EP025: Bridging Tech and Traditional Companies - An Interview with Ayyeka's Ariel Stern
This is an episode of the "Ventures in Industrial IoT" series brought to you by GE Ventures. In the series we explore success factors and challenges in Industrial IoT markets with CEOs, investors and experts.
IoT Spotlight Podcast introduction:
The IIoT Spotlight Podcast shines a light on Industrial IoT solutions that are impacting businesses today. Every episode we interview an expert about a specific IoT use case. Our goal is to provide insight into the planning and implementation of IIoT systems, from new business models to technology architecture selection to data ownership and security. The IIoT Spotlight is produced by IoT ONE, an information platform that provides market insight, partner development, and go-to-market support for technology providers, end users, and investors. Don't forget to follow us on twitter. You can contact me directly at firstname.lastname@example.org.
It is conventional wisdom that the way tech startups operate is fundamentally different from traditional companies. As technopreneurs in the Industrial IoT space, it is vital that you are aware of the reasons behind this difference when dealing with clients coming from traditional industries or vice versa so that you can approach these business dealings in a more strategic manner.
In the tenth and final installment of the "Ventures in Industrial IoT series" brought to you by GE Ventures, Ariel Stern talks to us about how the gap between tech and traditional companies can be bridged, drawing from the deep knowledge and experience he has accumulated at the helm of his own tech startup, Ayyeka.
Learn more about Ayyeka: https://www.ayyeka.com/
Learn more about GE Ventures: https://www.geventures.com/
Ariel Stern is the CEO and co-founder of Ayyeka, a firm at the forefront of bringing together cloud-based software and plug-and-play hardware data collection technologies to serve the Industrial Internet of Things (IIoT) market. As an electrical engineer, he applies his technical knowledge to develop innovative and secure turnkey data monitoring solutions such as the wavelet, Ayyeka's signature remote monitoring platform.
Prior to co-founding Ayyeka, Ariel served as Captain and Senior Project Manager with the Israeli Air Force, where he was responsible for airborne control systems implementation and operations, as well as managing the workflows of world-leading defense contractors.
Ayyeka develops end-to-end remote monitoring solutions that streamline and secure the process of bringing field data to decision makers and SCADA systems, enabling smart infrastructure and environmental networks in industries such as smart water network, smart grid, oil and gas and smart city.
Wavelet, a next-generation remote monitoring platform, is the core of Ayyeka's technology. Ayyeka’s Wavelet offers a cyber-secure, autonomous, and comprehensive solution of all components and services required for remote infrastructure and environmental monitoring.
"With startups, everyday there's something new and that drive to move forward fast sometimes makes you incompatible with the traditional companies."
"Picking a small company is exactly the opposite of picking stability"
"Technologists care about features. Approaching the market., we learned very fast that a customer typically does not care about features, they care about benefits."
"Once you understand that the customer or the end user cares more about benefits rather than features, you change the way the company works."
"Wastewater is similar everywhere but the need for data or the use of data or the implementation of IoT technologies is a bit different because the regulation is a bit different and the local governance is a bit different."
"The companies need to think of you as a partner and not a vendor because brands are important."
"Aiming for a higher implementation rate means partnering with bigger partners."
Welcome back to the Industrial IoT spotlight. I'm joined today by Ariel Stern. Ariel is the CEO of Ayyeka. Ayyeka is a company that is introducing innovative, cyber-secure turnkey data monitoring solutions for industrial automation. Ariel thanks for joining us today. Before we kick off our discussion, what else should we introduce around your background and Ayyeka's background to give a foundation.
I'm an electrical engineer graduated in Israel and I have my partner and my colleague who is a computer scientist a computer software engineer and we know each other for more than twenty years we grew up together literally and when we graduated and finished our initial career path. So we said let's do something. Let's do something together. Initially we did after we did some kind of small flying product that is now a part of IoT but back then it was 2008 or 2009. No IoT was out there. It was telemetry or machine-to-machine. We did bicycle tracking devices. We thought it would be a big hit. which was obviously not. I still think that it is a challenging area to track bicycles and that commercialize it. But we found ourselves with a solution with a software component and a hardware component on it that can communicate data and this is how Ayyeka started. So two engineers background as friend and just you know like to have a good solution
Yeah that's interesting so just in the past 24 months or so a couple of companies out of China OFO and Mobike forked out 1.5 billion dollars around a shared bike solution with GPS tracking but I think that is a little unique to the Chinese market.
Ariel I see from your background that you were a Captain in the Isreali Air Force and then also working for the Ministry of Defence, a lot of excellent technologies coming out of companies whose founders that at some point passed through the Defence sector in Israel. What's the backstory here? Is it just the focus of the Israeli military tends to be more on technology?
I think for just that we are just lucky because its a mandatory service in Israel
And very young engineers think about a young engineer probably in my early 20s. I received introduction or access to a very very developed technology area because as you know the defense industry typically is one generation ahead of civilian industries in some aspects and pumping out jobs. So the reason that is so popular are moving from the military to the civil is because we are relatively lucky we are young engineers getting a lot of responsibilities like technologies or high end technologies. Same for my partner he served in the cybersecurity part of the Israeli Defence Force. So we were fortunate enough to have early access in our career to high-end technology and that responsibility I was serving as a product manager for my initial career so I received access to protocols to routines the development cycle of the things that typically takes for other people. Let's take 10 years developing their career you know as a young engineer and you climb up the ranks. So in our case in Israel if you're fortunate and you are a Captain in the military service that means that you can have it very early access to high-end technology and high-level development environment. I think the reason you see a lot of young veterans from the military moving forward technology just because they set up a technology early career they get that responsibility and then when they leave the army and say I can do it on my own or to try to set up from startup from the defence side to the civil side this is my perspective on that.
Got you makes a lot of sense. The topic of our discussion today is on bridging the gap between technology companies and the traditional corporates, the companies that are supposed to be adopting these solutions. Explain from your perspective what are some of the challenges you face in terms of translating your technology into a business case.
OK so what we saw it is a huge gap between entrepreneurs then technology hype and investment capital in these areas of the economy and what is called a traditional market industrial IoT specifically. You're touching a very sensitive point in this space because the end user the client is typically is coming from the traditional space and infrastructure company, utilities the government end-users have a thing with a very special sort of presence. But to be limited in scope of what it called information authorities and some people say they are slow to adopt and to shift a big organization takes time. It's like a small company to offer them a solution and they can decide over and overnight or something other people say look it's not customers that can decide overnight to buy an application or sign up to the service.
I think if you're talking about an a factory or a deal you can bet propagating the message and reaching the right decision maker takes time. For a small company startup it's very challenging because of cultural norms very solid and you tried to approach them and with reasoning to explain or to learn from them et cetera. They're moving but it takes time. And this mental gap to convince a big organization or promote a new solution into them even if even if they want it takes time. Everyday something new, everyday new technology and the drive to move forward fast sometimes makes you incompatible. Today your customers because they need some kind of solid solutions. The reason they pick the big brands they pick IBM or Siemens or Schneider or one of those three will become corporate to all of them offer stability over long term periods. Picking a small company is exactly the opposite of picking stability Bridging this gap is one of the challenges faced by the startups on a day-to-day basis.
yeah right now you talk to a lot of companies that have been successful in doing the same thing on the smaller you know in general never the only pay attention.
To the recent I would say.
They get to go and technology at the company right now and say this so what we did as a small company we decided from day one that we will invest resources in the right approach meaning it's tricky because we are after the fact that a clear majority of the market is dominated by the big players meaning service providers or big entities. But if we rely only on them to promote the message. It may take time or more time that we have. So what we did initially we said from day one we need to think like a true company that we will prevent our partner and our end user. The immediate reaction will be this is a good solution. Solid solution reliable solution and goes all the way in the marketing material in the presentation in the internal structure of the company. The resource allocation ever used word was focusing towards a direct work direct sales which is good because then we are the best ones that are offer which is great. What is not so good about it. We didn't reach those a small company but a crucial part of our development starting are the early days. The first three or four years we did direct sales direct approach. We had some initial success then we we got what we describe as case studies or use cases but real ones you know like with real names real numbers real story behind them how we support their operations. And then what we saw like when we moved to the second tier of working with bigger partner because their systems are real and we are probably here to stay and we are not like a startup dream you know like fantasy that's to say okay we were for a few years make some advancement and then move forward or sell the company or other. What we said no we just say we don't have an exit strategy we have a retention strategy because we think that touching a very simply point in the operations that we want us to be part of a operation for a long time. Second we enjoy it. So investing the resources in direct or indirect say but not forgetting that we need to rely on partners and I think what has to move forward. Also remember that for us for the extremely challenging because we don't have local markets we are the Israeli company is very smart especially. We are our solution to focus on the infrastructure critical infrastructure. So in infrastructure the bigger the territory the better region for our kind of solution because if you compare Israel for a much bigger country Germany is Italy. The U.S. is going to see that you know in India China the bigger the infrastructure the more need for data that you are the more time that someone is out there. So we do have a local market and middle market so we needed a solid market So we are based in the U.S. So they want all they want. We approach the West. We hired a US team members to work with us like we opened the U.S. Department and they got everything from the paper size. This may sound ridiculous but they work in different paper size. The letter of day A4 all the way to the vocabulary etc.. I think what has passed to have the initial first step in the right way more directly in a foreign country needed. We need sort of power structure to do this. Having done that for or for years now now we are moving to the second phase of working with bigger partners
So are you more focused now on the US or on the China market?
So our go to market strategy we picked the U.S. or different what we believe is good reason first there is a lower language barrier for us the place. English is easier for us. The mentality in some cases similar and also a market condition in the U.S. is very unique now in terms of critical infrastructure. This is the good side of all the US are the benefit of the U.S. that the challenges aren't so big and complicated. So we start with the U.S. move because we need some initial success. About a year ago we started launching operation in Europe or a European area that's going to be on a broader scope the New York in the Middle East and part of Africa. We started about a year ago. We also would soon become the market. So we start in the U.S. have some success learning the market. Now we should felt mature enough in operation in Europe and next year from 2018. We are looking into the Pacific region Australia Singapore China India those areas for two reasons. First we are all mature so we can support more. Second a lot of our partners are looking now for global reach meaning they want with one provider or one solution provider with a global reach global meaning all the way from the U.S. to China covering the word so we only provide solution for the US or for the Europe market. So you are limited and they want to get that problem to the telemetry or in the IoT industry a lot of global solutions but not a global unified solution because we are in the solutions industry. We are in hardware so it makes our life even more complicated. But in the US We started because it was easier for us and it was proven to be a good choice. Europe is a natural expansion for us and Israelis and then pacific at a certain stage.
Probably the most challenging thing is to change the mindset of the company.We are a technology company technology people always think about features think about it when you buy a new iPhone for example or on your smartphone or you or your making it if you're technology oriented a person you think a great deal look at the features screen size gigabytes of memory of those bits and bytes and was very very present company we can talk about encryption protocols and about punctuality of the hardware et cetera. Approaching the market. We learned very fast that a customer typically not care about features cares about great benefits. It's a thin line between them because feature drive benefits and benefits the fine features and sometimes at least in our early stage we end up with a mix in our fight away from market perspective and the other one they are in the perspective we mix features with a benefit. And as long as you are a pure technology company and you go the role of customers you are very very focused on features because you think features who makes you shine through the crowd. What we learned a few years of operation is that benefits make your front door to crawl because benefits bring client client rigs inside the inside bring better knowledge especially by the way through probably almost any kind of market almost any market. A especially true for data structure because as I said is their response. They are not IP companies they have aspect of IP from them very well developed but in most cases IP is not the day to day operations they use it but they are not the focus of the company because they are considered in the solution. By definition IoT is part of the IP domain and they tend to provide less attention. I can tell you were sitting in meetings. We talk about money pouring some water infrastructure 90 percent of that meeting we're talking about wells being in metal and things like that because it's very very related to what they were and then ten percent was related to the telemetry. And we learned nothing quick because once you understand that the customer or the end user cares more about benefits than feature you change the way the company works will come because you might as well. So very nice to be on the front end of technology. Very very cold very good looking and you know on LinkedIn those kind of things by the customer if you can really use that scrubs that we don't know them the benefit and they took us a while we are still shifting by the way we respect about the company but now we are more organized towards a benefit. So the transition between the economic relationship between a startup and a business enterprise. So you shift as we grow if we're starting in the beginning but now I think it's part of the challenge we really like to grow the company like there anything which in theory should be the most fundamental shift because feature is working to develop.
That's a great perspective. How flexible would you say Ayyeka's solution is?"
Originally Ayyeka started as a very flexible solution.
We are doing an industrial IoT solution for the first process. So in general we can connect any kind of asset you know any kind of database that is in very high levels. But it's too high. It's very very high level. So very good you know for a general pitch but they come into the day to day activities too broad. What we learned the customer end users as customer calls end users are typically focused around their specific geography their specific challenges because our businesses relate to this state of the economy for the local market conditions to the regulation. Those I don't think it's different from geography to geography but once you start working in geography you can get a very nice overview of the situation and then you need to adopt a very wide solution into something more specific and if you're able to do this to bridge this gap this mental gap you are able to quantify the solution meaning a return of investment. and those kind of things are better to describe but in order to do this you need to understand the business conditions or the business environment you're working for example the waste water market in the U.S. is different than the waste water market in central Europe if similar or similar wastewater is similar but the need for data or the use of data or the implementation of IoT technologies is a bit different because the regulation is a bit different than the local governance is a bit different. But if you misinterpret the customer or the partner and you will like what we listen more than we talk. Because they describe it such a secret it says they typically they know very well how to describe their challenges. So we listen more than pitch you can absorb very fast and if you are popping up all that into the solutions you can win their trust. Because they see the partner and the vendor and there's a crucial in the development of the IoT system they need to think of you as a partner and not a vendor because brands are important. OK let's say I can be a vendor of the supplier. So if then are a partner they just import because in the few weeks or months I will be their preferred vendor the preferred vendor for two years someone else to come. If you are the partner you're aiming for a partnership for 5 10 or 15 years and this is what we are aiming for but then really listen and thought about a very wide solution into a very narrow targets and this is what we do on almost a daily basis.
Maybe we can talk about two points without going into specific details on things, since customers are more sensitive you know why don't and what what we are very proud of and come to think of are proud of is related to we are a very versatile solution. Meaning we don't solve only one problem or challenge for example in the environmental landscape. We don't only monitor level or level of water for example.
It's one thing and on the other hand we are a we'd make extreme effort to be kind and one point or one or emended every I am I apologize the I was dropped for some reason KeyCorp from.
Yes I said that we are we are versatile in the scope of the solution we can provide. On the other hand we are very end to end solution meaning we can do a lot with the sense of a customer or partner can offer a lot of the same type of solution. I would give an example in say made our mental aspect so we can monitor living parameters from different sensor companies or different application in the same telemetry backbone. So we can do hydrological, metrological and environmental in the same platform so this is versatile and on the other hand we are very end-to-end solution for the customer you only need to work with Ayyeka for 99 percent of the solution because we will provide them we will furnishing the hardware with the communication with the software support with the onboarding with everything. So we provide the customer with value in two major areas. First we can use the sensory of the solutions for more than one challenge which in theory saves you money because the overhead is lower. And second because we always want one and we want one vendor he caught a lot of resources when approaching a challenge. So less integration less vendor recruitment less operational over and over. So the bottom line is that what is as they see it is to see the lifecycle cost or total cost of ownership is lower so they get higher volume of data with lower ongoing cost and this is due to the fact that we are versatile and comprehensive in the same time. Very tricky to develop as a company was very tricky to do something very versatile and very end-to-end come from a end-to-end approach converts the time is up and when you think about what they typically use you're not very wide typically sometimes have rules and if you have something very tight typically very close in terms of solution wise features encompassing those two approaches into one solution brought a lot of benefits for our end users as an environmental aspect so we have customers who use our instead they replace an existing infrastructure that originally needed like half a dozen different vendors 5 6 7 vendors to have access to specific data means they don't know they have one vendor take responsibility for everything which greatly improve their approach to Industrial IoT because what we hear from the market and we approach them they say they are in there that things are going on but they offer only part of the solution. They bring you only the data analytics or they bring you only the hardware. Okay but what do you do with the data or is it really only individualization so you don't have not dominating all the data. Ayyeka on the other hand take alternative solutions are a turnkey approach meaning we provide all of the confidence then you can start from day one of our solutions.
It is not developing into an integration project and this really helps us with our end users.
Through evolution normal things like the ocean because once we started developing the offer and promoting the offer we understood that if we will not take responsibility for a broader spectrum of the solution than a typical vendor it will cause more problems to us not the end user. We said we can do the best solution. And because we integrate with the different components which we've got because our solution wasn't good enough because the integration services were not optimized. So let me give an example in the original days of Ayyeka we were not providing a communications plan for our users are going to we need them. So get an intro component but a customer needs to grow these services for the sake of simplicity the SIM cards. What we learned. Okay let's assume we can do it which is not always the case. Nothing we can do it. Sometimes the IT department you know terminates an agreement with their own vendor or vendor and not update. Engineering Department that they need to replace the SIM card one day suddenly all the devices are dead. You don't see anything because the SIM card was terminated remotely. So even though our solution will perfectly right the SIM card will be deactivated. The customer have a bad experience. That bottom line is not about whose fault it is. It is about who is take the blame or who will suffer the consequences of the solution because we what we said. Ayyeka want to provide alternative solution a solid one and a high quality one with responsibility for a lot of of. And is the reason we shifted from product into solutions like an end solution. Because the evolution happened really fast because we wanted as I mentioned before we did direct marketing or direct sales. We wanted to phase out so and then when the customers say yes I like it but I need to put that was the reasoning behind it easily. I think it was a proper evolution. Luckily we were not frozen or stuck in specific parts of solution.
Got you makes a lot of sense. Does Ayyaka also do a lot of the system integration between the different hardware components and connectivity?
We did hardware we are still doing hardware because our solution is resolutely unique because we are talking about the spread of assets in critical infrastructure.Typically different from industrial automation will work because in the classical industrial automation, let's say you have power supply,protection and you have maintenance and have made it very typical for a factory or a production line. Going through this thought process. The transformers all those kinds of things typically you will not find all three things. You will not find good maintenance, protection and you will not find power. But our business was there so we polished ours was the reason we developed the hardware because it was not a good hardware out there that can do everything we wanted and give us the strategy we needed. Remember we are versatile but comprehensive so we need a good control of the solution. The reason we develop the hardware I think this is a good indicator or restructured the autoparts rent and can offer alternative solution we can offer all the way from the hardware government says it doesn't matter if it's a board or a component or a certified solution all the way you know if you're not anonymization of the data and doing it in a versatile way you have a lot of strength and flexibility that the bigger players and the bigger partners actually now learn to like because we can offer them the easiness of approaching the market we have a very agile solution because there is almost if you're just the right question we'd probably find this our solution surging unfolded or help you with the same challenge. So we try to adopt we really like our hardware. Obviously we are flexible depend on the customers. We do think first of the customers you know under the product agreement by the is part of a trend almost like a vertical approach all the way from the hardware design to the software architecture really helps us.
Okay good maybe as a last thought tell us some of the challenges or mistakes some of your customers make in the deployment of the technology.
A very good question because you're the first one of the first one to understand or off the customer they're not perfect they the companies aren't perfect obviously and more companies are adopting whatever. But the customers also play a part in the success or failure of the project or the solution or the innovation what we try to be very careful of a customer does not have a mental state or an eye with the solution. And it's a very broad definition. If the customer deploys your solution but doesn't have a real need for the data I don't know what to do with it. Think the raw data or the process our work doesn't have a real motivation because its only cool to have it every day because it will be a bad customer that we not maintain the equipment that we not invest resources and that may well got and they don't care about it I will give an example very often now in the smart city landscape the market is very cool. Everyone wants to be smart. Every mayor or city officials think making your city smarter will look better for election purposes or for PR or political reasons whatever. So they allocate a budget that say a million dollars or a million dollars and then say let's make let's make my city smarter. And then they try to buy as much data for lowest price so they said all favor low cost or low cost solution that's more like a hobby which is clearly indicating a 100 percent failure of the project because the customer wants to get as much or low cost and he doesn't really understand the value of the data the value and what the meaning of the data become data comes in. All of a flavor there is like the theoretical side of the data the accuracy the resolution they call her in the so the customer will not understand why it's collecting data for next some of they say we asked them why didn't we debate. OK we have the budget rates. Send this to several states. What if he doesn't have a good answer. We were attempting to close those kind of times before but now we to be more careful because if he doesn't have a good answer on that it will probably not be a good customer and good customer for us there in what we call their recurring customer meaning you will grow the other the partner will develop an implementation with us. We know what we see on the box for say for the sake of piloting a hundred dollars to say 100 thousand dollars for the equipment or a lot of work. But it will not become an ongoing business meaning something that we develop a solution around specific needs.
Typically not a good customer for us because we're looking for scalability and volume we learned the hard right by the way we were very excited initially because we did a great pitch. Someone said they want to buy them back or switch my name in the field. And we provided very happily and then we were forced into like the things end user who doesn't want or cannot support such IoT implementation will learn better that if there was a real need difficulty there would be a good time behind it or a good partner behind that. We also learnt that is the need is really big enough, typically we need to partner with one of the bigger players. The GEs, the Schneiders, the Rockwells, the Hitachis those kind of industrial players. So they're still aiming for a higher implementation rate means partnering with bigger partners. they're doing they require us to move the smaller ones initially so by the tip is look for customers who understand what they are doing better than you preferably.
Ariel, how can people get in touch with you and learn more about Ayyeka?
First the website, www.ayyeka.com which is by the way is a strange word which means where are you in Hebrew. Remember I said we started bicycle tracking devices back ten years ago seven years ago. So Ayyeka where are you so we have the name and we kind of like it so we started a pitch. So our Web site is available. We have contact details there is quite a calm e-mail. We have phone lines, we have webinars. We are pretty good online visibility so we're very interested. Just shoot us an email.
Ariel thank you so much for your time it was a pleasure talking to you.
Sure, we'll be in touch thank you.