Within Air France-KLM’s strategy and innovation team, I mainly focus on corporate venturing and the biofuel programme.The time split is about 50:50, but can fluctuate heavily during the year. The venturing activity is mainly concentrated within MIF activities. I also spend a lot of time developing our second fund.
We focus on technologies that will have a big impact on transportation and aviation in the near future. The goal is to increase our customer-centricity, drastically improve our operational efficiency and remain the leading airline on sustainability. We continue to focus on areas such as customer and crew connectivity, safety, security and biofuels. Interesting new areas are big data for aviation, robotics and new retailing concepts.
MIF focuses on the Netherlands. We are currently working on a second fund that will have a European focus and is expected to go live in 2015.
The focus for KLM is mainly strategic, but obviously the fund needs to show a sound financial performance as well, as most things do not remain strategic for a long time if they are loss-making.
What benefits do you gain from the collaborations?
There are several ways KLM benefits. First of all, KLM has been the launching customer for several of the startups, creating an improved customer experience, generating new revenue streams or leading to cost savings.
However, KLM does not only benefit from MIF’s portfolio companies. From the hundreds of startups in our dealflow we also identified and connected more than 50 startups with our relevant business units over the past five years, from which more than 10 collaboration projects emerged. Even though the fund did not invest in those startups, they brought interesting innovations to our business units and customers.
Furthermore, the fund also gives us an opportunity to see early on which innovations are emerging, and gave us the ability to learn how to work with startups.
We spent most of 2010 getting known to the market and building our dealflow. With the first investment, we also had to learn how to get and keep our business units involved. Let us say we have become less naive, and just saying they are interesting is not enough any more. In dealing with the startups we learned how important the team is and that sometimes you need to change it.
What is the typical annual external investment, investment size and current order of magnitude of the investments?
The fund is a seed capital fund of €8m ($9.6m). We have done eight investments so far and are looking for one or two more. We invest around €1m per investee company and, if needed, we look for a co-investor.
Fund management rested with the people from Rabobank, who were spun out of the bank last summer and now manage the fund from their own limited entity, Shift Ventures. The fund management is complemented with two to three people from the other three partners, securing the industry knowledge and the link with the business units.
Illustrate what you have described with a couple of examples of recent investments and collaborations.
In the past we have served as launch customer for Casper, which developed the collaborative decision-making tool used at Schiphol. We are about to introduce the e-Track and e-Tag with Fast Track Company, a permanent electronic baggage label and baggage tracker that will enable faster baggage drop-off and easier recovery when bags get lost. Once radio-frequency identification becomes operational at more airports, this solution will reduce the number of lost bags, which is the ultimate goal.
An example of a company commercially involved with Air France-KLM is E-leather, producing a light-weight, durable and easy to maintain material that is engineered specifically for upholstering aviation seating. As E-leather is a UK company we could not invest from MIF, a limitation that will disappear with our second fund.
I am working with a number of organisations on new innovative value chain – taking technology and using a different business model with new partners in a value chain. Are you seeing these approaches in your sector?
Absolutely, just have a look at Uber, AirBnB, Housetrip.com, and so on, and how they change the taxi and hotel business, similar to how Ryanair and Easyjet changed the airline industry in the 1990s.
KLM is also exploring new value chains, illustrated by our leading position in the development of aviation biofuels. The Bioport Holland collaboration is developing the supply side – our corporate biofuel programme stimulates demand while SkyNRG, a venture created by KLM in 2010, is driving feedstock and bioport developments around the world.
A recent development is setting up a new value chain around medical travel, a new market with fast-growing potential.
How do you measure the financial and strategic performance of your corporate venturing investments.
The strategic performance is measured by the impact on our business units, calculated as new products and services introduced – and impacting the customer experience – new revenue streams or cost savings. As stated earlier, this is not limited to the MIF portfolio, but also takes into account the other startups we could link.
Furthermore, we look at public relations and the contribution to KLM’s innovative image.
The value of our portfolio companies has increased considerably. However, the ultimate proof has to come from the exits.
What do you do to relax?
I try to see a bit of the world – working for an airline does come with some travel benefits. At home I love to cook. I try to go for a run once or twice a week, and walking the dogs on the beach works pretty well to clear my head.
Andrew Gaule leads the GCV Academy, developing the capabilities and expertise of organisations leading open innovation, venturing and corporate venturing programmes to drive strategic benefit. He also supports innovation programmes and collaborations in new value chains in global organisations. To contact Gaule and for future interview ideas email andy@roscahill.com and tlewis@globalcorporateventuring.com