Renan Devillieres of OSS Ventures explains their highly-successful business model of uniting the disparate cultures of manufacturers and tech companies.

 

hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});  

Danny:

– Well hello and welcome to today’s IndustrialSage Executive Series interview. I am joined all the way from France. I have the CEO of OSS Ventures, Renan Devillieres. Did I get that right, Renan?

Renan:

– Excellent.

Danny:

– We practiced that many times. Sorry, my French is not that great. Thank you so much for joining me today on the Executive Series.

Renan:

– Thank you for having me.

Danny:

– I’m super excited about it. Again, I hope I didn’t butcher things too badly. But hey, before we get into the episode, I want to know a little bit about OSS Ventures. What do you guys do?

Renan:

– Sure. So we are a venture builder. A venture builder is a special kind of investment fund. Instead of investing funds in companies, start-ups, technological start-ups that already exist, we invest a meaningful amount of money, time, and resources in companies that do not exist yet. We provide the ideas. We provide with the partners, and we create companies out of nothing. And we are specialized in manufacturing.

Danny:

– Interesting. That sounds really interesting, and we’re going to get more into that here in a little bit about, specifically, some of the challenges that you’re solving and maybe how you’re doing this because it sounds very intriguing like a different business model. But before we get into that, I want to learn a little bit about Renan. So tell me. How did you get into the manufacturing space? How did your career start?

Renan:

– At the start of my career—I was a nerd, so I was good at math. I did a school in France where they pay for your studies which is really good but then you have to give back up to two years in public service. I was an economist at the OECD, and I was studying industry at 20-year timeframe, the whole world. After two years doing that I told myself, I cannot go on not dealing with reality anymore because it was all so virtual and so long timeframes. And so I told myself, I like the subject. I like the topic of industry. I’ll try to go work in a factory. And so they got a very young guy with a mathematics degree, a theoretical mathematics degree trying to go work in a factory. And I think I sent something like 50 letters, got 50 no’s from factories. But I got one yes from the McKinsey & Company consulting arm specializing in factories. They were saying that I was good enough to give some advice to factories. So I did just that, and that is how I started my career in manufacturing. After four or five years working for McKinsey & Company, I went on to lead planning and then quality and then be a site director. And so the eight first years of my career, I was deep down in manufacturing, and I loved it.

Danny:

– That’s awesome. That is fantastic. That’s pretty cool. That’s a great story. Sometimes you hear people that come in; they didn’t start from day one. What’s kind of interesting, it sounds like you jumped into it, and you found a love for it. I think what’s interesting is the–– and I shared that a little bit with you in a different light, that I never thought that we would be working in this space. This was several years ago. Having come into it, it’s awesome. It’s pretty amazing. But what I think is interesting in your story, you said you sent out, you said 50 letters?

Renan:

– Yeah.

Danny:

– And you got the one response.

Renan:

– Yeah.

Danny:

– And then that opened the door.

Renan:

– Because basically—yeah, and basically factories were seeing a youngster with a theoretical mathematics degree like a coder—I was a coder at the time—just saying basically, hey, got any room? That’s not the right way to get hired by a factory.

Danny:

– No, that’s awesome. That’s fantastic. So what were some of those particular challenges that you had to face coming in? Obviously a big challenge of getting in right out the gate was getting your foot in the door. As you progressed in your career what did some of those other challenges look like?

Renan:

– One of them, one of the things that I think a lot of people who are not dealing with manufacturing work do not realize is that the factory or supply chain is one of the most complex objects in the world. In a factory you have 100 people, 200 different types of machines, tens of thousands of different products that you can make, and you need to organize all of that. All those physical flows, all those quality criteria, all the automation And so the factory or supply chain is fundamentally one of the most complex objects in organization we ever created as humans. And so as with all complex objects, there are a lot of rules, a lot of things to understand, a lot of things to organize. And I think getting to understand that as a big picture and then getting to try to innovate in that space is mighty hard because the cost of complexity to enter the subject is so high.

Danny:

– Yeah, absolutely, it’s super complex. I know that there’s a stat that comes out saying that—what is it—the manufacturing space, supply chain is one of the most data-prolific industries out there because of the complex processes and how layered it is. It’s pretty crazy. I totally understand coming in and having to really learn all of that. It’s a big challenge. Let’s talk about influencers in your career. Who was somebody that stands out that has had a major impact in your career or in your life–– it could be your personal life–– that has an impact on your career?

Renan:

– Obviously there are too many to mention but if I had to pick one, it would be after manufacturing I created a tech company. And I got lucky enough to get invested by a San Francisco-based fund linked to Google. And so the guy who taught me product management was a guy who worked at [unclear]. And so he showed to me the way that you think of a product that is immensely complex that has CALs as inputs and constraints and parameters. And you try to go from chaos to something relatively simple that does the job. What I fundamentally, that’s re-wired my mind from, “Complexity has to be dealt with by complexity,” to, “Complexity can be dealt with by simplicity.” He showed me that naturally and over and over and over again in the tech company that I started the end product after one year was 50% smaller than the first product that I shipped. And it was way better, like way better. And so he showed me that and that again, and when I first showed my product to him, I wanted to show everything. And I say, hey, get a load of this also and this and that because it’s that X case. And he looked at me and he said, this is way too complex for a very simple thing. That was, oh, oh, okay, right, yes. That was the best influence.

Danny:

– Yeah, that’s a great story, and that’s something that we hear about a lot and so a lot of companies still struggle with. It’s just when it comes to product development and design, a big challenge is developing something that there’s not necessarily an addressable market for because we think this is really cool. And we can design it, and then—so that’s one thing. I love that, from the design element, pieces that, it’s exciting, and we can get into the weeds about, oh, we can do it this way, all these different things. But the reality of it is, it’s simplicity is the big piece. And then selling that, it’s like understanding your audience and your markets. Really at the end of the day most—this may sound really bad—but most don’t care how it happens or what’s the inner workings. It’s just, let’s look at the result. It does that? Cool, I’m good with that. Now obviously some people—you’re going to be selling more to engineers, whatever, they’re going to want to get into the weeds and look at that. But I think that’s really, really interesting, just really the simplicity of design. What a great story. Super great lesson. What products were you making?

Renan:

– I was in the luxury industry in the first part of my career. Worked on complex watch-making. Among the things the most complicated you can do with engineers everywhere, complexity being the root of everything else. That was my first part of my career, and at some point I went out of my trajectory, and I created a tech company that I ended up selling. What really strikes me in those two worlds, there are so many similarities between the tech world and the manufacturing world because when you look at any application at scale, it’s a very complex web of constraints and what needs to be done, and blah, blah, blah. It’s a very complex web of engineers to be organized and to lead. And so it’s basically the same thing. A lot of methodology, product development methodology, lean method, are the same in the two worlds, but they don’t mix. And so that’s why also we created OSS Ventures.

Danny:

– That’s interesting. That’s great. I can only imagine. You said just the complexity, and you said initially you were making watches? Did I get that right? That’s pretty cool, very cool, actually. Let’s pivot now to today, what you’re doing. You mentioned earlier on the value prop of what you’re doing at OSS Ventures and that you’re basically creating companies out of nothing. Explain that to me.

Renan:

– In the grand scheme of things, we think, and we are not the only ones, a lot of the industry thinks that the era where basically digital and IT in manufacturing was just ERP and SAP, this era is gone. And so what we think is that in 5 to 10 years any factory will have between 50 and 100 dedicated vertical software that deal with one thing. For example, let’s take a very simple example, stock management. Stock management at scale is, you have tens of thousands of products. What is the right level of stock? Well today people are trying to do some things where we think that with the software that deals with this subject that will not be ERP and so our software will deal with that, with artificial intelligence and blah, blah, blah. We think that in any given factory there will be those sorts of softwares. And so we create those softwares. That’s our job. We create companies out of nothing.

And so we have a very unique methodology which is we have a web, like a network of what we call pre-fab partners. Pre-fab partners are industries or companies, and they share pain points. So they say for example, I want to manage my stock, but it’s a mess. And so we find three, four, five companies with the same pain points, and we say to them, look. We are going to build the thing with you and solve the issue, and it’s going to cost you zero because OSS takes the risks. But when it works, you are going to say to all your friends, in all the factories of the world, that it works like a charm. And so we are going to sell as a software as a service what we created with you. We are going to sell it to the other 55,000 factories in the United States or Europe. And so that’s how we do.

So it’s free for people who co-build with us, and then it’s paying for the rest of the world. And so far it works good. We went to 140 people in less than three years, so we are in hyper scaling mode. What we understood is: industry or manufacturing organizations, they have an issue which is that they cannot pay coders and manage coders like tech companies do. They don’t have the culture. They don’t have the time. They don’t have the processes. It’s very hard for them to retain those. And at the other end of the spectrum, the tech people, they do not know zero about manufacturing. And so they can only imagine what would be needed, but they don’t have access to that market because there is that cost of factoring the subjects. I have a stat for you: operations in manufacturing in the grand scheme of things is 25% of the world GDP. It’s 0.7% of all start-ups.

Danny:

– Wow, 0.7% of all start-ups.

Renan:

– For 25% of the world GDP. So okay, there is obviously something that wasn’t working. So that’s what we do. We put those very tech people, tech organizations, that tech know-how of building products at scale, and we take the pain points of manufacturing companies and create companies out of that. That’s what we do.

Danny:

– That’s a very interesting value proposition. Very interesting stat as well. I have a couple of follow-up questions that’s brought to mind. One is, I guess the most immediate: why do you think that—you said 25% of the GDP is made up of manufacturing, and yet 0.7% of all start-ups—that’s a tiny number—focus on that space. Why do you think that is?

Renan:

– I think there are quite a lot of reasons, and I think also it’s changing rapidly. First, manufacturing has a bad image. When you tell your kids, you tell them, you better be good at school. Otherwise you end up working at the factory. That’s things that are being said right now, So when you have that mental image, you think okay, I’m not going to work for those people. So that’s first. There is another which is two worlds that really don’t mix. Go to San Francisco. I lived in San Francisco for three years. Go to San Francisco and ask a random tech bro in the streets. Say, okay, how does a factory work? How does it work? You’ll get answers that are so far out of reality that it will be funny. The people who know tech do not know manufacturing, and people who know manufacturing do not know tech.

But—and this is where it’s interesting—it’s changing really rapidly. Time person of the year, our dear friend Elon Musk, puts technology as a core asset to building the most tangible, physical thing in the whole world, a car. He’s now the richest people in the world. And what happened? He created the first factory in California. Now in California—I went to Fremont. In California you enter the Tesla factory. There are all those big machines, and you have young people, t-shirts and sneakers, and they are coding with their laptops in front of the machines. This is the future. This is not some greasy, in the countryside thing going on. That’s not where the future is headed. The future is headed towards mixing the tech and physical world in a totally new way of organizing physical production.

Danny:

– Absolutely. No, I love it. I love those. I love that you brought in Elon Musk, very topical, Time of the year, Elon Musk. I agree 100% with you on what the future is. You mentioned specifically going into a Tesla factory. You’ve got young people who are engaged in it. It’s coding; it’s the nexus between technology—and I think there is a big shift. I think the digital transformation that’s happening in manufacturing—I agree with you. I do believe it’s rapidly accelerating. I think it was accelerating pre-Covid. I think now, post-Covid or whatever, during Covid, it is now exponential. It’s clearly the way. But it also addresses the big labor challenges as well to be able to solve some of that. You mentioned attracting people to this greasy, this old, this mental image that everybody has. It’s a bad brand, a bad rap that it has. But I think we show a good light. We show what is actually happening. We show true innovation, and there’s a reason why people light up when they say, I want to go work for Tesla like you mentioned. I think that’s a—that kind of gets me excited a lot.

Renan:

– It does, it does. It’s very exciting.

Danny:

– That’s awesome. Okay, another question I want to ask about the value prop. You mentioned earlier on that you think that the future, the vision that you have is instead of managing, you’ve got an SAP, or you’ve got one big ERP, and it’s managing all the processes that it would be a little bit more micro-focused and saying maybe there was going to be 50 to 100 that’ll be I guess instead of generalizing the whole process, it’s going to be very specific to a certain process. Do you think that those would roll up under a larger ERP? Would they be more, I would say, just independent? What are your thoughts on that?

Renan:

– If you look at tech cycles in any industry, it’s a game of bundling and unbundling. There is that joke in San Francisco that there are only two ways of making money in enterprise software, either bundling or de-bundling. If you look at it from the big picture, the bundling phase is ending. SAP, the new version, SAP S/4HANA, the functional parameter is down 30%. So it’s 30% less feature than the previous version. The SAP CEO shared with us—the new one because the old one got fired—the new SAP CEO said in 10 years, 30% of all my income will come from third-party apps being distributed on top of the SAP platform. The best minds and the people who are leading in that area say the same thing. There is a question which is, will we see a kind of situation a la Apple/Android where someone will tax everyone? Or will we see a situation a la marketing apps where no one takes a tax? There is no question about, there will be innovation coming from verticalized software, way more easy to install, a lot of AGU machine learning, EURIX, everything. This will happen. Will it happen with an SAP tax or without the SAP tax is the interesting question.

Danny:

– Yeah, I think that’s very interesting as well that you bring up. I don’t see how that happens without that, to be honest. You look at Salesforce for example, and they’re across multiple industries, obviously. They’re growing in the manufacturing space. It’s the idea of creating a platform, and then you can plug into—Infor is doing that right now. And so I do see that happening. But to really boil it down, it’s creating an app store. It’s an app store on a platform.

Renan:

– That’s what they are trying to do. And at the same time, there is something called the common data model. The common data model is pushed by SAP, Microsoft, Salesforce, Infor, all the big guys. It’s an open-source data model, and if you share the same data model then you can be interoperable, and so there is not tax in the app store. And so the reason why this has been pushed as an open-source project is because the late entrance to the party such as Microsoft or people like that, they say we are going to go the open-source route so there is no single app store done by SAP or anything. But that’s very interesting to see.

Danny:

– Yeah, that is super interesting. I think it’s fascinating. I like the idea, the vision that you have going forward saying that we’re going to focus on micro processes, having the technology software to focus on that. One of the things that we’re seeing that’s very interesting, let’s say, in the robotics space right now, that is in supply chain and manufacturing, is the whole question of interoperability where you’ve got so many different platforms and different use cases with different AMRs or AGVs. But they all, essentially (boiling it down) they all need to talk to each other somehow.

If you have proprietary system on top of proprietary system, from a scale standpoint it’s very difficult. It’s certainly not lean, and it creates challenges there. But I think that it does, from an efficiency standpoint, really help to solve some challenges in a much more meaningful way. It’s exciting, I think, to see where technology is going to take the manufacturing space and supply chain because I think there’s a lot of really complex problems that are way above my head; I’ll be honest with you. Going to your thing saying how these are complex processes, and you go to San Francisco, and who understands manufacturing and how a plant works. It’s like, what? It’s interesting. What would you say right now is the biggest challenge in the industry?

Renan:

– To me, I work closely with car manufacturers. I work closely with other verticals. Every single company is going to become a Tesla, a SpaceX or some form of it which is a company that leveraged technology as part of the operations and is able to operate at a pace, at a speed that is 5X the speed that is normal. It started with cars. It is coming with space. It will come in other vertical construction, pharma, pharma with the new R&D, and blah, blah.

Today all the big CEOs in manufacturing are faced with one question which is adapt the culture at scale or fade into irrelevance. The car manufacturers, they took too long to do that, and so you have the Volkswagen CEO says, we are five years behind and it takes me 10 hours to assemble my cheapest car when it takes 1.5 hours to assemble a Tesla. And so they are all faced with that cultural organizational challenge. So what I say to them each time is the same. Nobody remembers, but 25 years ago a little-known Japanese car company called Toyota came and invented lean manufacturing, and it was radically different from everything everyone was doing at the time. And it took the whole manufacturing industry ten to fifteen years to implement some form of lean at one level. They have deep inside that muscle to change. They just need to grow it back.

Danny:

– That makes a lot of sense. It’s funny; it’s interesting that you bring in lean manufacturing because one of the questions that I’ve been posing to some people and there’s different facets of it, but relative to, let’s look at supply chain, and you look at lean. Have we taken it too far? Certainly we need to look at—the stat that you bring in you’re saying that Tesla in 1.5 hours, they can go from fully assembling a car on the line to 10 hours for others. I think that’s what I wrote down here. Obviously there’s some big things that need to happen there. With the Toyota example, I think one of the big areas for that was empowerment, I believe, on the line for people to be able to say hey, there’s a problem; we need to do—versus saying, hey, I’m a cog in a wheel, and I’m just gonna whatever. I see a problem, and there’s an issue, quality, whatever, I’m going to take ownership, and we’re going to be able to do that. It’s interesting when we look at production efficiency. I’m curious from a lean standpoint, have we pushed the envelope too far, specifically when you look at the broken supply chain right now that has forced some more globalization, outsourcing. I’m curious on your thoughts about that. I know we took a left turn here.

Renan:

– Something I am deeply convinced of is that innovation happens by layers. It’s not this or that; it’s this and that. Usually what I tend to see in companies, in industries, is that when they take an innovation, an organization innovation layer, if there is not another one to be created on top of that, then you go too far in the first layer, and you over-optimize for work that doesn’t exist anymore. And so one thing I say to all the people I work with is, I went to Tesla Fremont. I went to Amazon warehouses that are top of the pop. I went to the BYD (Build Your Dreams) car maker in China. The big difference between those lighthouse and a regular factory is that they are doing lean, and they are doing tech. So they are doing lean at certain points which is not to the extremes that we saw, especially in terms of reducing stocks and everything that we see in some companies. They are applying the first layer of innovation and the next one. And so what I see in organization is that organizations create reasons for existing. You have people. They are in charge of organizing the company. They know lean. They do lean, and they do lean for 30 years if left to themselves. And so you have to take those and say, now you do tech also. That is a mighty change.

Danny:

– That is a big change. That’s a big organizational shift, and that’s not an easy change.

Renan:

– No, that is not.

Danny:

– Well this has been just a fascinating conversation. I know we could literally go on for hours because I have—I probably have about 20 more questions I’d love to ask you, but I don’t have the time unfortunately. But for those who would like to learn more about you, they can check you guys out; they can go to oss.ventures. Is that correct?

Renan:

– Yep, excellent.

Danny:

– But yeah, like I said, this has been fantastic. I have a bunch of notes here, you can see here, that I wrote. It’s a fascinating conversation, Renan. Thank you so much for your time.

Renan:

– Thank you.

Danny:

– Alright, well and that wraps up today’s IndustrialSage Executive Series interview This is with CEO Renan Devillieres who is the CEO of OSS Ventures. If you’d like to learn more about them, it looks like they have some fascinating technology, and I really love Renan’s vision of the future. There’s so many great insights that I pulled away from here. One in particular, talking about how 25% of all GDP is in the manufacturing space, yet from an innovation standpoint from tech start-ups, that it’s 0.7%. I think that was fascinating. A lot of other things as well, just in terms of their vision on how they want to break down the processes and looking at maybe ERP isn’t one, big global behemoth that’s managing all the processes, but it’s more specialization. I’m kind of boiling that down. Anyways, as you can tell, I really enjoyed this episode, enjoyed talking with Renan. So check them out.

Listen, if you’re not subscribed onto the IndustrialSage email list, you need to go to IndustrialSage.com. Get on there because you’re missing out on great insights like this where we’re talking with great leaders like Renan and others about innovation and changes happening in the manufacturing space. So that’s all I got for you today. Thank you so much for watching or listening if you’re listening to the podcast. I’ll be back next week with another episode on IndustrialSage.

 

Thanks for reading. Don’t forget to subscribe to our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go!

Sponsored by Optimum Productions