Toby Gardner Talks About KPMG Energise

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Toby Gardner has moved back to Perth from Silicon Valley and is now the director of the KPMG Energise program. We got his views on the program.

//SN: Last time we spoke you’d just arrived back in Perth from Silicon Valley and had started turning up to startup events, and the next thing we hear from you is a year later and you’re the director of an accelerator program. What’s the story? How did you get from there to here?

Energise _ Toby GardnerOne of the things that’s pounded into you in the valley is that the best ideas come from collaboration. Additionally, one of the fundamental principles in innovation, is that you need to have all the people, processes and systems in alignment and working in unison. When I came back to Perth, one of the things that stood out to me is that there’s a sector (energy and natural resources) that the community is very much reliant on and knowledgeable about. It was also going through a large-scale transformative downturn and there was not an effective innovation program looking at bringing new technologies to the market to help with those pressures.

It wasn’t so much that I’m an energy/resources guy, it’s more that I’d spent a lot of time in the valley looking at business models and how to look at innovation both in terms of startups and from a management consulting and mergers & acquisitions viewpoint. It seemed to me that the Western Australian community could use a lot more innovation through collaboration. So I started to think about what ingredients might be necessary for all of the different stakeholders; startups, big corporations, customers. What are their barriers? What are their issues? More importantly, how can we systematically remove those issues so that we can all come together and work towards producing the best ideas and best innovation.

//SN: One of the big barriers that we find here is that the large companies in the sector don’t like buying from small local suppliers, and massively prefer either proven ideas from large suppliers or in-house solutions they’ve built themselves. Getting on the approved supplier list for a large resources company is almost impossibly hard for a small startup. How are you going to address that?

I agree completely, this is a problem. But when we talk to those large companies, they are actively looking for innovative programs as part of their current strategy. But their problem, and the startup’s problem, is connecting the right people from these organisations so that they can explore some of these ideas within the company. That’s actually a big issue for them. They know that there are innovative solutions out there that they could use, but they don’t know how to get to those founders. So that’s really what Energise is trying to help resolve. It is a platform where the large corporations can experiment in a safe environment and evaluate and integrate some of the great ideas and solutions out there. Because the big assumption, even mistake, which a lot of sectors make is believing that the best ideas come from within. A lot of great ideas do come from within, but certainly the value of supporting programs like Energise is that there’s value in an outside perspective. You can get too close to the problem. So they have to determine how they bring startups with great innovative solutions into the corporation.

As part of the program, KPMG is working with senior-level executives within these corporations, which is what makes this accelerator a little bit unique in Australia, probably even globally. It’s a top-down accelerator; we work with large corporations to identify what their problems are and then use the program to see what game-changing companies are potentially providing solutions for those problems. This way we can make sure that the startups get to the right people with their solution and that they are evaluated to see if their solution fits the problem. They also learn how to navigate through a large corporate environment and present a new idea. That knowledge will hopefully then percolate into the community which will enable more successful innovation.

Big corporations assume you already know how to navigate their environment. That’s not them being difficult, that’s just because there’s a lot of organisational distance between the people with the problem and the people who startups talk to. There are also a lot of knowledge gaps around how startups actually work and how large corporations work. We’re hoping to narrow those gaps and get the right people talking to each other.

//SN: Do you actually need an idea to apply to Energise then, or can you pick one of the problems that the executives are saying they have?

What Energise is about is connecting problems with solutions, so there has to be a solution there to connect to. We’re much more interested in later-stage startups that may not have customers but definitely have a product or solution that is at least able to be demonstrated, and preferably is ready to be integrated into a customer organisation.

There’s recently been a spate of early-stage accelerators and incubators in WA, which is great, so that stage is catered for now. What’s missing is that next step, going from an idea and building the solution to actually connecting that into customers and getting real sales. This is more standard business school type stuff; pricing models, sales strategies, organisational structures and so on. This is about execution of a business model rather than searching for a valid business model. It’s about taking late-stage startups and getting them to be early-stage companies.

//SN: Late-stage startups usually have a customer base of some description, in that it’s rare for a startup to have got to the point of having a product that actually appeals to a customer without having a customer already. 

This is why we can’t take an idea-stage startup to a large corporation and ask them “does this provide a solution to you?” Energise is about providing a platform to allow big corporations to effectively integrate startup solutions and for startups to learn how to sell to big corporations. So even if any given large corporation doesn’t find the best solution that they’re looking for they may still find one that they haven’t considered or that is relevant to different divisions and still worth integrating into their business.
So best case is we get a perfect match; that one of the startups in the program has a perfect solution for one of the problems that one of the large corporations have, and they become a customer and invest money. Worst case scenario for the corporation is that they identify strengths and weaknesses of integrating startups into their organisation and get better at it and more aware of what’s out there.

There’s a couple of cultural observations that I thought were really insightful. One of them was from one company who said that the problem in Australia is that there aren’t necessarily the best technologies in the sector, which is why they use a lot of overseas technologies that are proven. What’s so telling in that statement is that it’s a self-fulfilling prophecy. If you don’t support the local ecosystem they never get customers and they never become proven. In areas such as North America or Europe, they’re far more comfortable, despite the risk aversion in the industry, to take on local companies and give them a test or pilot. If they become customers, the technology is proven, and therefore Australia looks to adopt it. Part of what we’re trying to do is change that cultural expectation and communicate that what we do in Australia is good, and it’s good even on a global level, and we should be proud of it and champion it.

This is one of the reasons why we made Energise no-cost, no contract and no equity for startups – so they could feel comfortable that they can address what I consider to be the four big issues for them: Brand awareness, Access to Capital, Access to Customers and Access to Talent.

So how did we address these? Successful applicants will increase their brand awareness by being part of the program. We will provide access to customers through the companies participating in Energise and provide access to capital via a cash prize at the end and also on graduation night. Finally, over the 12-week program, we will help start-ups identify the gaps in their current team and assist them in streamlining their organisational structure.

For the big corporations, we will help them bring in early-stage companies and assist them in promoting an innovative culture within their organisations. Large corporations are all about business model execution. As a result, they find what startups do really intriguing, really interesting, really risky and at times a little bit crazy. Half the time these startups don’t appear to know what they’re doing but if the end result works, huge businesses can get disrupted. Some of the corporations involved in the program are keen to have a few employees actively participate for 12 weeks so they know what an innovative culture looks like and can promote it internally within their organisation.

//SN: One of the things that we talk about in startup culture is the ability to fail, that failing is an important part of the process. Large companies cannot fail, and the politics of the organisation means that if a project fails that’s a bad thing and people are fired for it. So for this kind of innovation culture to take root in a large corporate, that’s going to have to change.

Absolutely, and we see this as a problem with metrics. If you looked at just the metrics, you’d never have a Facebook, and probably never have an Apple. A lot of the most game-changing technologies and companies we see right now would never have happened if they’d been judged on forecast revenue and the standard metrics of business. So making that shift is a big one for these organisations, which is why part of the process is helping the companies understand how to navigate external innovation too. So everyone involved in the program is learning. It’s not about multi-billion-dollar resource companies coming to the program to cherry-pick some solutions and ideas. Those companies are definitely looking for ways to improve their thinking and approaches outside of their core business.

Providing a role model of what non-metric-based success looks like for a small organisation is a real need, because it is an example of how that can work, something that others can point to and say “those metrics need not necessarily apply here, look at this”. So we really hope that the applicants that come through the Energise program go on to succeed and get customers, get investment, and even get acquired. We’ve certainly had a couple of organisations enquire “what if we want to buy a company going through the program?” Certainly we believe this could make for an interesting conversation – and for some applicants that’ll be a great result, and for others it may not suit.

//SN: Are you worried about any of the companies stealing ideas in the program?

Not really, for several reasons. We’re looking at later-stage startups that have already developed the product and are in the market. So there’s less incentive to steal it because they can just buy the product, or indeed the company. Large organisations generally don’t steal ideas like this. In Lean Startup, Eric Ries suggests that startups worried about large companies stealing their IP just take their patent application and drop it off at the lobby of a large organisation and see what happens to it (the result is that the IP usually gets lost amongst the rest of the organisation’s portfolio and never sees the light of day) And we think that being part of this program, where we’re actively promoting these ideas to the industry, will help. It’s hard to steal something in plain view.

//SN: What does KPMG get from this?

We get to work closer with our clients and understand their needs and priorities, which in a nutshell is our core business. Our clients are looking for external approaches to innovation, so we see that as something we can help them with. Also, we hope that some of these startups will scale up and remember where they got their start and become clients. This is not a zero-sum game, there’s some genuine benefit for everyone involved in bringing startups up to the right level and hopefully making some real success stories.

Part of my experience in the valley is having seen these stories work through, having some role models for how this can work. For example, from my business school class, about ten of my classmates have raised over US$250million with their various startups. So there are these role models in the US. If you’re trying to build a successful business, then it could really help to speak to a person who has successfully done it, or a person who’s done it five times. Part of the program is about bringing in some of the great local successful CEO’s who have actually done this and making them available as mentors. Someone who’s been there and done that and has a different opinion from KPMG because of that experience, and that’s incredibly valuable. KPMG can tell you about best practice, but some of these guys have a different perspective, which is really important to get a balanced range of advice.

//SN: Yeah, I don’t recognise any of the names on the mentor list, who are these people?

We pulled in a range of mentors to get this mix right. As I said there are successful local CEOs of energy and resource tech companies, there are Silicon Valley entrepreneurs who have done this before. We’ve had more companies wanting to be involved in the program than we had room for so we’ve really been able to bring in some of the local heroes, and I really wanted to make sure that the mentors we had for the program were proven entrepreneurs who are relevant to our applicants.

Peter Salfinger for example, from Immersive Technologies, has this fantastic mining simulator technology that they’re selling all over the world. He has a great attitude and is very supportive of new businesses in the sector. He says he wishes there had been something like this around when he was starting out, because one of his issues was actually getting to the Australian market. Australia was one of the last markets that adopted their technology, which seems pretty unbelievable that a WA company has to go and prove itself all over the world before WA resource companies will adopt it.

We find there’s a difference between sectors that means that some techniques and approaches don’t cross over that well. So we really made sure that our mentors have experience in the sector. Another great mentor is Jarom Feriante from Chevron Technology Ventures based out of Houston, who will be teleconferencing in to help the attendees think about how to integrate because that’s a challenge that Chevron routinely deals with.

//SN: So you’re looking for startups with products, who are looking for customers in the energy and resource sector, to join the program, is that right?

Exactly, and we’re not restricting that to just Energy and Resource sector startups. If a startup can potentially be applied to large organisations then we’d encourage them to apply. Very often there are advanced technologies in other sectors that are completely applicable to this sector but who don’t think of themselves as “Energy and Resources” relevant. I see this a lot in healthcare, where there’s a lot of technology around managing a very remote workforce in a highly-regulated and compliant environment. That description transfers straight over to the resources sector. So if a startup has something relevant to the sector we really hope they’ll apply.

//SN: Things like data analytics, for example?

Absolutely, great example. Data analytics startups should be looking at large corporations because they’re the ones with the most data and therefore they can extract the most value. Resource companies collect a lot of data and anything that can help them extract value from that is always going to get some attention.

My personal goal for this program is to get a couple of local startups up to the next level, to see a big resource company invest in them, use their product, and see them succeed. I really hope we see that. But to be honest, even if we just help get a dialogue started between the large energy and resource companies and some local startups then that’ll be a good result.

//SN: Thanks a lot Toby, great to see this program getting going and we really hope it achieves what you plan for it.
If you’re interested in applying for the Energise program, then head to their website here: http://www.energise.kpmg.com.au/