In It Together: Thales InnovDays 2019
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It has become an overused trope in entrepreneurship-related publications that for a business entity to keep up with constant disruption, and stay ahead of the competition, it has to be either a startup, or operating as a startup- at least, to a certain extent, or in some of its divisions. Therefore, it is not that common to read about a business giant of 80,000 employees in 68 countries as one of the most agile organizations- unless it is Thales, a Paris-headquartered global technology group operating in the aeronautics, space, transport, digital identity and security, and defense sectors.
Historically, Thales has pursued a policy of open innovation with some of the world's most prestigious universities and research institutes, such as France’s Centre National de la Recherche Scientifique and Université Paris-Saclay, the universities of Bristol, Southampton, and Laval, the Institute of Data Valorization in Montreal, and many others. However, Marko Erman, Chief Technology Officer, Thales, explains that the last decade has led them to a slightly different approach in its pursuit of innovation. “It is because of our understanding that innovation is a story of bigger ecosystems and a variety of actors,” he says. “You need to group together all these competences.”
Thales has put in place systems and procedures to regularly cooperate with customers and end users, as well as startups. “When it comes to cooperating with clients, it is something the consumer industry is very used to already,” Erman says. “L’Oreal is testing its shampoos with its users all the time, but experimenting on the future of cities is a little bit more difficult. This is B2B. In this approach of understanding the value for the customer, we came to a conclusion that it is important for us to understand what the value is for the customer of our customer. Ultimately, what is the value for the end user which, sometimes, is disturbing for the customer. For instance, when we sell a cockpit to Airbus, we would like to know the opinion of the pilot. Classically, Aribus would tell us what they want, but nowadays, we ask the pilot. So, in order to serve our customer better, we need to understand the whole chain.”
Marko Erman, Chief Technology Officer, Thales
One of the reasons for a change in the approach, Erman explains, is because, traditionally, the customer in defense and telecommunications knew exactly what they wanted, “but, nowadays, cities have become so complex that many customers do not know exactly what the solution should be. They know what their problem is, but not the solution.” For that reason, Thales has been developing advanced technologies for critical systems that help its customers make the right decisions at the right time. “One of the most complex cases that we’ve had was in Mexico City,” Erman says. “They had no clue what they needed, but explained that the problem was a high level of crime, mainly gunfire, and the rescue forces arriving too late. So, they wanted us to diminish the crime rate, and to make them more agile in interventions.”
In response to the Ciudad Segura (Safe City) project, launched in 2009 by the Mexico City authorities, Thales teamed up with Mexican telecoms operator Telmex to propose an integrated urban security solution based on a large-scale video protection capability. Thousands of CCTV cameras were installed in the capital’s streets. “However, the problem then was how to see an incident occurring, when you have thousands of cameras,” Erman says. “So, we coupled the cameras with acoustic sensors to extract from the urban noise the sound of gunshots.”
A decade after the project was launched, the city’s official figures state that crime rate has fallen by 56%, car theft by 58%, and average response time has been cut from 12 minutes to 2:09 minutes. “It was a difficult problem for which we didn’t have a ready-to-go solution,” Erman says. “Since then, we have developed a laboratory where we can simulate a city, put citizens in as simulators of human behavior, meaning to inject a crowd and simulate different characters and their intentions. These are very advanced simulation tools.”
A similar solution of using video surveillance to detect and prevent incidents as well as to regulate people movements and inform them in real time has since been deployed in Mecca, the seat of one of the greatest pilgrimages in the world, in Saudi Arabia. “The trend in user experiences in B2B is relatively rare, so we are pioneering it, and what makes us different is the amount of effort we invest internally versus externally,” Erman explains. “Many companies have progressively diminished what they invest internally, for the benefit of relying more on external sources. This depends on what you believe you are, and what you want to be. The reason why we continued investing so much internally is because we are in five verticals, which few cover besides us, and because we believe that digital has transformed them all, so to keep doing that in time, we need to have teams internally.”
One-third of Thales workforce (28,000 employees) is directly involved in science, technology, and engineering. Every year, the group invests close to EUR3.5 billion in research and development, financing more than EUR1 billion themselves. Raphaël de Cormis, VP - Innovation, Thales Digital Identity and Security (formerly Gemalto), says that “there is no magic recipe” for achieving internal innovation, and that one of the main lessons they have captured so far is not to focus only on the technological aspect.
“Innovation is not a matter of technology, but of a distance between an idea and a decision to make it happen, and what we insist on is that any innovation we start working on is somehow anchored in the business,” de Cormis says. “Otherwise, you face two risks. The first one is doing a project just for the pleasure of doing a project. The second risk is to have something up and running, and not being able to scale it. To avoid that, we have a central team of experts, both in developing methodologies and accessing external networks as well as technology, and we mix those capacities with people from the business line with mainly business skills, in order to make sure that we are able very quickly to go out to the customer.”
Raphaël de Cormis, VP - Innovation, Thales Digital Identity and Security (formerly Gemalto)
These interviews were conducted during the InnovDays 2019, held in the La Défense district of Paris, which is an annual event Thales has been organizing since 2012 to present a vast array of new technologies and solutions in the areas of aerospace, transport, defense, and digital security. This year, the guests were presented with 70 high-tech innovations, most of which were developed internally. Giving a glimpse into their process of internal innovation, de Cormis says, “Firstly, we look at the trends among our competitors and the ecosystem in general, and we gauge whether there is an opportunity for the business or, on the contrary, a risk of disruption. Then, we talk with our business team about whether it’s worth looking at. Afterwards, we form a joint team very quickly, and we go outside of the company, and analyze who and how much cares about that particular issue. Then, we come back to our business team, explaining that our customer is as worried as us, or as excited as us. Then, we decide to co-build something with the customer to address this problem or this opportunity.”
Launching one particular project, de Cormis adds, needs to be done with enough trust from the outset “that it will work, and not remain just an idea floating in air.” He adds, “At any point, we want to be able to stop an initiative, and for us, that ability to stop a project is the most important part. We usually stop 12 out of 13 projects, which is the ratio between seed and Series A for startups. In 2018, for example, we launched 38 explorations, of which we had three product launches.”
Another reason for their committed and long-lasting approach to internal innovation, Emran adds, is because “Thales has never believed in integrated company models.” He adds, “We believe in verticals. We did climb the value chain, but we never left the bottom stages. So, we are not climbing up but extending. That means that in every segment we have deep technological roots, down to equipment, sometimes even components, which gives us competitive advantage.”
Over the last decade, Thales has been focused on digital innovations, such as connectivity, big data, artificial intelligence and cybersecurity, or in other words, all kinds of technologies that support businesses, organizations, and governments in their decisive moments. One part of this is done by cooperating with startups. Among other initiatives, this approach includes the group’s work with accelerators, like the Cyber@ STATIONF program through which Thales accelerates the development of cybersecurity startups by providing advice, technical expertise, and access to its core markets. There’s also its partnership with CENTECH to launch AI@CENTECH, a six-month program focused on AI startups, in Montreal, Canada, and lastly, its commitment to the Starburst Accelerator to help develop early stage aerospace startups.
“There’s a momentum of startups popping up all across the world, and they bring innovation into our field as well,” Erman says. “At the same time, they invent new business models. These business models can be an opportunity or a threat. If it’s a threat, it’s good to know it in advance. If it’s an opportunity, it’s good to grab it first. Whatever the reason, we are motivated to listen and to learn that. There are hundreds of thousands startups created every year, and the problem is not to work with startups, but to work with the right startups. We want to focus on what matters, and therefore, we have devised a methodology to target the right ones.”
However, he points out that working with startups has become “a fashionable thing,” and therefore, Thales takes a cautious approach. “I cannot say that we get that much money, because we work with startups,” he says. “It is more about education and understanding where the industry is going, which has a price, and which then is not directly transferable to our bottom line. That’s why we aim that the systems that we’ve been developing are not too expensive, but that they enable us to focus on what matters. Other companies embark on massive interaction which, I think, is too expansive for ROI.”
Frédéric Montagard, Director - Technology Intelligence, Assessment, and Insertion, Thales, gives more details: since 2014, Thales has been in touch with approximately 1,000 to 1,200 startups per year. Out of those, they annually select around 200 startups of interest for the group. And out of those 200, they have signed approximately 20 contracts per year. “We are focusing on startups to identify innovative business models; for example, all kinds of disruptions of offering a platform or a product as a service, but also for the reason of increasing our competitiveness, such as solutions capable of accelerating our turnaround time, our time to market, and decreasing our internal costs,” Montagard says.
“After the first contact, we have the second meeting at their place, because we like to assess their claim that they have reached a certain level of maturity, because we are very selective. Once we have selected them, we sign a confidentiality agreement to cover them, and to cover us. Then, we proceed with a customized agreement. We don’t have a standardized approach, because we believe that each startup is different, and that each of our business lines has different needs and requirements.”
Frédéric Montagard, Director - Technology Intelligence, Assessment, and Insertion, Thales
Thales’ approach to working with startups is noteworthy, to say the least. Montagard explains that it is based on three principles- selectivity, fairness, agility. He says, “The first concern from startups is usually who they should contact in Thales, since it is an organization of thousands of people. So, we have developed an internal tool for everyone to share information about the startups that we cooperate with. Then, startups usually claim that it takes big groups a long time to make decisions, so we worked on identifying the right person within the group, and avoid them meeting with people with no decision-making power. Therefore, we usually organize one meeting at one place with everyone who is in charge of deciding. In terms of confidentiality, they claim that they are asked to sign too many non-disclosure agreements (NDAs), so we have decreased it to one NDA for the whole Thales Group. Regarding the payments, to help them with the cash flow, we do accept down payments. We suggest paying 50% in advance and 50% upon the delivery.”
In conclusion, Erman shares a piece of advice for entrepreneurs wanting to work with corporates like his. “My main advice for startups is not to go to a large industry for the purpose of searching for money,” he says. “If you want to contact the industry, it should be because you want to become something bigger, to have access to markets that you don’t have, to acquire knowledge that you’re missing, and so on. But if it is for money, there are probably better addresses. It does not mean that we prevent ourselves from investing, but it means that we are not a bank. We are looking for innovation. Industry is not an enemy, not here to grab their idea, not to kill them, but to be a part of the same ecosystem.”
THALES IN THE UAE
Bernard Roux, CEO - UAE, Thales, explains that the Middle East is one of the group’s strongest markets. Some of its most successful projects here include delivering a complete technology package for Dubai Metro for a world-class passenger experience. Recently, Thales has been focused on setting up a UAE entity that will work on localizing and transferring technologies in the country as part of its efforts to boost the industrial sector and support its growth. The newly formed Thales Emarat Technologies intends to foster its contribution to the UAE’s ambitions to become a global leader with outstanding civil infrastructure and defense capabilities underpinned by a strong local industrial technology base. In doing so, Thales Emarat Technologies has committed to strongly invest in human capital by hiring and training a highly skilled local workforce, especially UAE nationals.