Thank you Robert Bosch Foundation Alumni Association for giving me the opportunity to speak to you tonight. Its a great honor.

I would like to give you a bit of my perspective having lived on both sides of the Atlantic and having seen the US and German corporate as well as the startup and venture capital world.

Imagine tomorrow morning you will open your Sunday newspaper and read that Uber bought Lufthansa. Right below the headline it says “Apple to buy BMW”. Today this possibility sounds absurd for most of us, especially for us Germans. The threat to lose some of Germany’s most visible global players, which stand for Germany’s values like few others, is widely ignored.

Yet, these scenarios are not as unrealistic as it seems at first sight. When looking at the market caps of both German corporates and then review the cash reserves of  Uber and Apple, the possibility doesn’t seem to be so absurd at all. The good news however: it does not necessarily make strategic sense for Uber and Apple to do so! But that’s not a safe bet!

What may astound particularly the Germans amongst you is not something to be surprised about. Overall the sum of German company valuations are in relative decline compared to the U.S.! It is simple a numbers game: How many companies do you think have been created in Germany over the last 10 years that today achieve an annual revenue of $100 Million or above? Compare this to the US and you have the answer.

Let’s take a step back and reflect how we got here:

The answer lies in the way we innovate and how we create new startups!

Some say that German innovation differs from U.S. innovation in the way that it is more incremental than radical in nature.

German engineering prides itself with having improved a product over centuries to derive at the very best solution in the market. Making  a good product even better, making machines work even more efficient to become the ultimate driving machine is what Germany’s innovation is proudly based on.

Germany is head on head with China as the world champion in export and continues to be a key player in the supply of sophisticated components to the world’s best companies. Often German companies found profitable verticals that are so specific that few other companies would be able to compete. By focusing on a small niche market, German companies often create outstanding solutions which they incrementally improve to hold onto their competitive advantage. Very often these niche market leaders are family owned with no ambition to go public or to shape their industry. This is the secret sauce the German Mittelstand is made of. Incremental innovation is what the Mittelstand’s competitive advantage is made up of.

On the other hand, U.S. and especially the Silicon Valley innovation is often radical by design. Radical innovation disrupts existing markets and drastically change societal and/or business practices. Once a company strikes a breakthrough innovation, a completely new market is created and an existing one eliminated with new rules and often redefined value chains. These disruptors enjoy exponential growth and are highly profitable. A new global market leader is born.

As you know dozens of companies in the United States such as Apple, Facebook and Google fall into this category. What is remarkable is to remind how indeed young these players are. They create enormous value for their shareholders and  the local ecosystems while also releasing new waves of innovators equipped with skills and financial resources. They also are the engine for the startup ecosystem where smaller companies are acquired to fuel the cycle of startup innovation.

Such ecosystem is really not existing in Germany. German startups have a much harder time to exit their venture at attractive valuations thereby fueling the ecosystem. The German M&A market is very limited by number of transactions and in financial terms: German corporates have not understood how to fuel the ecosystem which ultimately feeds their disruptive innovation efforts.

The economic benefits from being a disruptive innovator versus an incremental one will become even more extreme! During the time of digital technology, incremental innovation cannot compete with disruptive innovation. By nature, digital technology is exponentially improving as stated symbolically by Moore’s Law. When placing the exponential graph of new digital disruptive innovation on a graph together with the linear line of incremental innovation of current technologies, it is clear to see that eventually, exponential growth will outperform incremental improvements. Exponential growth of digital technology therefore will eventually catch up with all incremental improvements ever made by mankind.  Experts argue that we are currently experiencing the intersection by which  incremental improvements of technology are being overtaken by the digital exponential growth of improvements.

The catch up will have huge effects on countries’ economies and will leave few markets untouched. Today, we can already start noticing those changes! This is good news for countries whose economic and cultural structures supports the creation of companies embracing a culture of disruptive innovation by following new paths, such as the U.S..

It is bad news however, for countries who rely on the sales of products based on technology that has been incrementally improving over decades, such as Germany or Japan.

To give an example, Germany’s car manufacturers will be the first to notice that it is not beneficial having the best combustion engine in a car that gives the most pleasure driving it, when the rest of the world is leasuring or working in electric, self driving cars to enjoy and have a productive way to get from point A to point B.

Before getting too grim, it is to be pointed out that, Germany’s ecosystem is able to be a great place to foster disruptive innovation. Germany is historically a country of many ideas and inventions, it has great trade and industry organizations, it has some of the world’s best education and workforce development, business structures, talent, academia and research, strong access to global markets as well as world class media outlets. Germany continues to develop high tech  in its universities and applied research centers such as Fraunhofer. We merely have to step up our game to introduce such tech to the global markets much faster, and prepare for a new future of innovation ecosystems.

How do such future innovation ecosystems look like?

Here we come to Silicon Valley. Thank you for selecting it as the venue for your annual alumni event!

SV is clearly an outlier amongst the disruptive innovation ecosystems. Its diverse mix has been created over decades if not centuries. Thanks to a row of events, Silicon Valley has established itself as the most extreme environment to innovate. While it has become commonplace to believe that Silicon Valley’s ecosystem cannot be copied, many economies around the world challenge this belief. I encourage you to read the book “the Rainforest” on how elements of it might be transported.

There are dozens of cities like Berlin, London or Tel Aviv to name a few that provide a similar mix of key components every ecosystem needs: Access to technology, entrepreneurs, and a vibrant startup ecosystem. The same holds true for corporations. These companies are ecosystems within themselves and could provide a similar mix of the same “ideal” factors necessary for disruptive innovation.

Despite having all of the necessary ingredients, these ecosystems never came close to power of the disruptive ecosystem created and re-invented in Silicon Valley. If we could get these cities and corporations to become somewhat closer to the performance of Silicon Valley in producing disruptive innovations, we would see the world advance at much faster speed and spread the benefits that come with technology across the globe.

All innovation ecosystems (cities, companies or countries) are hindered to achieve disruptive innovation due to four barriers: 1) Geographical proximity to other innovators 2) Social network failures 3) Cultural and language  issues, and 4th) lack of trust.

It is safe to assume that in the very near future, that geographical barriers are undeniably decreasing. Technological breakthroughs in categories like travel and  communication from services like Skype, Google or Webex, are enabling people to communicate with each other, work on the same documents and solving a problem remotely nearly flawlessly. While still not perfect, the frictions of working remote will continue to decrease by introducing Virtual or Augmented Reality environments supported by companies like the startup Seebright I am responsible for. Soon, an entrepreneur based in Germany will be able to go for a coffee with a Venture Capitalist sitting on Sand Hill Road by simply putting on an augmented reality device. This will make physical meetings close to irrelevant and creates new experiences in newly defined environments. When being able to work with all experts from around the world at each moment in time, our only limits to disruptive innovation, will be set by the connections we make between key players in the ecosystem.

Once the physical barrier will be overcome, it will not matter if an entrepreneur is based in Silicon Valley or Berlin or Cape Town. The only issues innovative ecosystems will then face will be of interpersonal nature: Networks Failures, Cultural differences and Trust issues.

While geographical constraints will take care of themselves, overcoming interpersonal barriers is core to any ecosystem to become innovative. The very advanced stage of cultural openness and cultural integration in the U.S. and particularly in Silicon Valley, is a key component to the success of the entrepreneurial and innovative achievements made.

The ecosystems that will be open enough to equally overcome the interpersonal barriers will become the future norm of innovation hubs. While these hubs might never be as significant as Silicon Valley, there will be far more “satellite hubs” that are all interconnected. By interconnecting innovation ecosystems, transaction costs will be reduced.  We will see more “random” connections being made between players in the different ecosystems with complementary skills and resources. A great example for this is Tel Aviv and Bangalore and their striving ecosystem connected to Silicon Valley.

Germany seems to be in a very good position to overcome these barriers, too. The German culture has a deep understanding for cultural empathy. We are very open for multicultural cooperation and are overall a very welcoming nation. The diversity created by RBF’s alumni is a great example of this.

If Germany has the ideal hard and soft factors for disruptive innovation, why then does Germany fail to create global market leading companies in the “new world”? Why do German entrepreneurs focus more on local markets and not on aiming for global leadership?

From what we have seen at the German Accelerator there are 4 particular issues keeping German startups from becoming global leaders.

1) Past incremental growth companies have led to few exits. As a result we have few serial entrepreneurs in Germany. Huge successes are not as visible to inspire other entrepreneurs.

2) There is a longer lead time for beta customers making disruption harder.

3) Slower market scaling in Germany.

4) There is relatively limited access to growth capital for founders (capital is needed for market penetration/ disruption).

When looking closely at all the issues, one factor is underlying all of them: our German RISK culture.

As many might have experienced while being across the pond, Germans are generally risk averse by nature and prefer take the safe route over the risky one. Founding new companies, growing them exponentially, corporate managers buying products from young companies, or investing in startups are all risky things to do.

In addition, German society shows little tolerance for failure which is putting more stress on the German entrepreneur to “play it safe”.

What do we need to go from good to great, from local category leader to global market leader?

In my opinion, there are two answers:

What can our startups do?

Instead of waiting for the German ecosystem to flourish, German entrepreneurs cannot wait by the side lines while other ecosystems shape the future. Germany’s startups have to take a proactive step to quickly become relevant on an international level, and they have to do it FAST. We figured out that the best way of doing this today is by entering the US market, a market which is very often makes up 60% of the world’s total market size. Why?

1st, when coming over to Silicon Valley, our German entrepreneurs can learn from local, well experienced entrepreneurs who have founded many companies. Learnings that often put the entrepreneurs miles ahead of their German counterpart. The gained knowledge would have taken a long time to learn back home where there is less access to experienced entrepreneurs. The dense ecosystem of meet-ups, events and industry trade shows in combination with the open way of networking in the U.S. give the entrepreneurs a quick understanding of what the American market looks like and what their role in it can be.

2nd, when selling products in the U.S., German entrepreneurs realize that the US consumers are far more likely to try out new products in the consumer space. When selling to companies, the founders will often experience a much shorter lead time for beta customers. This leads to faster growth than would ever be possible back in their home country.

3rd, there are much larger sums of funding available to startups. Funding also often comes at more attractive terms. While many companies in Germany bootstrap and find it hard to get substantial amounts of money to finance their quick global expansions, startups coming to the U.S. will find new and larger opportunities. Perhaps most importantly, there is much “Smarter Money” available for founders. Smart money opposed to stupid money gives companies access to the investor’s relevant network and experience. Benefits that are often more important to startups than the actual capital.

Lastly, while being here in the U.S. entrepreneurs get to embrace the entrepreneurial mindset. German founders get challenged to think bigger. It seems impossible to not get infected with the Silicon Valley mindset of creating a product that changes the world. A change in mindset from a local to global, scalable product is the very first and most important learning for an entrepreneur when coming over to the United States.

Unlocking these benefits to Germany’s most promising startups is what German Accelerator’s mission is.

With the goal of fostering the international growth and radical innovation of German tech startups by supporting them with an effective and efficient entry into the U.S. market, we started the German  Accelerator in 2011 with the support of the German Government.

As of now the German Accelerator brings 36 companies to the United States each year with acceleration locations in Palo Alto, San Francisco and New York City. We have four startup batches per year, each lasting three month, leading to great learnings and ongoing improvements of the program.

The core elements of the program are a mentor scheme, a lean launchpad course as well as dozens of workshops focusing on diverse issues such as local culture, finance, funding, marketing, sales, communication, banking, legal matters, networking, pitching and many more. Our growing pool of over 40 highly skilled and connected mentors with wealth of local startup experience are all available for one on one sessions with our companies. Our mentors also facilitate introductions to key players in the local ecosystem.

The program has seen significant success stories. We have seen lasting market entries into the US market, and several of our Alumni companies having raised double digit million funding rounds from American VCs.

We are also very grateful to receive overwhelming support from German corporates which believe in the creation of a thriving German startup ecosystem and we count as our advisors and partners. Amongst others we have to thank Siemens, VW, Deloitte, Digital Accelerator (Allianz), Telekom, as well as local players such as WilmerHale and BakerHostetler to allow German Accelerator to operate.

The second answer on how to create disruptive innovation leaders is closer than we think. It requires the utilization of German global corporates such as Bosch and other established players.

Let me ask you: “How many industries did your corporation disrupt over the last 10 years?”

Let me not guess the answer. But maybe it should be at least one per year.

Corporations have to find new ways to innovate and become leaders in a new era of disruptive innovation. We have to find better ways to successfully foster Intrapreneurs in corporations: Innovation departments in German corporates have tried, and everyone has mostly failed to make it work. Well, we will have to try harder! Let’s promote Intrapreneurship 2.0! Intrapreneurship can be the basis for disruptive innovation inside your corporation!

We have to! The culture and the huge financial valuations of new industry leaders such as Facebook, Google are not only justifiable because their projected future growth but also because of their ability to create new innovative business models very fast. But they do this not only internally but through the rapid integration of external innovation through aggressive M&A of technology startups.

These companies will aggressively grow and can always reinvent themselves (remark: google’s move into textile industry). Today’s established corporates from the “old-world” find it more difficult to make huge changes nor can innovate as fast through external innovation. We all know about the NIH problem!

To disruptively innovate, corporations have to let expertise and knowledge come in from the outside much easier that it happens today. And this demands change in culture and structure:

  1. Corporations will have to turn into much looser Co-operations: Non-contract workers or Freelancers and distance workers will become more relevant in modern organizations.
  2. Corporation have to create an environment of hyper growth management and leave the notion of Change Management. Change will have to be is part of the game. Change will have to become fun!
  3. And…The walls between the corporation and the startup world will have to become much thinner.

For corporates to be able to do all these things, the right incentives have to be set and the right people executing have to be put in place. Here are some recommendations:

  1. Make innovation the responsibility of the CEO. Take it serious and judge a significant portion of her/his performance goals on growing new business units.
  2. Make it visible that CEO is the “leader of innovation” and that she/he will be rewarded for success accordingly.
  3. Encourage the hire of  managers with startup experience and give them the freedom to work like a startup. (here remark: advantage of US organizations)
  4. Encourage startups inside your organizations by actively seeking and promoting intrapreneurs in your organization (here remark: intra- vs entrepreneurs)
  5. Include innovation indicators as part of your annual reports. Promote your organizations by such “new company indicators”, similar to sustainability or environmental indicators.

While the whole corporate world will try to make intrapreneurship work, I believe for Germany to be in a great position to take the lead and shape the way in this regard. Germany still has some of the world’s most influential corporations that hold patents to the world’s most important technologies. German love complicated things and systems. And lets not forget our claim that we are the “Land der Ideen”.

But Germany, or any country, will not be able to do it by itself. Ecosystems will have to become more interconnected in order to flourish. By ongoingly building and strengthening bridges between Germany and the U.S., we ensure that our countries keep being key players in the global innovation industry. Only through the support of global organizations with the mission of connecting ecosystems, we can create the needed environment that will lead to the serendipities entrepreneurs and intrapreneurs need to create thriving, global businesses and remain globally relevant.

Thus, I’d like to highlight the importance of institutions such as the Robert Bosch Foundation. By improving U.S. and German relations, RBF creates hundreds of the valuable connections between core players in both ecosystems. By allowing Americans to gaining an in depth understanding of the political, economic, social, and cultural environment in Germany and Europe as a whole, barriers of innovations are being reduced as we speak and clear the path for greater, more disruptive innovation. Having said that, I would also like to congratulate RBA on their achievements to date on helping more than 530 young american individuals to bridge Atlantic gap and wish all the best for future endeavors.

Before resuming to our dinner, I would like to leave you with 3 short but important messages:

  1. Keep building bridges between our countries through making friendships with likeminded people. It is ultimately people who disrupt industries not corporations.
  2. Foster Intrapreneurship in your corporation,  make innovation a CEO level top priority.
  3. Take more risks and aim to innovate in a disruptive fashion!


Many thanks and bon appetite!