Conversation

Managing change

We met Paolo in Düsseldorf to talk with him about innovation and to inject a dose of startup spirit into our veins. We learned about how Henkel supports internal and external innovation, and left knowing that if there is one thing that Paolo would wish for, it would be to have more time to spend talking with the creative minds that are shaping our future; those on his own team and in the many startups he gets to know.

About Henkel

now.

In your opinion, what is Henkel’s outstanding quality?

Dr. Paolo Bavaj

Henkel has a great tradition in Germany. We are not only famous for our laundry detergent or household products, we also enjoy strong customer loyalty. In all our businesses, we have a very thorough understanding of our customers’ behaviors and processes. That is extremely important to our company, and it benefits all of our business relations. I think this and the unparalleled access to consumer and industry markets was one of the first things I noticed when I started working for Henkel four years ago.

now.

Henkel as a brand is definitely well known in Germany. We regularly talk with people from smaller companies, and also with people who work for large corporations similar to Henkel. Many of the newer huge companies have a very fast product development cycle that differs from that of more established organizations. How does that match with your experience at Henkel?

Dr. Paolo Bavaj

When it comes to projects or forecasts, we currently work in a 4-year planning cycle. At the moment, we are in a cycle that will end in 2016. Henkel’s goal for 2016 is to increase sales by 4 billion in order to reach 20 billion euros. These cycles not only allow us to be flexible and to react to changing market situations, but they also restrict us to mainly undertaking relatively small-scale projects that are scoped for a maximum of two or three years. When I started working for Henkel, I was asked: Paolo, why don’t we go for a 100 million euro project?

now.

So, why don’t you?

Dr. Paolo Bavaj

Because the larger the scale, the longer the time period for which you have to scope the project. Our projects are focused on the here and now and the near future, with a maximum 5-year time horizon. I think we have recognized the need to expand our perspective, and I’m optimistic that we will be able to take on bigger projects.

Adhesive Technology

now.

One of the current secrets in the automotive industry is not really a secret anymore: traditional welding has been replaced by gluing certain parts together. Now that we have gotten over the bad reputation of adhesive materials, where is adhesive technology heading at Henkel?

Dr. Paolo Bavaj

Traditionally, adhesive technology was first and foremost always about adhesives. But for a while now, that is no longer the case with regards to materials; we are already beyond just talking about adhesives. We are also working with sealing materials and functional coatings. The automotive industry is a big customer for us because we seal the pistons of cars, provide underbody coatings, glue windshields onto cars and sell several adhesives for a number of bonding applications in the car, and so on. We invest a lot of effort into making the transition from traditional welding – and other bonding techniques – to gluing as smooth as possible, and we are developing various types of coatings to make the processes in the automotive industry more efficient.

now.

It sounds as if glue has become a by-product of your actual work.

Dr. Paolo Bavaj

We are a company that is very much interested in coatings and surfaces – sometimes it sticks, and sometimes it doesn’t.

That is definitely true, we are a company that is very much interested in coatings and surfaces – sometimes it sticks, and sometimes it doesn’t. It has a little bit of a philosophical edge for us, because working and modifying surfaces is what all our products do on some level. Our washing detergents alter the surface of your clothes, and our cosmetics alter the surface of your hair. Without trying to sound too metaphorical, Henkel really modifies surfaces.

Innovation and Risk Management

now.

Why doesn’t Henkel take the plunge and invest in something that is completely outside of their product portfolio?

Dr. Paolo Bavaj

The investments we make have to be considered carefully, because the consequences of our actions will have repercussions for the entire business and for every person involved in it, not to mention their families. Of course, startups have different risk management in that regard because if a startup fails, the people involved can often shake it off more easily and just go on and start something else. If we lose a significant part of our 16 billion euro business, the loss will not be as easily digested. This is why we choose to invest in startup companies by taking minority equity positions. We let them develop a totally new technology and then, after a successful development, we incorporate the technology into our business. Moreover, we incorporate innovation ecosystems to complement our existing capabilities, while simultaneously mitigating the risk of moving into something completely new.

now.

So corporations should say “no” on occasion?

Dr. Paolo Bavaj

They have to evaluate the risk factors and then, if necessary, reject innovative ideas if the investment is too big or too risky. We need to consider our parenting advantage. If Henkel cannot contribute anything to an innovation, we are probably not the best owner of that idea. We manage our innovation portfolio carefully – and that certainly means saying “no” sometimes.

now.

Where do your ideas come from?

Dr. Paolo Bavaj

We actively look for innovations and pay attention to what is happening around us. We walk through the world with open eyes and connect the dots whenever we see opportunities. There are also many people who work at Henkel and come to us with something they have thought of, or something they have found online, that they could imagine working on. We listen to all of those ideas, and if there is something that we feel matches Henkel, we investigate it further.

now.

It’s all about getting the right people, isn’t it?

Dr. Paolo Bavaj

That is exactly it. We are keen to support and develop our employees. In my department especially, it is important to have some fresh blood to mix with our existing staff. It is about combining new views and ideas with our internal experience and network. We think that our work has a lot more substance when there are people of different backgrounds and with different perspectives collaborating on projects.

now.

So Paolo, would you also consider recruiting outside of your comfort zone of scientists and engineers?

Dr. Paolo Bavaj

I definitely would. It is a highly personal thing. If there is someone who fits our corporate culture, they don’t have to have an engineering or science background. We need them to be good at their jobs and to be well educated, but I do not want to shut my door to “unusual” people. It is important that they are a good fit for the team and that they can contribute another perspective. I recently held a job interview with a psychologist, so I’m open to all kinds of candidates. I’m looking for the best people, not necessarily the typical ones. Of course, most of the people working for me, and for Henkel in general, are engineers, chemists, or people with an MBA. My team is already quite diverse; we have 13 people on our team representing 7 different nationalities and very different educational backgrounds. They also have varying levels of working experience, and all of that diversity is great for exchanging ideas and perspectives. However, I would like to see us become even more diverse over the next couple of years.

New Generation of Innovators

now.

Where can you find those unusual people?

Dr. Paolo Bavaj

We’re in touch with a lot of universities in Germany, for instance the TU in Munich, the RWTH Aachen, and several universities in Berlin. There is also an entire network that links us to international universities like the Massachusetts Institute of Technology (MIT), which makes a lot of sense for us since they research materials science extensively. We also work with the Mass Challenge accelerator in Boston that hosts the biggest business plan competition for startups worldwide. That is always a great opportunity to speak with startups and the new generation of innovators and entrepreneurs. Together with some trusts and the German energy company RWE, we founded the German Tech Entrepreneurship Center (GTEC) in Berlin, because Berlin is a hot spot for the German startup culture. GTEC aims to support young entrepreneurs and their business ventures, and it is a place for accelerators and industry members to exchange knowledge.

now.

Why do you think Berlin is the innovation center in Germany?

It’s fascinating to see what these startups are attempting to develop with so much passion and it is very exciting to talk and work with them.

Berlin is Germany’s biggest city, but the cost of living is not as high as in other places, so many people go there to start a business. The city and its dynamics are unique in Germany and I’ve experienced that it works as a great multiplier for businesses. There are things happening there, and it’s a very exciting place to be. Henkel likes to keep up the dialogue with young startups. They are certainly mostly focused on software, rather than materials, because it takes a lot longer and requires more funds to develop a material, especially a new one. Software is more accessible and quicker, and a lot of those young people want to create the next Facebook or the next successful app. They want to move things fast, and I can understand that materials science is not the best platform for that… at least not yet. But we find that particularly in Berlin, Boston and other hotspots, there are still a considerable number of startups trying to enable innovations through new materials. 3D printing and printed electronics are very prominent examples here. It’s fascinating to see what these startups are attempting to develop with so much passion and it is very exciting to talk and work with them.

Maker’s Movement

now.

Speaking of wanting things to change fast, of having the drive to get things done, and changing the world. What do you think of the Maker’s Movement? Do you see that happening in Germany?

Dr. Paolo Bavaj

Most definitely. I like a “roll up your sleeves and get to work” attitude and I think that it is coming in Germany. Have you heard of the Fab Labs? They are those workshops that offer digital fabrication, and I coincidentally live right next to one of the German ones in Düsseldorf. They are a great idea for a small-scale endeavor, I think. There is an organization called Wirtschaftsjunioren at the University of Düsseldorf, that includes young leaders and entrepreneurs. In the summer, they organize these cool Pitch Party events, where they present a lot of business ideas. We talked with them about becoming their main sponsor for this year’s party. You see, we don’t just invest and expect an immediate return. Luckily, Henkel has the resources to build a foundation for future projects with these young people, who may very well come up with great projects that would fit Henkel. I think it is really important to invest not only in specific startups, but also in the environment where startups can be founded.

3D Printing

now.

Can you tell us more about what the collaborations between Henkel and startups looks like? What can startups offer Henkel, which you wouldn’t ordinarily do yourselves?

Dr. Paolo Bavaj

Well, we are currently working with a Dutch startup called DUS Architects. They are focused on 3D printing, and that is a topic that we find very interesting. At the moment, we don’t have a slot in our company for a 3D department. But we can provide printing materials, and we deliver them to DUS to experiment with. They run the largest 3D printer in the world with a 2.5m x 2.5m x 3m building chamber. The project is about building houses, and we already have a couple of elements that we were able to print with our materials. DUS had one 3D printer before and we have bought them another significantly improved one, a portable printer that can be transported all over the world. It is actually quite amazing how they ship this huge printer back and forth.

The idea to print houses stems from their “affordable homes” concept, which is devoted to building fast housing for low-income families. For a philanthropic endeavor like that it makes sense to have a mobile 3D printer that can print objects locally. DUS has won a Sustainable Entrepreneurship Award recently and has received a lot of attention from the media, so they are a really good partner for Henkel. This is a great project that teams up our engineering and chemical expertise with a new technology, and I’m looking forward to seeing the finished product.

now.

Besides supporting a good cause, what is the value for Henkel in a project like that?

Dr. Paolo Bavaj

For us at Henkel, working with an external 3D printing company means that we have people who are excited about playing and experimenting with our materials. We treat those experiences like case studies, because that is what they truly are. What can our materials do beyond what we are currently using and selling them for? To explore that, we decided that working with people outside of our business delivers the best results. 3D printing opens a lot of doors, and I don’t think companies should only compete with each other in the development of new products, or solutions. Connecting with other businesses or think tanks is important; we should collaborate instead of trying to imitate each other’s work.

now.

Collaboration is indeed important. Don’t you think that the digital revolution has made that much easier? I can set up a call in a matter of seconds and talk to people all over the world.

Dr. Paolo Bavaj

A lot of human interaction and communication is lost during a telephone call or even a video call. Skype is great, but personal contact is better.

It has, and it’s great for getting different people together for a project. On the other hand, Skype calls, even a lot of them, are not sufficient for long-term projects. I prefer personal contact to digital conversations any day. A lot of human interaction and communication is lost during a telephone call or even a video call. Skype is great, but personal contact is better.

Innovation at Henkel Adhesive Technologies/ New Business Development

now.

We have spoken some about innovation in general, but why don’t we turn more specifically to innovation at Henkel Adhesive Technologies? You have been with Henkel for four years now, and since 2013 you have been the head of New Business Development, a department you created in February 2012. How would you describe the work in your department and how does Henkel manage the topic of innovation internally?

Dr. Paolo Bavaj

Adhesive Technologies, where New Business Development is situated, was reorganized in 2013, because what started out as a “project” in February 2012, with only three people, turned into a whole unit with 13 Scouts. When I came to Henkel in 2010, we had short-term innovation in our research department as well as in our product development departments within the operating business. We have since then discovered that there is a lot to be gained from having a central dedicated department that focuses on finding new potential business areas for Henkel to get involved in with both mid- and longer term investment horizons.

now.

Would you say that the way innovation is perceived at Henkel has changed through this?

Dr. Paolo Bavaj

I think that innovation has become a state of mind for us. We have changed the way we initiate product and technology development, because we have moved away from using only technical parameters as starting points. We have been focused on pushing technology for the past 90 years or so, but that is gradually changing. Personally, I would rather think about market opportunities first, to find out where I can see hotspots Henkel can and should get into, instead of starting with a product or solution as the given factor, and attempting to make it work in the market. If there is a good idea for a business, technology can usually deliver the product… otherwise, we initiate conversations with other companies, startups, or universities and find a suitable technology outside of Henkel.

now.

How do you go about developing new solutions then? And does the structure of your department reflect your endeavors?

Dr. Paolo Bavaj

The last of the three scoping stages takes about a year.

Our New Business Development process is split into three parts: Foresight Management, Scouting and Incubation. Each one of these has their set tasks and they are most active at different periods of a project. Foresight Management, which is focused on potential future scenarios for a specific topic, (e.g. “Lighting 2025”), is in place for about six to nine months. The next phase belongs to the Scouts, who work in three stages. First of all, they pre-evaluate the project for three weeks to point out obvious no-goes for development. Then they work on scoping the concept, which takes three months. Needless to say, that is one of the most important parts of the project. In the scoping stage, we discuss the actual innovation and this is also the stage where a lot of ideas are discarded. We also find out about the market pain points and establish how Henkel could address these issues… and if we would be able to do it better than other companies. The last of the three scoping stages takes about a year and there we go through technical feasibility to see if the project can be implemented under the conditions we have established beforehand. The result of this last stage is to have a completed business plan and a prototype model. After we have spent a long time evaluating and rating the project, we then hand it over to the incubation team, where we prepare for presenting the plan and the prototype to the Henkel stakeholders, the Adhesive Executive Committee. For the presentations, we have been inspired by TED talks and how they are set up. The team gets to present their project in 18 minutes, and afterwards we schedule about 40 minutes for questions from the audience. This makes it easier for the team to really sell their idea. Once we get a go from these very senior managers, we create an incubator, receive funding and work towards incorporating the incubator into a business unit. It is vital for us to involve the operating businesses in our evaluation as well as into our research department. This way, we are ensuring that we use the collective knowledge of our company while building up a network with our businesses to create their buy-in.

now.

And what if there is no business unit with a suitable portfolio?

Dr. Paolo Bavaj

If that happened, we would open up a new business unit! When an incubator has enormous potential, we will make it work and will adjust our structures to support the new project. We also make sure to intertwine the work of our Scouts with the core business, and that has proven quite profitable when working on innovative concepts. Our department differs from the rest of Henkel’s units anyway because we are not restricted to the four-year cycle. Instead we work more in a five-year plus time frame.

now.

What are you hoping to achieve through the relative independence of your team?

Dr. Paolo Bavaj

My goal is to plant the startup or entrepreneurial mindset in the thinking of my team first, and then bring it to the operating business later by moving our Scouts to the next level in their careers. There is a lot of excitement and passion involved in starting a business, and I think that with a startup attitude, it is easier to convince managers of the value a project will have for Henkel. If you think about it, Henkel was also a startup. Almost 140 years ago, Fritz Henkel founded a laundry detergent company; that is our heritage.

Product Development: Facts vs. Gut Feeling

now.

Do you think a lot has changed in those 140 years in how business decisions are made?

Dr. Paolo Bavaj

Nowadays, the business decisions we make are factbased. We have grown so large that the traditional “gut feeling” of one individual cannot suffice any longer. There are a lot of people involved in making decisions at Henkel, and we invest a lot of time and money into researching the industry in order to make informed decisions. We also talk to the target industries and present our business ideas to them, because if they are not interested, there will be no funding from our executive management. If you relate this to innovation, this was not always the case when I started working for Henkel.

now.

Do you experience that as restrictive at all? What if an idea that you reject now becomes the next big innovation? Wouldn’t that have made the initial risk worth it?

Dr. Paolo Bavaj

I don’t think that it’s restrictive, I think it is pragmatic. The question is: How much risk are you willing to take? As I have mentioned before, the larger the corporation, the riskier such endeavors become. Yet, in my opinion, what Henkel does really well is to understand that it is not our role to make huge leaps. Instead, we search for investment or collaboration opportunities with startups or established companies. Let me explain this with an example. The futurist scenario “Lighting 2025” is devoted to OLED Lighting Systems and how they will be used in the future. When you work with OLEDs, you need a really good barrier film. We couldn’t develop it, so we went out and searched for solutions from outside of our own company. After some trial and error, we initiated the conversation with Vitriflex in California, a startup that works with affordable materials and produces exactly the barrier film we were looking for. If we find a solution that we can scale and is mass reproducible, Henkel is happy to invest in that. This is how it is with Vitriflex and that is how we work with all the startups in our network. So far, Vitriflex is meeting our expectations and they are reaching all the milestones. They are opening our minds to the world of OLED Lighting, OLED Display and Quantum Dots.

Move Forward to Change

now.

We’ve spoken about your team and how the internal structure of your department is set up, but what is your take on your own profile? Is your original job description still accurate?

Dr. Paolo Bavaj

I don’t think any job turns out to be exactly what it says on the label. Our team has grown considerably over the last 2 years and now, of course, I have to deal with more restricted schedules when it comes to the time I can spend with everyone on the team. It is a shame, but it is unavoidable. The more a department grows, the more you have to think about structures and how to organize your projects. It is tempting to create many substructures with different mid-level management entities, but that is not an option that I particularly like. I prefer to keep hierarchies limited and structures open. In my opinion, it helps to have people of different levels of experience on board. Also, and this may sound harsh, it helps to let new members of the team fall into a black hole in the beginning. That happens a lot to our Scouts because the job is quite overwhelming at first. If the Scouts manage to get out of that black hole, they will have really gained expertise. It’s important to get out of your comfort zone; that is the most effective way of growing as a person, and also as a company.

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