on. We do not have much of a choice as we need to provide more food at a cheaper price by using the same or fewer resources. The world population keeps increasing, there is a limited amount of land and water left to use for farming, and of course human resource is slim.

The Power of Communities Assists with Solving

Global Farming

Challenges Dana Kedar,

Contributor Community Manager at GrowingIL

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he COVID-19 Crisis has caught the world, and with it the agricultural industry, by surprise.

In the agriculture industry, the pandemic’s global impact is reflected along the value chain: disrupted supply chains, insufficient distribution of food supplies, and large amounts of produce thrown away due to absent quarantined workers. There is no doubt these threats bring harsh challenges. At the same time, they also present opportunities

to strengthen certain trends that were already rapidly developing in the AgriTech field - automation and robotics, which reduce human dependency and replace human labor and traceability as an advanced transparency/monitoring throughout the supply chain. The COVID-19 crisis demonstrates the importance of investing in advanced agriculture technologies to ensure the world population’s food demands are being met.

While the need to address inefficacies in the agriculture and food industries is heightened these days, it is certainly not a new thing. Furthermore, there are great challenges yet to come due to the expected world food crisis as well as the impact of global warming. Both crises will have a substantial effect on the ability to supply food to the growing world population. Preparing for these crises must be achieved by accelerating the adoption and implementation of agriculture technologies, increasing productivity and outputs, all while improving the use of available resources.

Israel is undoubtedly a world leader in agriculture and food technologies. The Drip Irrigation System and the invention of cherry tomatoes are only a couple of examples of Israel’s impact on worldwide agriculture. With great knowledge and innovation, today more than ever, Israel could help overcome these global challenges.

There are about 500 Israeli AgriTech companies that are part of a unique local ecosystem which is contributing to the development of the whole agriculture field. One substantial organization to contribute to this ecosystem is GrowingIL – Israel’s AgriTech community. GrowingIL is a non-profit joint venture between Israel Innovation Institute, Start-Up Nation Central, The Ministry of Economy, and Digital Israel. GrowingIL’s goal is to continue to develop and implement innovative technologies in the field, while positioning Israel as a global innovation center for AgriTech. GrowingIL has a unique position which provides a

peripheral view of all the parties in the ecosystem. This position helps to identify barriers and challenges and contributes to finding solutions, all while it seeks to utilize community assets: business strategy and development, networking, dialogue, and cooperation between different players in the ecosystem (startups, academia, investors, government agencies, corporates, farmers, etc.).

To address the COVID-19 crisis, GrowingIL has launched several initiatives to support startups with overcoming the ensuing challenges. The first initiative is a virtual mentoring program that connects startups with experienced mentors from leading companies and investor funds in the field (ADAMA, BASF, Netafim, ICL, Trendlines, etc.). The second initiative is a unique website which unites local startups and farmers for pilot purposes; the goal is to help startups to develop their product and test it in the field without delay in the wake of the worldwide quarantine. The third initiative organizes various “Round Tables” with representatives from leading startups and government offices to create a productive dialogue on how the government can assist in facing modern challenges. Finally, this upcoming November, GrowingIL and Start-Up Nation Central will be holding a virtual investors event where hundreds of AgriTech/FoodTech startups will have the opportunity to seek further funding.

We strongly believe that in times of routine and especially in times of crisis, a strong community and ecosystem prove crucial in overcoming any challenges, even those that are yet unknown.

Enabling

AgriTech Startups

INNOVATION SAGE

A Way to Create Global Impact

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Author:

Tal Berman

Co-Author:

Sharon Vanek

Contributor:

Dennis Donohue

Director of Western Growers Center for Innovation & Technology & Former Mayor of Salinas (2006-2012)

Contributor:

Gil Demeter

Vice President at Pontifax AgTech

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pon reading thus far, it is quite clear that the world of agriculture is changing at a very fast pace. New technologies have entered that domain and started the very important process of digitalizing the entire industry. This is a process which will take more time to conclude, and even evolve from that point. Yet every long journey starts with a one small single step.

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Entrepreneurs who founded an AgriTech startup are taking that single step forward by creating disruptive innovation. As they baldly enter a domain which has changed only slightly in the past century, they aim to maneuver and drive it to the 4.0 revolution. “AgriTech startups succeed as they push for a change since they address major issues for growers,” claims Dennis Donohue, the former mayor of the city of Salinas, California, and the current director of Western Growers Center for Innovation and Technology. “The major issues for

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Western Growers members are food safety, labor, and precision. AgriTech startups help address these needs by providing more data to comply with increased regulations. These requirements for more information are coming from large customers, who also have a strong need to become more productive.”

The interesting question though is not really the why because let’s face it, the importance of agriculture to our survival as a race is rather elementary.

Therefore, it is the how that piques our interest. “AgriTech startups are taking various approaches to assist in maintaining global food security as well as improving health and nutrition,” explains Gil Demeter, VP at Pontifax Global Food and Agriculture Technology Fund, “there are some startups who are focused on crop protection and improvements to yield, both of which are necessary to ensure that production needs are met. Others are working on improving the crops themselves, using

“AgriTech startups are taking various approaches to assist in maintaining global food security as well as improving health and nutrition.”

advanced life science technologies to directly improve the crops through cutting-edge gene editing technology.

There are a lot of different paths here.

And there are startups on all of these paths, each trying to help create a more sustainable world for agriculture and farming.”

“Our goal is to facilitate the rapid commercialization of solutions for our members.

Co-development is the best guarantee of future success, and we try our best to facilitate that.”

This distinction appears very profound on the macro level, but if one wants to drill down and look at the end user (i.e. the farmers themselves), they may find it valuable to comprehend what is actually happening in that front.

“Most successful AgriTech startups work directly with growers and co-develop products,” emphasizes Dennis. “We currently have a major focus on field harvest technologies, which is where there is the most concentration of labor.

Areas such as thinning, weeding, and irrigation, are all part of the field harvest segment, which appears as the big challenge.”

As we now understand the dire need for AgriTech startups and the way they are changing the industry, we can certainly garner that more are coming down the pipe. Therefore, there is an expanding need for platforms, which enable these companies to develop their

technologies and business models, as well as get their products to the field as soon as possible. “Our Center is part of the Western Growers strategy to actively promote and pursue technological and innovative solutions for the challenges the industry is about to face in the upcoming years,” Dennis defines his center’s aim as he tends to agree with our statement. “Our center is the physical manifestation of the strategy capitalizing on Salinas’ proximity to the Silicon Valley. As previously explained, the most successful companies in AgriTech work closely with the industry.

Our goal is to facilitate the rapid commercialization of solutions for our members. Co-development is the best guarantee of future success, and we try our best to facilitate that.”

“There are certainly idiosyncratic challenges to AgriTech investing. One of these difficulties is a longer and slower adoption cycle, which lengthens the horizon of any investment made into AgriTech companies.”

Assisting startups to move quickly for their proof-of-concept by using multiple incubation models, such as the ones used in Dennis’ center, are very important; however, that is hardly proves to be enough. As we are all aware, entrepreneurs need funding to pursue their vision. Without that, despite the efforts made to promote them by any of the known incubators

INNOVATION SAGE

or accelerators, any innovations are fruitless. As much as the demand for AgriTech startups necessitates their creation, venture capital and other types of investments are equally necessary. “Pontifax is a growth capital private equity firm that is focused on investing in the next generation of AgriTech companies,” Gil states as he is managing nowadays such a funding solution. “The AgriTech space is very exciting and investing in the sector is becoming more and more prolific – AgriTech startups raised more in the first two quarters of 2020 than all of 2019 combined. That being said, there are certainly idiosyncratic challenges to AgriTech investing, and being a successful investor necessitates deep sector expertise, intimate knowledge of the supply chain, and significant relationships with strategic food and agri-corporates. One of these difficulties is a longer and slower adoption cycle, which lengthens the horizon of any investment made into AgriTech companies. While our growth capital strategy helps us to identify companies that have performed well in spite of this challenge, this is still a dilemma that we must consider when evaluating investment opportunities.”

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According to Gil’s conclusion and as a well-known fact, entrepreneurs who have tried to raise money have come to realize the extreme challenges, even despite their optimistic figures.

Other than Gil’s explanation, there has to be something missing. “One must take into account the technology risk,” he continues. “For many companies in the life sciences, crop protection,

or FoodTech spaces, this is definitely a large issue as companies have to validate their technology/IP and its safety. Once again, this has a more significant adverse effect for earlier stage companies, but it is still a consideration at all levels of investment.”

“AgriTech startups will face some short-term disruptions in 2020 as a result of the COVID-19 pandemic.”

This approach makes us here at Innovation Sage a little pessimistic, as we look at the need to quickly rearrange the domain of agriculture, particularly in light of the COVID-19 crisis. Moreover, we are stepping into an economic recession indefinitely, thus less money will be directed at high risk – high reward types of investments. “Startups that had previously raised funding generally have kept moving while pre-series A startups have had some difficulties,” Dennis concurs with our worries. “Investment activity has slowed in general. It gets harder and harder to get much-needed funding. Also, bear in mind that the growers have had less time and spare money to look at new products, although thankfully they have continued to look at items that address immediate needs or demonstrably help lower costs.” Gil is also worried as he looks at the punitive reality, “AgriTech startups will face some short-term

disruptions in 2020 as a result of the COVID-19 pandemic. Technology adoption as a whole has already been negatively affected by the poor 2019 planting season, and the market uncertainty caused by COVID-19 will only exacerbate this dynamic. AgriTech companies in the life sciences sector will also face additional headwinds from the transition to remote work due to the in-lab operating nature of these companies and the fact that the pandemic is preventing workers from physically going into the workplace.”

“We expect that investors will reflect on pre-COVID-19 valuations as inflated and unsustainable. This will drive down valuation for AgriTech startups, specifically earlystage startups that are hindered by low commercial adoption.”

Nowadays, uncertainty rules. “The immediate impacts were loss of crops, adjustments of planting schedules

(i.e. cutting back acreage), possibly more termination of the workforce, higher operating costs for testing and worker safety-related issues,” Dennis provides some bad news from the fields. However, it would seem that the indirect impact poses another set of grave setbacks. “The shutdown of the restaurants, hospitality and travel sectors severely impacts numerous producers and suppliers. Moreover, the connection between the agriculture and the education industries faces trouble at all levels, whether it is the inability to supply meals to children at school or corporate feeders that supplied Universities. Thus far, general estimates indicate that the foodservice sector was impacted by as much as 70% of reduced demand. Thank goodness numbers are now back into 60-70 percent range.” The investors are also shaken up by this situation. As Gil explains, “we expect that investors will reflect on pre-COVID-19 valuations as inflated and unsustainable. This will drive down valuation for AgriTech startups, specifically early-stage startups that are hindered by low commercial adoption. We also believe that financially well-positioned portfolio companies will be able to weather the storm and adjust positively to a post-COVID-19 world, given their critical contributions to the productivity and sustainability of the food and agriculture sector.”

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“

“We expect to see large corporates aggressively return to technology acquisitions, driving attractive portfolio exit opportunities.”

The most important question raised now remains, “what will we be able to experience after the skies are clear?” Gil optimistically observes. “Fortunately, the agriculture industry has been relatively resilient in the face of COVID-19 due to it being deemed a ‘critical industry,’ its naturally social-distanced nature (farms are spread out over wide swaths of land), agriculture commodities and food prices being generally more stable versus other industries, and the fact that food consumption at home has increased substantially and thus accelerated demand for food from producers.” He continues to calm the panic a bit, “this sector will continue to evolve over time.

One of the longer-term changes we believe will occur is alternative proteins becoming a larger percentage of the pie, as people continue to look towards other sources of healthier food. On the farm itself, robotics and automation will become more and more prevalent until full automation is achieved and adopted, revolutionizing the way farms operate. This shift to automation reflects the increasing digitization of all parts of the agricultural supply chain that started during COVID-19; and, this digitization will endure as technology continues to create a more efficient

and transparent agricultural supply chain. Farm technology will also make advances in crop productivity through a combination of genetic enhancements and crop protection tools that will improve overall yield and crop health.

At a macro level, we expect to see large corporates aggressively return to technology acquisitions, driving attractive portfolio exit opportunities.

There will also be more emphasis on the vertical integration of branded food and agricultural production, once again creating more efficiencies in the supply chain. Overall, I predict that the agriculture industry, as well as AgriTech, have a bright future ahead.” Once again Dennis looks at it from the farmer’s point of view, “I expect to see much more automation on the farm and in the processing plants. Farmers will have more input data as it will be more accessible. Right now, growers are a bit burdened by all of the data they have to manage, if they are fully engaged in all facets of the business. The workforce will possess more skills in order to operate increasingly more sophisticated equipment in the farm. The West Coast will remain the primary production area for specialty crops.”

From Theory to Practice:

New Ways for

Ensuring Academic Knowledge Spillover

INNOVATION SAGE

Reaches the Farmers

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Author:

Tal Berman

Contributor:

Kristy Sun

PhD – California State University at Fresno

Contributor:

Cecilia Monclova

PhD – Texas Tech University

F

INNOVATION SAGE

ar before the emergence of the COVID-19 epidemic, farming has been a necessity for humankind and vastly determined the way we live. As we have been confronted with this reality in light of recent world events, we all applaud the caretakers at these times of health uncertainty, be it doctors, nurses, and other such workers. However, for some reason farmers have remained in the shadows, despite the reality that “Agriculture is the backbone of our economy,” as former US congressman John Salazar put it. Even though it is quite clear that heathier food consumption provides us a much-needed protection against many diseases, still we do not see people stepping out to their balconies to cheer for their local vegetable growers.

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“COVID-19 has re-focused our attention on what matters the most, agriculture being one of the most important economic sectors of society. Farmers struggle every day against economic impacts, climate change, pathogens, weeds, increasing costs, and lower profits.”

Without minimizing the invaluable job our healthcare professionals provide, farmers also provide an instrumental service to society and individuals alike.

Not only had they been dealing with quite a lot of challenges even before the pandemic, but the consequences of this pandemic from which we all suffer and fear, such as quarantine and economic recession, became a real disaster for the farmers. Prof. Kristy Sun of Cal State University at Fresno explains, “Field workers need to take care of their kids due to school closure and so are absent from work for much of the time.

According to the age census, the average age of farmers is at least ten years older than workers in most other sectors, and it is a well-known fact that the elder populations are at a higher risk for severe illness from COVID-19. Therefore, it is not only a challenge to get enough labor, but also the labor costs are getting higher and higher.” Cecilia Monclova, Assistant Professor and Extension Specialist, from Texas Tech University confirms her colleague’s assessment: “I agree, COVID-19 has re-focused our attention on what matters the most, agriculture being one of the most important economic sectors of society. Farmers struggle every day against economic impacts, climate change, pathogens, weeds, increasing costs, and lower profits. I hope the community realizes the importance of investing in agriculture to ease the burden, assist in the development of new technologies and make it accessible and affordable.”

“

“Agriculture 4.0 is the future trend the agriculture industry is facing, which focuses on precision agriculture and the Internet of Things (IoT), to improve production efficiencies.

Technology is changing the agriculture world without a doubt.”

With the recent ultraquick development of the AgriTech vertical, farmers in the future will be able to enjoy the digitalization of their industry. “Agriculture 4.0 is a term used by the World Government Summit,” Prof. Sun elaborates. “It is the future trend the agriculture industry is facing, which focuses on precision agriculture and the Internet of Things (IoT), to improve the production efficiencies. Technology is changing the agriculture world without a doubt.” However, it seems as if we are far too early in the process with a long journey ahead. “I think technology could play a great role in assisting farmers to move agriculture forward. However, in order for this to succeed an infrastructure, a network of professionals are needed to analyze the data and make it available,” Prof. Monclova explains as she cools the enthusiasm a bit.

“Technologies like drip irrigation and precision spraying have brought new opportunities for farmers and are changing the agricultural landscape.”

Speaking of technology and digitalization, there are many things that have already been employed to assist the farmers with their production and costs. Meanwhile, others are being developed as we speak. “I believe the use of robots to harvest or make applications would help a lot.” Prof. Monclova insists that, “the use of sensors to diagnose and predict issues related to crops would be of considerable benefit. There has been an increasing interest in developing state-of-the art technology from unusual competitors like Microsoft, and I am looking forward to what their ideas are and how to implement them into the field.” Prof. Sun adds some more types of innovation to the mix: “Technologies like drip irrigation and precision spraying have brought new opportunities for farmers and are changing the agricultural landscape.”

Obviously, this new wave of change is in its infancy. It will take much longer for this revolution to become fruitful. So, what else is needed to bridge the gap? For centuries academic institutions have been a source for knowledge. Academic research has helped advance civilization in numerous verticals. However, in the quest for knowledge, one may find that there is a lack of practical application in the real world. As a matter of fact, academic journals are the type of documentation where practitioners may get lost.

Malcolm Gladwell, put it well when he surmised, “That brilliant learning sometimes gets trapped in academia and never sees the light of day.”

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“We serve the farming community, as their challenges and needs deserve to be served and fulfilled.”

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Nevertheless, in agricultural research all over the world we notice that talented and enthusiastic scholars work hand-in-hand with the external farming community. “We serve the farming community, as their challenges and needs deserve to be served and fulfilled,” explains Prof Monclova. “That is what my colleagues, my team, and I do every

day. It is important to keep your eyes and feet on the ground and always keep your clientele in mind.”

In the US, academic research has wisely adapted itself to the growers. For example, scholars at the University of Idaho perform vast research on potato farming because local farmers in the state grow 25 breeds of that delicious vegetable. You may find similar examples all across the farming landscape in each state and region where academic research concentrates on the local farming ecosystem. “The findings from my Cabernet Sauvignon research can provide guidance for the San Joaquin Valley winegrowers,” Prof. Sun shares the value of her research to the ecosystem.

“By using our methods, they may be able to achieve a higher margin with higher per acre production and better fruit quality with less water and labor cost.”

“The meaningful findings from research projects are provided to farmers and the industry through seminars, publications, field tours and demonstrations.”

In general, research universities are well aware of the value their scholars provide with their academic work, and therefore most high-level institutions are making all efforts to commercialize it.

They all have TTOs (Technology Transfer Offices), which assist the researchers with converting their work into sellable products. Prof. Sun observes that, “From my experience, agriculture scholars are commercializing research findings into products, services or procedure. For example, the California State University Agricultural Research Institute (ARI) supports applied research and outreach activities and encourages technology transfer activities in order to benefit California farmers. The meaningful findings from research projects are provided to farmers and the industry through seminars, publications, field tours and demonstrations.”

A recent report from the Milken Institute on the matter of commercializing US academic research shows the everlasting growth of patents and licenses issued by these TTOs with over 6,000 each in the year of 2015. Although there is a vast decline in revenues since the big economic crisis of 2008, universities still prove successful in commercializing their research to an amount of $2.5 billion in license income.

Taking a closer look at these statistics, we checked the numbers provided by the Office of Research Commercialization in North Carolina State University, which are based on the previously mentioned Milken Institute report. From the 25th ranked university in that report: 51 out of 157 (almost a third) of the total commercialization agreements reached in the year 2019 were plant licenses.

“Professors do market their developed varieties and they do produce great ones,” Prof. Monclova sheds some light on these findings while keeping her feet on the ground. “Usually the price is low to make it affordable which is great, but at the same time there is a limited access to the cutting-edge technology due to competition with other sciences that fortunately for them get more funding.”

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“Technology- and innovationbased agriculture requires technological standards to ensure the compatibility and safety of equipment. It requires better collaboration among government, industry, and farmers.”

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Bridging the gap between theory and practice may be the way for assisting farmers in dealing with the new situation of not only the recent pandemic crisis, but also of all macro-level challenges of climate change and the lack of available water, just to name a few. It is

hard to imagine the world remaining apathetic about it moving forward.

“Technology and innovation-based agriculture requires technological standards to ensure the compatibility and safety of equipment,” Prof. Sun points to a more multifaceted solution with many stakeholders joining forces.

“It requires better collaboration among government, industry, and farmers.

Education workshops and technology demonstrations for farmers are also useful.” However, the solution for which Prof. Monclova argues must also be from the top-down. “More funding toward agricultural research and extension is needed. There are great ideas and concepts that could be groundbreaking only if there is enough support to follow them. All in order to improve and move toward a technology, which needs to reach the farmers.”

“In the future the focus will move to precision agriculture, which is using the minimum quantities required (water, fertilizer, etc.) to meet the crops’ needs.”

To sum up, where is the world of agriculture turning as we move forward into a new future? From the plant perspective there are vital changes; as Prof. Monclova claims the necessity of “sustainability, maximizing inputs, recycling resources like water, fertilizers and more. Probably using less soil and more in aquaponics under controlled environments and vertical agriculture.”

Looking at it from the farmer’s point of view, Prof. Sun suggests movement in other directions: “In the future the focus will move to precision agriculture, which

is using the minimum quantities required (water, fertilizer, etc.) to meet the crops’ needs. Future agriculture will also use more technology and innovations. For example, plant-based meat, 3D printing of food, automation and robotics for the food production, field sensors, scout drones and GPS systems. The knowledge around technology-based agriculture will make farming more predictable, efficient, profitable and environmentally sustainable.” I guess all of us will have to monitor the industry well and find out for ourselves.

Wine and Grape

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Farming in the Age of Climate Change 36

Contributor

Guy Haran

CEO of Vinspiration.wine, a wine expert, educator, and founder of the podcast Wine Is Basic.

N

ew technologies and globalization are shaping and changing the wine industry constantly. Stainless steel tanks were adopted from the milk industry 70 years ago and became the main material used for wine vessels in addition to materials such as cement and oak. Wine critics, such as Mr. Robert Parker are influencing international style. However, on top of everything, else climate change threatens to shuffle the industry completely.

The average temperature rises all around the world and creates new challenges for producers. Regions, such as Bordeaux in France, become warmer and less stable climatically and the effects are easily discernable. For example, in 2017 the production of the whole region dropped by 40%, which means a drop of about 200 million liters compared to the previous year. These significant numbers oblige measures to be taken and indeed things are changing in France. In 2019, Bordeaux’s winemakers allowed seven new grapes to be grown and become part of the local wine, which is very unusual. Grape varieties such as Marselan, originally from the south of France, and Touriga Nacional, arriving from Portugal, are now part of the Bordeaux blend. Both grapes have better resistance to a warmer climate. Until 30 years ago, growers’ main worries were a lack of ripeness and cold autumns, but today it has turned completely over.

In addition, we are witnessing vast research around the world attempting to

manage climate change, much of which is being done here in Israel. Only last year we received a group of winemakers and oenologists from Bordeaux, who came to learn how we handle and perfect winemaking in a warm climate.

Israeli agricultural inventions have transformed the world of wine. A notable example is the dripping irrigation systems, which increased the total production of wine in Spain by over 30% in the last 25 years. That comprises a growth of more than one billion liters per year.

Wildfires have frequented California wine regions in recent years, demolishing vineyards and wineries as well as endangering the lives of many. Australia too has suffered from huge wildfires which affected not only agriculture and wine making, but also tourism and of course worse yet – a massive ecological disaster and the loss of lives of both humans and wild animals.

The Volcani Institute alongside the Hebrew University are leading the way and developing new grape varieties and technologies to cope with the swift changes we see around us. Technologies to better detect and handle water shortage, diseases, and other hazards.

Innovation and R&D are key factors in finding the right path for a sustainable future for wine, as the challenges are getting bigger and bigger for the growers and producers.

INNOVATION SAGE

CUSTOMER 38

SUCCES

SS

The Concept of

Customer Success as a

Psychological

INNOVATION SAGE

Archetype

40

An interview with

Prof. Dr. Jens Uwe Pätzmann,

Director of the Institute for Entrepreneurship at Neu-Ulm University of Applied Sciences

T

he term Customer Success has been coined in recent years and represented a very important shift from the traditional term of Customer Service. Why has this shift taken place, and what does it mean exactly? To answer this question, we decided to pick the brain of Professor Jens Paetzmann, a customer insights expert and researcher.

Tell us Professor, other than a marketing and customer insight researcher, who are you?

I am the Director of the Institute for Entrepreneurship (IfE) at the NeuUlm University of Applied Sciences in Germany. The IfE sets three priorities: A. International research (mostly funded by third-party partnering universities, for example the Academic College of Tel Aviv-Yaffo), B. International teaching (joint courses on Bachelor’s and Master’s level), and C. International transformative initiatives (nurturing of startups set up by students of our own and partner universities). Moreover, in my daily job I teach marketing, branding & strategy for startups in Germany and abroad, i.e.

Kenyatta University in Nairobi. I primarily publish works on branding and customer insight research topics. In my empirical research, I use socio-psychological and cultural-anthropological methods.

For instance, I explore my research on customer insights through the lens of archetypes. Our topic of this interview Customer Success - can also be linked to archetypes.

“The product or service should not only make the customer satisfied but demonstrably more successful.”

What is the newly coined term Customer Success?

The basic idea of Customer Success is quite simple: the product or service should not only make the customer satisfied but demonstrably more successful. Companies actively support the customer in making the best use of their offer to achieve individually agreed-upon goals. First and foremost, Customer Success concerns business models that generate recurring revenues. The customer pays for a subscription at regular intervals - as is the case with software licenses, for example.

This is why the term is particularly common in the SaaS industry. If you want to maintain customer relationships in the long term, you must never rest on your laurels. After all, the real work starts when the contract is signed: the customer must be “conquered” again and again (i.e. convinced of the benefits of the product or service).

What is the difference between Customer Success and Customer Service, and why did the business world move from one to another?

Although there is some overlap, Customer Success is not just a fashionable synonym for Customer Service or Customer Support. Customers turn to service or support when they already have a reason to complain. Typically, service or support personnel are confronted with problems that always have the same cause. They cannot eliminate the causes completely but only solve individual issues. This approach is reactive. Perhaps the most significant difference between Customer Service/Customer Support and Customer Success is that the Customer Success Managers (CSMs) are proactive. Based on the usage data, they recognize early on if a customer could become dissatisfied in the future. This enables them to intervene

in adequate time and solve the problem before a complaint is even made.

What has changed? Customer Success is based on the customer‘s journey and the lifetime value of a customer. It is process-oriented and dynamic. Customer Service and Customer Support are merely tactical units that work on the ad-hoc resolution of small-to-medium-sized problems. Customer Success Teams form strategic units. The radical focus on this strategy is new. Customer Success is lived Customer-Centricity. However, one can argue about whether a new term for this function would have been necessary.

Customer Success as philosophy should be the logical goal of every “helping” organization because the idea, the desire, and the consistent mission to do everything for the success of its customers benefits everyone involved. The creation of benefits and strengthening of emotional bonds throughout the entire customer journey - regardless of whether someone is already a customer or not – does not concern just one department or another. It affects everyone.

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“It is generally more costeffective to develop and maintain a customer via Customer Success (“farming”) than to acquire new customers via marketing and sales (“hunting”).”

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Understood, however, would you please emphasize why is this function so crucial?

Of course, and it quite an easy answer.

It is generally more cost-effective to

develop and maintain a customer via Customer Success (“farming”) than to acquire new customers via marketing and sales (“hunting”). Customer Success is becoming increasingly crucial in companies worldwide. Maintaining regular customers is cheaper because it takes less effort and fewer resources to strengthen the basis of trust already established with a customer, rather than to build up trust with a new customer at great expense. There are five core advantages that result from its practical implementation in the Customer Success Management function: 1. Reduction or elimination of customer churn.

2. Increase of sales with existing customers (upselling and cross-selling) through higher loyalty and “retention” (retention and lifetime value).

3. Improvement of the customer experience and customer satisfaction through a consistent focus on customer benefit and success.

4. Confirmation for the customer that the right partner/vendor has been selected.

5. And more opportunities for new customer acquisition - triggered by changing a contact person to a new employer with simultaneous “taking along” of the existing provider (socalled second-order revenue).

Why do many enterprises today seek innovative products and models to achieve Customer Success?

Sales were the first growth factor, and thus, the first innovation in terms of customer-centricity. Even at the turn of the 21st century, distribution was the primary growth factor for B2B companies.

Marketing was the second growth factor. The Internet opened up a new source of information. It has been shown that potential customers, if they have a choice, prefer to do their research, and only talk to a sales representative when they are ready. For companies, this has opened up a new opportunity to arouse the interest of potential buyers much earlier in the purchasing process. While salespeople were still needed, the company’s growth no longer depended on the size of the sales team, but rather on the number of leads that the marketing team could generate for the sales team. Of course, customer satisfaction was also important, but longterm contracts were still the norm and provided some protection for companies.

Besides, customer acquisition was so incredibly cost-effective that the question arose, “Why should companies invest too much money in customer retention when it costs so little to acquire new customers?”

Now, everything suggests that Customer Success will become the third growth factor. Buyers today have an incredible amount of choice. Never before have buyers had so many options, information, and offers vying for their attention.

The balance of power has shifted; no longer will buyers be forced to sign annual contracts. More and more software companies are switching to so-called “freemium models,” which allow customers to test a product before buying it and terminate the contract at any time. Customer acquisition is becoming increasingly expensive, as it becomes easier for customers to turn their backs on a company. The result of this development is that companies are making much more effort to satisfy existing customers. Companies will continue to need salespeople to close deals and a marketing team to handle

lead generation. For growing companies, however, it does not matter how large the sales or marketing team is. The key to a company’s continued success is its ability to stem customer churn and build a satisfied customer base that will recommend its products to others.

How do Customer Success platforms assist in customer satisfaction improvement?

I would like to extend the term Customer Success platforms to include Customer Success software. There are a multitude of providers. Three are mentioned here: 1. HubSpot offers a so-called service hub, which contains a variety of different customer access tools. Users benefit from free features such as live chat, shared email inboxes, and a service ticket system that helps you to maintain your customers. You can also add a knowledge base to your site that customers can access if the team is unavailable. HubSpot even offers chatbots. These can be programmed to perform a variety of tasks without the intervention of an employee. Price: free entry, premium versions available.

2. Totango supports companies in setting goals for their customers.

Totango’s tools offer status evaluations, thanks to which you always know whether your customers are achieving their set goals. This platform also supports continuous testing, and adjustments can be made at any time during the customer journey. Price: varies.

3. Amity centrally consolidates data from other software products.

Several integrations can be linked to your Amity account to efficiently consolidate customer information.

Once this data is uploaded to Amity, the tool creates guides and notifications based on customer behavior. Amity offers additional features that facilitates the easy sharing of information with the entire organization. Price: varies.

Common to all three providers is their use of the following metrics: • Renewal Rate - renewal rates of subscriptions.

• Retention Rate - Individual/general retention time of the customer with the product/ company.

• Adoption Rate - Duration until a customer fully uses the success-relevant features of the product/service.

• Churn - Proportion of “jumping” customers concerning the total customer base.

• Upsell Rate - Absolute/relative size of upgrades sold to a higher/valuable product category.

• Cross-sell rate - Absolute/relative size of complementary and additional sales.

• Down-sell Rate - Absolute/relative number of “downgrades” to a lower product with less performance.

• Net Promoter Score (NPS) - Loyalty metric over time and/or in comparison to the industry peer group.

• Customer Health - General “state of health” of a customer, aggregated from the metrics mentioned above, overtime/moment/in relation.

• Sales growth - General growth in sales with the existing customer base (new and regular customers).

• Customer Lifetime Value (CLTV) - the “lifetime value” of a customer, calculated by multiplying the average “time a customer stays” in years by the EBIT margin/contribution margin per customer (what you effectively “earn” from this customer in the long run).

• Customer Acquisition Cost (CAC) - The cost of acquiring a new customer, calculated as the sum of all marketing and sales costs divided by the number of new customers acquired.

• Customer Success Cost (CSC) - the effort required to “keep” existing customers via Customer Success, calculated from the sum of costs of all Customer Success efforts divided by the number of existing customers.

• Hunt Farm Rate - Comparison of the relative sales shares of new vs. existing customers over time (also as a comparison of target contributions from Sales vs. Customer Success).

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• Predictive metrics - such as churn risk, upsell/cross-sell potential, renewal probabilities, etc.

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• Activity metrics - even if not business-relevant, they can be used to improve the efficiency of CSM through data such as activity levels, telephone/emails sent/opened/ clicked, marketing response/opt-outs, meetings/QBRs held, milestones achieved, etc.

“If, in the end, emotional connection with customers falls by the wayside, Customer Success Management is useless. We are simply people and not machines.“ Has COVID-19 emphasized the need for Customer Success?

Yes, because the contact to the customers was in danger of getting lost. You had to switch to ZOOM, WebEx, Teams, Go-toMeeting or similar video conferencing tools to stay in touch with customers.

Actually, the crisis has shown that the classic customer contact, now via ZOOM, is experiencing a renaissance. Metrics and digital dashboards are all well and good, but if, in the end, emotional connection with customers falls by the wayside, Customer Success Management is useless. We are simply people and not machines.

Are there new opportunities for innovators in the field?

I believe that companies and service providers who find answers to the

following questions will remain innovative: •

Product: Which new features in our product will help the customer to reach his/her goal faster/better/easier?

•

Development: What new features do we want to develop so that we can offer added value to customers via upselling/upgrade?

•

Onboarding: How can we make the product and onboarding as simple and easy as possible so that the customer can experience instant quick wins?

•

Sales: For which leads and prospects are we most likely to be suitable providers and partners in the long run - and not just for a single transaction?

•

Marketing: What performance promise do we make so that the customer is never disappointed with the success and added value that he gets from us and our product/service?

•

Finances: What types of financing can we offer to make it as easy as possible for the customer to reward and pay for our products/services?

•

Controlling: What metrics can we offer our customers so that they immediately recognize the measurable success and added value of our product/service?

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46

“

“Customer Success without well-founded customer insights –which manifest themselves in motivational barriers, motivational amplifiers, personas, psychograms and ultimately customer archetypes – will not work.”

What does the future hold in that regard?

In chronological order, we have seen the following developments in Customer Success: 1. Quantifying Customer Success through metrics.

2. The digitalization of Customer Success through the Internet.

What we will experience in the future is the emotionalization of Customer Success through psychology. Why will this be so? Human being’s economic decisions are 70% emotional, not rational. Homo oeconomicus is a fairy tale. Behavioral economics, neurosciences, the discipline of psychology in general, permeate all areas of economic life. Life per se is psychologized. This too applies to Customer Success Management.

What does that mean in concrete terms? Customer Success without well-founded customer insights – which manifest themselves in motivational barriers, motivational amplifiers, personas, psychograms and ultimately customer archetypes – will not work.

Global companies, in particular, work with customer archetypes because archetypes are universal prototypes of human beings. They are based on the basic motivational systems of security, autonomy, and arousal, and they trigger our emotions in the limbic system of the brain. If we manage to influence customer decisions implicitly, incidentally, and preconsciously through Customer Success Management, objective metrics become emotional successes.

Why Do We Need Customer Success

and Why Is

INNOVATION SAGE

Customer Support Not Sufficient?

48

Noa Greenberg,

Contributor Customer Success Manager at Semperis

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ell first, let me ignore completely the second part of the title I so carefully chose, and start this article by proposing a concept: Customer Success is not just a role, but a business conception and orientation. In today’s market (especially SaaS companies, we will soon understand why) companies recognize the fact that their clients have choices. Never before in history did humans have as many choices as we have nowadays. To break through the noise, companies now invest their money in marketing, products, and Customer Success, which we can actually substitute for the term “customer experience.”

This third aspect, customer experience, encompasses the scope of this article.

Naturally, Customer Success is extremely common in companies, whose business models are based on subscriptions (like SaaS). When you face the risk of losing a customer (what your finance gal/guy calls “monthly payments”) hovering over your head each month – you do everything in your power to prevent it. That is where Customer Success kicks in and saves the day.

Companies orient all their employees to be customer focused. That is, companies direct their representatives to be the nicest, most attentive selves they can be.

Companies seek to cradle their customers in a big soft blanket – a tight wholesome hug the client will never want to leave.

The person who conducts this orchestra for the customer is the Customer Success Manager (nice to meet you!). His/her job is to make sure the customers are happy,

use the product or service, find value in the content sent to them, and most importantly to ensure they never leave (or churn) anytime soon.

As this field is constantly evolving, the recent trends show that in addition to preventing churn, many companies are focusing their Customer Success teams on growth. As the CSMs (Customer Success Managers) are in constant communication with the clients, companies leverage the knowledge the CSM gains to surface opportunities, provide relevant solutions and expand customer value (or up-sale).

Companies could win big by using this strategy, with McKinsey benchmark data suggesting that existing customers consist of between a third to half of total revenue growth, even at startups. Costs for revenue expansion from existing customers are also a fraction of those for acquiring new business.

So, now that we know what Customer Success is, we can easily answer the question of why this role is different than any of the support roles. Customer Support is Customer Success oriented, meaning customers use support when they run into a problem, and the support team provides the best service to solve the problem. The Customer Success function (or CSM) takes their responsibilities one step further to include the customer’s wellbeing through its entire lifecycle.

To sum up, upholding responsibility for the customer’s lifecycle, to prevent churn, and last but not least to push growth and up-sales forward, defines your Customer Success team a true champion of success.

Pushing

Customers

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to Succeed

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An Interview with

Ziv Peled,

CCO at AppsFlyer

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ecently, we all learned that AppsFlyer has turned into another Israeli unicorn. The latest valuation due to their last funding round was at $1.1billion. One of the reasons for this amazing success – other than its great management team – is their stateof-the art customer relationship management. We sought to understand more about Customer Success and what makes theirs so successful by talking to AppsFlyer CCO, who leads its customer engagement.

Hi Ziv, great having you. Let us start by listening a little about you and your background.

I have over 20 years of customer-facing roles under my belt, including account management, pre-sales, outbound product management, and Customer Success. I started my career working for telecommunication vendors, serving the biggest telecom operators globally until I joined AppsFlyer as a senior Customer Success Manager back in 2014.

Since then, I advanced to lead the team, which evolved into several teams, and have been working in my current position as Chief Customer Officer for about four years.

What is AppsFlyer and what is your role in the company?

AppsFlyer is the global attribution leader. At AppsFlyer, we empower marketers to grow their business and innovate with a suite of comprehensive measurement and analytics solutions. As previously mentioned, I serve as the CCO, Chief Customer Officer, leading our incredible Customer Success and support teams, 220 people across all 18 offices.

How does your background assist you with executing this role?

I understand customers and I understand how Customer Success Managers (CSMs) should serve customers to help them reach their goals, and how we should operate to gain our customers’ trust. I gained an in-depth understanding of the importance of a positive customer experience by working with customers for over 15 years, which taught me how to develop deeply personal relationships with champions and decision-makers within the companies I serve.

“We are not just here to make sure they use our product well; we want to make sure they use our product to succeed.”

What, in your opinion, drove the switch from Customer Service to Customer Success?

Customer Success is an evolution of the industry. We are not just here to make sure they use our product well; we want to make sure they use our product to succeed. At times, we will even adapt the product itself to make sure it provides our customers with what they need to succeed.

What has changed in the customers’ perception to have driven that change?

I believe this changed customer perception is characterized by a shift from a more transactional interaction to a true relationship, that is the clear difference between Support and Customer Success. In a Customer Success role, you develop a deep, longterm relationship, which in some cases can yield the feeling that the CSM is a part of the customer’s team.

decided to build our solutions inhouse on top of SalesForce, Looker and Troops.ai. Vendors in the Customer Success vertical must work to better understand our needs and make sure they build a best-of-breed solution.

Has anything changed in your customers’ demands in recent years?

Of course. Customers are looking for a partner who understands their needs and challenges – a company and a real person to help them provide a solution for a current need and build

“Customers are looking for a partner who understands their needs and challenges – a company and a real person to help them provide a solution for a current need and build more value in the future.”

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What are the trends, technologies, and products in the field nowadays?

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There are more and more vendors building Customer Success platforms, add-ons, AI and prediction solutions.

These are very interesting solutions, but unfortunately none of them truly blew my mind. We tried a few of them in the past and in the end

more value in the future. Companies that understand this grow and become leaders in their categories, especially in B2B SaaS. There is also a growing demand for an “expert” or a “consultant” in certain industries.

For example, benchmarking trends in the customer’s vertical or market is increasingly becoming a standard expectation these days.

“I see this role growing more and more into a trusted advisor, a customer expert who is somewhat of a “Relationship Manager,” not merely focused on the commercial side of things.”

Where do you see the future of the Customer Success function?

In the beginning of the 2010s, the Customer Success function was an enhanced and dedicated support engineer that mainly ensured customers got enough value in the onboarding stage. Then in the middle of the decade, the Customer Success function focused more and more on value for the entire customer lifecycle. Today the focus is on a long-term relationship with the customer and specific significant relationships built between CSMs and their most important contacts. I see this role growing more and more into a trusted advisor, a customer expert who is somewhat of a “Relationship Manager,“ not merely focused on the commercial side of things.

Customer Success:

Owning the Customer’s

INNOVATION SAGE

Journey Ensures Mutual Success

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Tomer Artzi,

Contributor Vice President of Customer Success for Kornit Digital (NASDAQ:KRNT) Asia Pacific

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owadays, more and more companies are embracing the growing trend of incorporating Customer Success teams into their organizations, exploring ways to synergize across teams, and deliver unique value to their end customers.

Is the new name simply a disguise for a customer support organization, or a profound change in the journey of customer-centric organizations? What are the objectives of such teams, and what are their key success factors? The following article offers some insights into a Customer Success team’s profile, objectives, and path to achieving success.

We know businesses’ surroundings can change quickly. COVID-19 has presented a glimpse into the changing dynamic of market trends and consumer behaviors in a very short period of time. Global supply chains shift to a world of low (or nonexistent) inventory, while e-commerce businesses are booming and exploring new measures to cope with the sharp increase in demand. Consumers’ behaviors also change rapidly, and the online world dictates new ways of doing business. Go-to-market strategies are reshaped, driven by the evolving market trends. Real-time connectivity, along with data analysis, become either an enabler or a sheer barrier. Darwin’s immortal theory about the most adaptable animals surviving has never been more relevant.

Fast-growing production facilities are now facing multi-dimensional challenges, far beyond the classical “break and fix” types of problems. Their suppliers’ efficiency, Service Level Agreements (SLAs), and reliability indicators (such as OEE – Overall Equipment Efficiency)

have become the lesser standards, no longer sufficient for withstanding unfair competitive advantage in a fast-changing and complex business environment. In many cases, a supplier’s superior Key Performance Indicators (KPI) reflect its own efficiency, rather than the customers’ ultimate success – the proverbial “the surgery worked, but the patient died” predicament.

“Customer Success” implies a different strategy and mindset for teams who wish to become customer-centric. The way customers define “success” dictates the team’s success and drives its internal processes, leadership profile, culture, and solutions portfolio. The suggested “Customer Success” approach is intended to continuously monitor customers’ growth barriers and develop internal competencies and solutions accordingly.

This is an iterative process that keeps the relationship alive through mutual targets, similar vision, and continuous growth.

In order to define and refine the customer’s needs, the team should own the responsibility of the customer’s complete journey. It begins with an early engagement in the “Solution Evaluation” phase during the pre-sales process, enabling an opportunity to capture some of the key pains that led the customer to start the engagement in the first place.

Those capabilities, including solution integration, require an investment of new competencies and practices that are no longer limited to serving the products themselves. The team should be equipped with capabilities and methodologies on multiple domains, with a direct impact on the customer’s growth, such as the customer’s end product, applications

variety, third parties contributing complementary products, and the connectivity between them. The ability to translate the value into cost savings or incremental growth is part of the holistic view any Customer Success team should integrate.

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In the digital printing industry, for example, successful KPIs targeting impressions growth (actual production yield) are no longer limited to the printer’s performance alone. Many other factors affect the end result, such as production workflow (from order to delivery), IT, fleet management synergies, optimizing variety of applications, trained manpower, media types being used, and commercial fit for different job types. In many cases, leveraging the printer’s technology to develop unique applications for a customer may open up new markets.

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Another example would be streamlining the jobs that are generated from the consumer’s order through production and delivery, reducing unnecessary decision points. Doing so requires a comprehensive understanding of the customer’s needs, as well as internal workflow, and available solutions. Helping customers to orchestrate the outcome (impressions efficiency and growth) requires a comprehensive approach, contributing

to customer’s intimacy, satisfaction, and ultimate success.

Though it is not suggested a Customer Success organization adopts a vertical responsibility of the production environment, the team should focus on developing capabilities and practices relevant to the company’s core business, which in turn affect the customer’s outcome. A functional blueprint for any Customer Success organization addresses the customer’s journey. It should include a technical team that specializes in products, and teams that evaluate the customer’s ecosystem and commercial coverage to quantify ROI. This Customer Success approach is best-suited for companies with high dependency on long-term customer relationships, whereby recurring revenue is a substantial pillar (through valueadded services or others). As mentioned previously, everything changes rapidly, and so do the success criteria for Customer Success organizations. Those success indicators will continue to evolve and change. It is critical that Customer Success teams cultivate a culture of continuous adaptability, as well as maintain a holistic responsibility of the journey, while “True North” – the customers’ (own) success – will always remain the point of focus.

The Quest to

Turn Customers

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into Partners

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An Interview with

Omri Braun,

Co-Founder & COO at Lightico

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owadays, business is all about saving time and cutting costs without sacrificing your customers’ satisfaction in the process. Many enterprises are searching for products which assist them in achieving that goal. Seven years ago, while studying for their MBAs, two entrepreneurs thought about such a solution. And since then, they have secured three rounds of funding while maintaining a repertoire of high-end customers. Omri Braun, one of these ingenious entrepreneurs, was kind enough to share some insights about the world of Customer Success.

Thank you Omri for sharing your insights with us! Start please by telling us a little bit about yourself.

My pleasure. Well, my background is mostly in the FinTech industry. Previously, I was involved in several FinTech ventures based out of Israel as a co-founder and C level executive. I founded my first company back in 2007 and since then I have been active as an entrepreneur, consultant, and mentor to other startup companies.

“The repeated phone calls, requests for documents via e-mail or fax, the bouncing back and forth between channels, the wasted resources to accomplish simple tasks like sending in a copy of your bank statement to get your auto loan - these were all problems waiting, begging to be solved.”

How did you come up with the concept for Lightico?

My co-founding partner, our CEO, Zviki Ben Ishay, grew up, so to speak, in the call center technology landscape and saw first-hand the limitations and challenges that call center agents face in completing their mission. More and more customers were on the go with their mobile phones - and companies were unable to serve them efficiently. The repeated phone calls, requests for documents via e-mail or fax, the bouncing back and forth between channels, the wasted resources to accomplish simple tasks like sending in a copy of your bank statement to get your auto loan - these were all problems begging to be solved. It was clear that we would be living our lives more and more on our handsets and that a vast number of businesses needed a solution to get things done on their customers’ handsets – but not as a separate app.

Where are you in the process? And what are your future goals and plans?

Our product and service have matured to the point that we have seen some very significant growth in customers over the past year, including some of the biggest names in banking and finance. For 2020, we set some very aggressive goals that, despite or even as a result of the pandemic, have accelerated our growth; we have expanded both within the verticals in which we are already strong, such as finance and telecom, as well as in newer verticals including healthcare and insurance.

“We have had clients decrease turnaround time on transactions by as much as 90%.”

Lightico has been a great tool for Customer Success. How so?

Lightico enables customer-facing businesses to complete transactions of all types much faster, more securely and more conveniently. For example, we have had clients decrease turnaround time on transactions by as much as 90%. That means customer service agents are much more efficient and their own customers are amazed at the level of their customer experience. It is a win-win for all involved and is really what we have come to expect from interactions in 2020.

“Customer Success is about changing your mindset from ‘have I done what is required of me?’ to ‘is my customer happy and was the interaction a success from their perspective?’”

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As a startup in this particular vertical, how do you interpret the switch from customer service to Customer Success?

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Ultimately, it is about changing your mindset from “have I done what is required of me?” to “is my customer happy and

was the interaction a success from their perspective?” Today, it is just not enough to tick the boxes; you need to be actively and passionately invested in your own customer’s experience. We take pride in championing their success just as much as ours, as they are mutually inclusive, and ensuring that we are providing the service they need. A perfect example of that is during the initial stages of the pandemic, we had customers reaching out to us with urgent requests for features or changes to keep their businesses running. A customer service approach would say “we are providing the product you purchased, we will add your requests to a feature list.”

The Customer Success approach is “we understand your crisis and we will work overtime to get you what you need.” It also comes down to sharing ideas from our experience to make them more effective – suggesting different approaches and use cases that can help them reach their goals.

In your opinion, what was the change in the customers’ perception which drove that change?

In a word: Amazon. In two words: Amazon - Netflix. People expect things to get done quickly and easily and on their smartphones. We do not understand why the bank needs us to come in to sign a form or send a fax. eSignatures exist and are just as legally binding and secure.

Like most of us, I do not have a scanner, so I send pictures and documents using my smartphone. These changes, driven by disruptors like Netflix, Lemonade, and Vroom, have led to customer expectations that are much higher. Companies that do not provide such level of digital customer experience ultimately disappear - and the pandemic only sped up that process.

“Today, state-of-the art technology is assessed more by its impact, its implementation, and integrations within the organization.”

What are the state-of-the art technologies in the field nowadays?

There are endless buzzwords and technologies being talked about: AI, Omnichannel, Cloud, etc., but that is just the technology in a vacuum. As a response to COVID-19, people are asking how are these tools deployed, how are they leveraged, and what is the value they are providing to companies and their customers? Today, state-ofthe art technology is assessed more by its impact, its implementation, and integrations within the organization.

Has anything changed in your customers’ demands in recent years?

Just as customers’ expectations have changed in general, so too have our clients’ demands. They expect customizable, fast, secure, and integrated solutions that provide measurable results

and bottom-line impact. We cannot just sell our product as-is, we must listen and be open to the fast-evolving needs of our customers to provide them with the tools for success. Regulations change and customers’ expectations change. It is critical to have business relationships that can continue to position you as a trusted business and technical partner.

“SaaS companies especially need to look at customers as partners that they are committed to helping succeed.”

Where do you see the future of the Customer Success function?

The future is a growing focus on business partnerships - not just customers. SaaS companies especially need to look at customers as partners that they are committed to helping succeed.

By combining great technology with guidance based on external experience, both sides stand to gain, and companies transform from tech providers to partners.

“Don’t Call Us – We’ll Call You”

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When Customer Service is Just not Enough

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Sharon Vanek,

Contributor Executive Director at CICC – California Israel Chamber of Commerce

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unning a small business is not easy, and the last thing you want to worry about are calls from unhappy customers.

Moreover, you want to make sure that your customers return and to maintain business relations for as long as possible.

This is where Customer Success was born, in the small mom-and-pop stores, where “everybody knows your name,” and the store owner knew what you wanted even before you asked for it. Where you received advise on better or even cheaper alternatives and where you were filled in on up-to-date trends that fit your needs and style. Back in the days, when store owners took pride in their version of Customer Success, these “regulars” were the happiest with the products and services with which they were provided.

This kind of relationship encouraged both customers and businesses to thrive.

In the past couple of decades, the function of “Customer Success” was first introduced by subscription-based companies, as they struggled to ensure their returning customers. Then it became synonymous with SaaS companies in an industry where new software versions came and left in a speedy fashion. And now, companies of all sizes begin to realize that in a competitive “flat world” they need to have a special designated team to look after their customers in a way that considers them as more than just “accounts.” It is the time for companies to adopt a proactive approach towards their customers’ success.

As the term Customer Success tends to vary in definition, let me be more specific as to why companies must adopt a Customer Success function:

•

The key understanding should be that Customer Success becomes an integral part of the way you all do business.

•

This should be a major business growth engine, as long as you all realize that this is not just another tool to retain customers.

•

Building a Customer Success team is a long-term investment in sustaining your business, as this team ensures that happy customers will spread the word and support your brand promotion.

•

Your product updates and upgrades can be generated from the feedback your Customer Success team gathers as they acquire essential product information from current users.

•

Internal communication procedures and workflow become more efficient once you have such a team since the function of Customer Success is to provide a bridge between customer support and sales.

Regardless of whether you sell a subscription service or a one-time-sale kind of product, remember that Customer Success is the path for creating a mutual value for your business and for your customer. This can be achieved once you build trust through the customer life-cycle. Your ability to provide your customers with products and services allows them (and you) to achieve their goals in an easy, efficient, and profitable way. Do not wait for your customers to call you – be proactive and call them.

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DENMARK

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DENMARK Great

INNOVATION Farers on Stormy Seas,

Getting to the Source of Danish

INNOVATION SAGE

Innovation

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Author:

Tal Berman

Co-Author:

Sara Roy-Bonde

Contributor:

Lasse VintherGrønning

Executive Director at Innovation Centre Denmark in Tel Aviv

I

have a fear of heights. There, I have said it out loud. The first time I came to Denmark, I participated in a team building activity as part of the Maersk International Shipping Education program. I was asked to rappel off a 30 foot platform, which I instinctively refused.

However, while shaking vigorously on that platform, one of the Danes coordinating these activities tried to calm me down by pointing to the horizon: “Look over there, it is where they used to build huge ships, the kind that crossed vast oceans.”

“Lovely,” I thought to myself and, as I could not care less at the time, much too preoccupied with reaching the ground safely. Today, as I try to understand the source of the Danes’ excellence in innovation, I cannot help but think about what that tall blonde man said to me almost two decades ago up on that ramp.

Danes have been innovating for thousands of years, ever since the time of the Berserkers – a tribe of Vikings in the first century AD. These legendary warriors invented their amazing longboats, first conceived of the hair comb, and greatly enhanced the magnetic compass and portable tent. However, the Vikings are long gone. Once a vast empire, today’s Denmark is a small country (133rd in the world in size and 115th in population) with minimum natural resources upon which to depend.

Therefore, the country now relies strongly on innovation and entrepreneurship to bring economic prosperity to its inhabitants. And so, the modern Danes successfully followed in the footsteps of their ancestors and invented the loudspeaker, LEGO bricks, insulin pen, and many other world-changing technologies.

In the 2020 European Innovation Scorecard (EIS), Denmark was only surpassed by Sweden and Finland.

The small country has been a top-3

performer in this index ever since its creation, anchoring itself as one of the most innovative countries in the EU. It has performed particularly well in the indicators for framework conditions, R&D expenditure in the public sector, public-private co-publications, and design applications.

One could call Denmark a model country for nurturing innovation.

And if we are to learn and apply best practices from Denmark, we must first understand what lies underneath this fertile ground. Sara, a Danish entrepreneur and friend, and I joined forces to investigate potential reasons from a macro-perspective; and, we were fortunate to get valuable input from an expert, Lasse Vinther-Grønning, executive director at Innovation Centre Denmark in Tel Aviv.

Political and Social Security: Enabler or Sleeping Pillow?

Denmark has created excellent “framework conditions” for innovation.

These include new doctorate and graduate programs, lifelong learning curricula, international scientific copublications, scientific publications (10% of which are the most cited), foreign doctorate students, broadband penetration, and opportunity-driven entrepreneurship.

Looking to the political landscape, we observe that Denmark is a democratic country that has enjoyed long-term political stability and numerous social benefits, such as free healthcare, unemployment benefits, subsidized daycare, free education at all levels followed by a monthly “study grant,” shaping students into an employee-like entity of the state. The Danes know that

from birth they are protected by their country; due to this sense of safety, they assume a high inclination to take risk.

Supporting this theory, Denmark is ranked 4th in the World Bank’s “Ease of Doing Business” and performs particularly well in trade across borders, dealing with construction permits, resolving insolvency, and paying taxes.

“If you wish to own a business in Denmark, you are only a couple of clicks away.”

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Lasse elaborates on the importance of that factor. “If you wish to own a business in Denmark, you are only a couple of clicks away. It may actually take you longer to open a bank account than a business. As Denmark reduced all of its bureaucracy by that much, it allowed its innovators to focus on what is really important - to develop their businesses.” In addition, Lasse cannot stress the factor of trading across borders enough. “We have always been a nation of traders. We always had to look outside of our borders for new opportunities. That tradition has stood the test of time and allowed us to be openminded and integrate a lot of things from abroad to our economy and society.”

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And the ease with which one does business in Denmark is made further possible by the country’s favorable conditions: corruption is basically nonexistent. The judicial system is wellfunctioning. Loyalty, trust, and ethics

are extremely high priorities. This healthy business environment supports the notion that Danes have a higher inclination to take risks, which again should inspire more of these Nordic people to become entrepreneurs.

However, despite this fertile business environment, according to official statistics Denmark has the lowest number of self-employed individuals in the European union. “As a top performer in several indicators, it would seem we have succeeded in creating a great foundation for business and innovation.

However, at the same time, it seems this foundation does not succeed in inspiring entrepreneurship. On the contrary, I wonder if our social security system, instead of inspiring innovation and entrepreneurship, has actually turned into a sleeping pillow?” Sara wonders. She concludes that while long-term political stability and security may support strong conditions, high R&D spending by the public sector, and potential for innovation, it does not appear to trigger a higher level of engagement and activity.

Growth – a Blend of Formal Education, Upbringing, and Training The educational system in Denmark is free, from the time a child starts school at age of 6 until they have completed graduate school/Master’s degree. While the first ten years are mandatory, many choose not to proceed to high school and tertiary education.

“There are plenty of entrepreneurship degrees from which to choose and many courses that are integrated in the curriculum. Moreover, most of these academic institutions have TTOs, which assist scholars with commercializing their research.”

“Danish universities, especially after Brexit, have topped the EU Horizon 2020 Project List,” Lasse says proudly.

“Some of them are the best in the world.

These are ancient universities that date back to medieval times. Nevertheless, in the last decade they have realized the need for teaching entrepreneurship and innovation. There are plenty of entrepreneurship degrees from which to choose and many courses that are integrated in the curriculum. Moreover, most of these academic institutions have TTOs, which assist scholars with commercializing their research.”

Simultaneously supporting the innovative mindset are the conditions under which Danish children are raised as independent and dynamically learning humans through PBL (Problem/Project Based Learning) methods. This system is characterized by a close connection between teachers, parents, and children, which inspires continuous questioning and learning. And, an early-age working culture – in which young people are often

employed in age-appropriate side-jobs, such as babysitting, paper and grocery delivering, and sales assisting – enables them to become familiar with money, savings, what “responsibility” really means, and other very important business skills.

Moreover, although it has decreased significantly since 2012, Denmark still remains a leader in lifelong learning, supporting the thought that one-sided formal education during the formative years alone does not form a person.

Early Adoption in the DNA For a small country with a small population, staying ahead demands the ability to learn from the outside and quickly adapt to changes.

“One thing I believe has helped Denmark to stay ahead with regards to innovation and early adaption is the fact that we speak English,” Explains Sara. “While we have a smaller national entertainment scene, we were quick to adopt the English and American pop culture as our own and do not make use of dubbing. This, catalyzed by our desire for adventure and travels, means we have at least three generations, basically everybody born post-WWII, who are able to communicate in English. And this ability easily allows us to study abroad, develop international partnerships, learn from foreign innovators and researchers, just as it makes it easier for them to come to us.”

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“

“In order to prosper we always had to look outside our borders. We understand that we can only do so much within Denmark itself. We are only 5.5 million people and in order to have the right competencies and skills we must integrate knowledge and manpower from abroad.”

Lasse, on the other hand looks at this from a different perspective. “It really has to do with size, as Denmark is a very small country. It has a strong economy, but it is still quite small. In order to prosper we always had to look outside our borders.

We understand that we can only do so much within Denmark itself. We are only 5.5 million people and in order to have the right competencies and skills we must integrate knowledge and manpower from abroad.”

Furthermore, the Danes have taken this interest in learning to another level. The government has created “Innovation Centre Denmark,” an establishment that aims to help Danish businesses, startups, and research institutions to gain access to international knowledge and innovation environments. Nowadays, these centers are found in eight worldwide locations: Shanghai, Silicon Valley, Boston, Munich, São Paulo, New Delhi, Seoul, and Tel Aviv. They employ Danish researchers and trade officials, who are constantly monitoring, learning from, and partnering with these global technological hubs, with the objective to test their best innovations in their home market.

“We are here to absorb the best elements from the specific innovation hub and import them to Denmark.”

Lasse elaborates on that, as this is his primary focus: “The aim is to reduce barriers and create access for Danish researchers and entrepreneurs to cutting-edge knowledge. We are here to facilitate partnerships between Danish companies and researchers with global researchers, corporates, or even multinationals, who may serve as potential customers. Denmark has many SMEs which can only do so much by themselves, and so we assist them quite a lot as well. For instance, these SMEs lack the resources to approach multinational corporates themselves and we help with that. Most importantly, we are here to absorb the best elements from the specific innovation hub and import them to Denmark. If, for example, there is a certain incubation model which works we will bring it to Denmark and inspire technology hubs

and investors to do something similar.

Looking at it personally, I call upon Israeli startup companies to come forward and collaborate with us or with other Danish entities.”

The ability to communicate, attract, and partner with foreign researchers and innovators may indeed be a strong reason for Denmark’s high performance on indicators related to attractive research systems, one of two parts of the innovation-friendly environment.

Entrepreneur by Necessity or Opportunity, and the Cultural Effects Denmark is also a top scorer when it comes to the other part of the innovationfriendly environment indicator, opportunity-based entrepreneurship.

This represents a person’s willingness to become an entrepreneur as a matter of personal choice rather than out of necessity or lack of other options. Pull vs.

Push.

INNOVATION SAGE

One could consider this as a natural outcome of the strong social security, however it is impossible to leave it at that without mentioning the “Law of Jante,” a Nordic code of conduct passed from one generation to another. This specifically labels unconventional thinking or doing things out-of-the-ordinary as inappropriate and unacceptable.

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“It is no surprise to me that Denmark enjoys a high degree of opportunitybased entrepreneurship as our strong social security in general makes us less necessity-driven,” Sara observes. “The Law of Jante, however, is still an integral part of the Danish culture, though, in my view, thankfully not as strong in the young generation as in the past. It is the ‘secret

code’ that explains why Danes do not speak loudly about our accomplishments.

It is what makes us terrible at receiving compliments (‘Oh, it’s nothing’). And it is what makes us observe those who dare to stand out with skepticism. Therefore, while safety may increase our willingness to follow opportunities, the not-so-subtle Law of Jante may keep entrepreneurship down overall.”

However, Lasse adds another factor into the mix – one that combats the Law of Jante. “The state created a strong public funding system. There is quite a lot of funding available for startups in Denmark in comparison to other EU countries. This is very useful because it is ‘free money’ as opposed to VC or Angel funding which obviously impacts the founders’ equity.

So, lots of public budget is aimed towards innovation. As an entrepreneur, you may apply and if external evaluators find you suitable, you get the money. Simple as that.”

Conclusion: A Great Benchmark with a Catch Overall, while political stability and social security can create great framework conditions and ease of doing business, in particular the latter may also be a contributing factor to the country’s low numbers of self-employment. It is a double-edged (Berserker) sword. Also, it may produce a “false” positive perspective of opportunity-driven as opposed to necessity-driven entrepreneurship, instead of showing the alarming low level of overall entrepreneurship.

Another contributing factor may be the country’s combination of formal, informal, and practical education and training usually starting from an early age and continuing throughout life. And while the

Danes’ English abilities and interest in foreign countries’ innovations make it easy and natural for them to adapt quickly, go abroad, and invite talent to come to Denmark, the government’s support for innovation and SMEs through the “Innovation Centre Denmark” centers truly enables cross-border innovation.

But the ranking hides a secret.

Denmark has seen a major decrease in many of the EIS indicators in the past 8 years.

Finland have surpassed Denmark in recent rankings, and while the Netherlands, and Luxembourg have almost closed the gap entirely, other nations have been gaining ground as well – an indication that Denmark is losing traction, despite its high ranking.

In particular, the discipline of manifesting innovations into real results appears to be a challenge in Denmark, as the country scores low in basically all indicators related to Employment and Sales impact.

“You cannot slack and rest on your laurels. You must always invest and drive innovation forward. We need to keep working hard and be more creative in our actions towards fostering more innovation.”

Lasse does sound a bit worried by these stats. “This verifies that other countries are investing in innovation just as much, and rightfully so as it is a proven engine for economic growth, prosperity, and job creation. It also proves that you cannot slack and rest on your laurels. You must always invest and drive more innovation forward. So, all in all I truly hope that we keep finding new ways to sustain our high ranking. You may see for yourself that the competition is fierce, which is actually a good thing in my opinion, as it keeps us on our toes. We need to keep working hard and be more creative in our actions towards fostering more innovation.”

Underneath the surface of Denmark’s apparent leadership in innovation, we uncover a complex set of conditions and circumstances that stem from both tradition and evolution. It will be interesting to learn from the great success of Denmark as much as it will be to follow the country’s efforts to improve efficiency within the entrepreneurial and innovation environment in the coming years.

The

DANISH INNOVATION MUSCLE

D M.Sc (econ), Contributor

INNOVATION SAGE

Rune Meyer,

74

Founder and CEO of The Circular Economy Club (www.circulareconomyclub.org)

espite the small size of Denmark, the country has managed to rank as one of the richest and happiest countries in the world. The reason is simple: the culture. After a history of constant warfare with and defeat by our neighbors, the motto: “What is lost outwards must be won inwards,” was created and became part of the Danes’ national identity.

At the same time, the informal “Folk High School Movement” rose, led by the N.F.S. Grundtvig in the 1860s, who said, “People first, God second.”

And thus was born the cooperative movement. This subsequently inspired communitarianism, the understanding of a community

where everyone takes care of each other, everyone has a say, and everyone has the right to express their opinion. This structure has been largely successful.

This has resulted in a great trust between one Dane and another, but also in the political system, which has been characterized by a flat feminine hierarchical structure - meaning a short distance between top and bottom.

As these conditions have fostered a foundation of trust and safety which has allowed for a daring to try and fail, they have also had positive impact on the national innovation muscle, “Rather one experiment than one thousand expert assumptions,” as expressed in words by the founder of VELUX Windows, Kahn Rasmussen.

So, where does that bring Denmark today? We have a “social contract” in which the political system delivers the “welfare state,” a system which (via numerous high taxes) ensures a high level of welfare for its citizens: pensions, free hospitals, free education, a flexible labor market system, and a zero-tolerance towards corruption. The “welfare state” also upholds responsibility on externalities like the environment, pollution, and waste.

The outcome of these conditions is an increased focus on the circular economy, both in the public and private sectors.

This in turn has sparked growth in innovation with a focus on sustainability, where the circular economic principles challenge and thus inspire innovation.

Why is the circular economy a driver for innovation? One major reason is

the fundamental change of mindset.

This mindset is explained in the phrase coined by John Elkington in 1994 to describe the triple bottom line and the goal of sustainability: “people, planet, and then profit.” Many misunderstood this and thought it was merely a new accounting system. But in reality, it is a gamechanger.

Until now, we have been driven by profit and used this as our #1 order point of maximization. But as pointed out it is a gamechanger when we start using “people and planet” as our #1 order point of maximization, and “profit” as our #2 order point of maximization. Think about it. This requires totally new business models, which include re-designing our products and services in order to maintain our value proposition. In terms of capitalist structures, this is the biggest shift since the invention of the wheel.

This has initiated many startups and even established companies in Denmark that believe they have read the sun, moon, and the stars correctly, that consider the future to lie in the circular economy, and therefore eagerly strive to be at the forefront of the needs and developments of tomorrow.

So, the recipe for the Danish innovation muscle is “Necessity.” We have a saying that goes: “Necessity teaches a naked woman to spin,” which also seems to apply to the state of Israel.

Will the next wave of innovations in Israel be driven by the circular economy, where “people and the planet” come before “profit and God?”

DENMARK BETS ON INNOVATION

W Daniel Tjornelund,

INNOVATION SAGE

Contributor International Business Strategy Professional

76

hen asked about Denmark, most people imagine streets full of bikes, delicious pastries, and fairy tales. Indeed, the small Nordic country has rightfully earned itself such a reputation, with its capital, Copenhagen, being crowned as the world’s most bike-friendly city in 2019 and home of H.C. Andersen, writer of timeless stories such as The Little Mermaid and The Ugly Duckling.

What most people do not realize is that Denmark is also a world leader in innovation: last year, The World Economic Forum ranked Denmark 4th in “Entrepreneurial Culture,” and Bloomberg ranked it as the 9th most innovative country in the world.

Innovation is nothing new to Denmark - many major discoveries can be attributed to its scientists and institutions: H.C. Ørsted discovered the connection between electricity and magnetism, and Niels Bohr developed the popular Bohr model of the atom.

More modern innovations include the insulin pen, and the all-time favorite toy, LEGO. Indeed, innovation flourishes throughout Danish society, from its popular “Danish Modern” furniture design, to its renowned architects and global enterprises, such as Vestas, a world leader in wind power. No wonder Denmark tops world FDI rankings, as MNEs seek to tap into Danish innovation and ingenuity to strengthen their competitiveness.

participate in innovation-related activities. Professor Jes Broeng, Director of Entrepreneurship at DTU, says that DTU is reinventing itself with regards to entrepreneurship, as it produces informal initiatives – such as DTU Skylab, home for extracurricular innovative activities managed by the students themselves – and formal ones, such as the newly established two years master’s degree in Entrepreneurship.

“Anyone with bachelor’s degree, even in sociology, anthropology, law, or business, can come to DTU and get a comprehensive couple of years master’s degree in Entrepreneurship, in which time they can launch their own company as a part of their studies,” Prof. Jes Broeng explains the innovative nature of education at the University.

In recent years, new governmental initiatives aim to ignite the Danish startup scene, as a broad range of institutions have been established to support innovation and its commercialization. These include Erhvervshus – a countrywide network of pro-bono business hubs intended to assist businesses in reaching their goals; Innovationfonden – a fund that was created to strengthen and foster strategic research and innovation projects; as well as innovation centers at universities and in key markets abroad.

Yet, Denmark also looks abroad for inspiration. For example, Denmark’s Trade Council helps small and large enterprises foster innovation in an effort to export and expand their activities to new markets. Innovation Centre Denmark is a governmental agency with eight innovation-focused centers across the globe. The centers’ goal is to deepen bilateral collaboration, expand cooperation between universities, and help Danish startups as well as MNEs to establish a local footprint in markets where innovation flourishes.

I myself got the first taste of entrepreneurship during my engineering studies at Denmark’s Technological University (DTU), while participating in a newly established course geared towards exposing young engineering students to the world of entrepreneurship. This led me to establish my first startup, which had a profound impact on the course of my career. Today, thousands of students

The threat of global climate change has given Denmark’s long-time focus on Green technologies and Food, as well as AgriTech a profound boost.

In the upcoming years, countries’ competitiveness will be put to test by globalization, and Denmark has placed its bet on innovation - I suggest you keep an eye on it too.