Huge Corporation Seeks a Small Start-Up
Can Israel find a place for itself among the leaders in global Food Tech? The Israel Innovation Authority and Nestlé are two examples of believers – and they are collaborating to meet the challenge of connecting multinational corporations with local start-ups
“The food sector is full of excitement,” declares Ilanit Kabessa-Cohen, Head of Corporate Innovation, Startups & Digital Business for Nestlé-Osem Israel. “Today it touches on a range of fields: biology, physiology, the environment, agriculture, lifestyles, emotional satisfaction, and our ties to family and friends. There are many directions that growth in this industry can take, but innovation is always the way. At Nestlé, our vision is to become important partners in projects where global innovation will start in Israel.”
This past year, Nestlé joined the Israel Innovation Authority’s Global Enterprise R&D Collaboration Program. This program helps multinational corporations (MNCs) locate Israeli technologies that they can benefit from, and it provides financial support for completing the necessary R&D. The goal: to bring new and improved products into the global market while promoting the Israeli startup culture and local innovation.
Noam Bar-Gal, head of MNC Collaboration at the Israel Innovation Authority, explains: “The Israel Innovation Authority is ready to fund the kind of innovative projects that are likely to emerge from Nestlé’s partnerships with high-tech companies and with older companies that are technologically innovative.
“In other fields – communications, computers, and software, for example – more than a few projects have already begun. However, in the food sector, even though we are working with Coca-Cola, Abbott (makers of Similac baby formula), and Unilever, no collaborations have emerged yet. Various subjects and ideas have been explored, but Food Tech is apparently more complicated in this regard.
“The Israel Innovation Authority is encouraging cooperation between big and small companies. Success is connecting Startup ‘A’ with MNC ‘B.' If we can pair them up – and that’s by no means a clear opportunity – we’ve done our job, because then we’ve created an opening for dialogue between the two companies. Once we’ve matched them, we enable the two sides to talk and progress by themselves however they see fit. And if their negotiations lead to agreement on a high-quality joint project, we’re right here to examine the possibility of funding it.”
Kabessa-Cohen describes the efforts invested in creating dialogues and connections between a conglomerate and several startups: “It’s not simple to build a relationship. It’s a labor of Hercules, and that’s an understatement. But I can say that some contacts have led to successful experiments and we’re considering extending them. Two are reaching the signature stage for continued collaboration. Others came to the stage of due diligence but stopped because Nestlé sets a very high scientific bar. We do have several projects that are going to be implemented this year.”
How Is Collaboration Born?
Kabessa-Cohen explains how the process began: “Our journey commenced thanks to the people who live in the Startup Nation. We began it as a local initiative, to persuade Nestlé to take a close look at the startup scene and then get involved in connecting the company as a multinational corporation with Israeli start-ups. We’re learning as we go because the process of bringing about this kind of change in an international organization – that is, creating a relationship between a conglomerate and a selection of startups – is very complicated. It has its ups and downs, successes and failures, and, it’s equivalent to founding a startup that’s internal to the organization.
“We signed the corporate cooperation agreement with the Israel Innovation Authority, and even though our program isn’t active yet, we’ve already examined several ways we can advance it.
The Israel Innovation Authority has already proven itself in many fields, so when they selected a new one and we have the privilege of taking part in it, we immediately realized that we could count on them. The offer everything from support for our initiatives, a group of professionals willing to listen, professional advice, a limitless network of professional connections, and a willingness to be true partners in the work we’re doing,” says Kabessa-Cohen.
“The patience of an organization like the Authority is crucial to our chances of success. They’re not new to this, they’re experienced, they know how to provide guidance, and they have the tools for supporting initiatives utilizing meetings, delegations, and more. When I include meetings with the Chief Scientist in my tours, our professional visitors are very appreciative of the fact that there is an organization dedicated exclusively to these issues.
“Now, we’re at the very beginning of the process,” says Bar-Gal regarding the understanding between Nestlé and the Authority. “It’s difficult, both because food manufacturing in Israel isn’t at the forefront of innovation, and because of the current corporate attitude in the Food Tech sector. The food industry in Israel needs to be incentivized toward technological innovation. When seeds of an innovation culture are sown in the industry, collaborative ventures can be created.
- The first stage is laying the foundation, which isn’t very large as of yet.
- The second stage is to create the interactions between the startups and the industry.
- The third stage is to finance these projects so that they’ll have a better chance of success in the marketplace.
“Our funding is a filter concerning the excellence and quality of the project. It’s also an indication, to the corporation, of whether the project is worthwhile – a stamp of approval, as it were. Our judgment is impartial. We judge only the technology and its commercial potential.
“It’s important to us to incentivize the whole Food Tech sector so that innovation will become a more regular part of it. These things go without saying in High-Tech, but not yet in Food-Tech. A critical mass of economic and business stakeholders – like the state, for example – has yet to be reached. The knowledge exists, but it’s extremely technical. In every sector, including Food-Tech, there must be some enthusiasts in the field, who come from the industry itself.
“Our investment arises from the companies’ requirements for capital, which they need like oxygen. Obviously, the small companies don’t have anything to give in return except equity. Afterward, the supporter can realize the investment by selling off the holdings. From the standpoint of a big corporation, if it invested in a small company that developed something in line with its strategy – it made an excellent move. The investment can be realized even if the startup developed a solution that turns out to be a part of a strategy that the big company didn’t choose before.”
Israel as a Culinary Superpower
“Nestlé’s R&D focuses on developing new and improved products for the global market and on implementing technological innovations in the food-manufacturing process,” says Kabessa-Cohen. “At the same time, the company is also involved in basic scientific research. Among the research topics are
- the relationship between dietary habits and environmental factors,
- the relationship between various aspects of health and gastronomy.
At Nestlé, we believe that the combination of scientific research and technological development will help us understand how nutrition influences the way different genes are revealed, it will enable us to improve the health of future generations and will enhance the quality of life.
“Innovation plays a critical role in the food sector, which is an industry with a fast pace for new product launches. Moreover, Israel has one of the highest rates of innovation in the food arena. Granted, the profit margins here are low, so it’s difficult to allocate resources for long-term technological development. Lookin into the future, these initiatives will be able to offer people proper and personalized nutrition based on an understanding of the relationship between nutrition, health, and quality of life.
“According to this scenario, modern mapping technologies for DNA and microbes will show how the food we eat affects our health. This information will help us consume our food very carefully, considering its impact on our bodies. The industry will also use the data to produce a new kind of food containing active therapeutic and health components according to each person’s individual needs. Zooming into the issue of "Smart Homes" and "Internet of Things, we can see the potential development of the industry there as well. We will have a "Smart House" with a "Smart Kitchen," which is one of the more attractive rooms and has a lot of potential for innovation.
“Once you get into the disciplines that set the parameters for the Food Tech industry, Israel has the potential to lead the food sector. Israel besides being a technological leader, is also a leader in the health industry and the culinary arena, and it’s earned an international reputation over recent years. Our strength lies in the integration of these fields.
“We’ve seen several interesting initiatives in the Food Tech sphere,” Kabessa-Cohen states. “It’s a new field in Israel, but there is a small group of leaders here, and no less importantly – that team is passionately committed. We all have a sense of mission to expand this field in Israel, and that includes all our associates in the Israel Innovation Authority. We all have the feeling of building a new ecosystem and the hope that together we’re constructing a high-quality engine of financial growth for the industry and everyone.
“Meanwhile, we are only scratching the surface regarding the community that needs to be cultivated and the entrepreneurs. The Food-Tech sector has only a few entrepreneurs overall, and few serial entrepreneurs. We need to create and build a multidisciplinary group that includes biologists and chefs, chemists, engineers and designers, IT people and nutritionists, culture researchers and businesspeople. Because of the role that food plays in our lives, this really can be done.”
Search for the Answers Here
How do we turn this kind of collaboration into a reality? Kabessa-Cohen describes it as follows: “Various channels are used to build ties between Nestlé Israel and local industry. The starting point for it all, however, was drawing attention to Israeli innovation and emphasizing its relevance to Nestlé. The initial effort focused on informing Nestlé executives that in addition to the extensive work done in Silicon Valley, Israel is another good place to look for innovative achievements. We brought senior Nestle executives to visit and gave personal tours to the appropriate people from the global company.
“The next step in building the inter-company relationship was accomplished by preparing reports and surveys about the startup picture and distributing them throughout the corporation to start the conversation. The next stage in promoting the connections took place this year. There is an expected phase of locating business units which have difficulty filling some need on their own and how to fill it by incorporating certain new technologies invented by the startups.
“At Nestlé-Osem Israel too, we work hard toward improving the organization’s willingness to collaborate, to turn Israel into a leader not only in finding technologies but also in applying them. Here we’ve had pretty good achievements. Start-up technologies are used mainly in marketing innovation, and people from all parts of the organization lend a hand in technological pilot programs, give professional opinions, and so on. The development of intra-organizational leadership that promotes collaborations with start-ups is one of our most critical challenges, as it’s essential to driving Food Tech forward, and I am very proud of the cultural change in the organization.”
In February 2016, Nestlé-Osem Israel inaugurated the Open Innovation platform. The platform is called “Henry” in honor of Henry Nestlé, who founded the Nestlé company 150 years ago.
Bar-Gal explained Israel Innovation Authority approach; “How does a huge company innovate and exploit the market’s resources? It opens itself to the market. It collaborates with entrepreneurs and with the entire ecosystem. In general, it participates as an investor, but it can also be an adapter or a user. This approach represents a whole philosophy that developed over the last decade and that deals with innovation rather than necessarily with the organization’s existing R&D efforts.
“The Henry innovation platform that Nestlé created is a kind of catalyst for making contacts in the industry. The idea is to build a tool that will make interactions between start-ups and the industry more systematic. Henry, a platform that already exists abroad, will be launched in Israel by Global Innovation Director Gerardo Mazzeo at a special event for start-ups. Similar events took place in London about a month ago, and in Silicon Valley at the beginning of the year. Now, Tel-Aviv Israel is joining the list of the most important cities on Nestle’s global map.”
