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There is a prototypical entrepreneur: he or she develops an idea during late teenage years or the early twenties, drops out of university, identifies a co-founder (of comparable age), seeks and receives venture funding, and the entrepreneur is off to the races. For every Jobs, Gates, and Zuckerberg who personifies this story, there are scores of entrepreneurs who are much longer in the tooth.
Avi Reichental is a case in point. Reichental immigrated from Israel to the United States, and would join Sealed Air when the company had $80 million in revenue and a few hundred employees. He would eventually take on major roles in Engineering, Marketing, and Operations, among other functions within Sealed Air. He was satisfied that he was doing great work. Two decades later, the company had 18,500 employees and $5.5 billion in annual revenue. He was happy, but a chance encounter with an executive recruiter informed him of an entrepreneurial opportunity. Now in his 40s, he had the experience and the financial wherewithal to take a risk. It turned out to be the best time to become a first time entrepreneur.
Fast forward two more decades, and Reichental is the founder and Executive Director of XponentialWorks, a venture investment, corporate advisory, and product development firm that specializes in artificial intelligence [AI], 3D printing, robotics, and the digital transformation of traditional businesses. Furthermore, he is also a General Partner at Cognitiv Ventures, the Chairman of Nano Dimension, the Executive Chairman and Co-founder of Nexa3D and NXT Factory, the Vice Chairman of Techniplas and the CEO of Techniplas Digital, and the Co-founder and Chairman of Centaur Analytics. He refers to himself as a parallel entrepreneur. He describes his fascinating career, his various ventures, which technology trends he is investing in and why, and much more in this far ranging interview.
(To read future articles like this one, please follow me on Twitter @PeterAHigh.)
Peter High: You are the Founder and Executive Director of XponentialWorks. Please describe the organization.
Avi Reichental: I consider myself a parallel entrepreneur. This is because I am concurrently seeding and scaling small companies while simultaneously helping several mid-market companies transform themselves from traditional manufacturing to digital companies. When I started XponentialWorks, I thought that I would just use it as a place to seed and scale early-stage companies. I wanted to invest in companies that I believed in using my own financial resources and my experience because I was passionate about the technologies you mentioned. I felt that applied exponential technologies combined with business model innovation could create new categories.
When I pursued this, it became an amazing success. A few mid-market companies showed up at the doorstep and asked if they could collaborate with us. This was because they wanted to learn how to behave similar to startups, and they wanted early access to some of the technology that our startups had. We stumbled upon this interesting combination of colliding these mid-market companies with early-stage companies. This entailed infusing a digital transformation on the operational and the business innovation side with new manufacturing techniques. We ended with an incredible recipe in which the mid-market companies were giving the early-stage companies use cases, validations, and access to the market. Simultaneously, the young companies gave the 100-year-old companies new technology, new generative design, and manufacturing tools. Over three years into this journey, I can certainly tell you that this magic formula is working. However, I cannot take credit for this formula because it happened organically.
High: From your experience, how does a digital-immigrant organization transform appropriately in order to compete with digital native organizations?
Reichental: In order to survive, every company will have to become a digital organization. The natives will have to become even better natives, and the immigrants will have to run even faster to maintain relevance, sustainability, and scalability. Typically, the companies that I advise are in the mid-market category with revenues between $500 million to $1 billion. Many of these companies do not have the ability to retain and invest in the core exponential technology capabilities that are required to embrace a digital transformation. This does not just entail a digital transformation operationally in the factory, but it includes all functions across the company, including business model innovation. At XponentialWorks, we think of ourselves as the edge organization that begins to bring those capabilities into a company from the edge to the core. We look to give them a flavor for a series of short sprints. Rather than giving them advice, reports, and PowerPoints, we look to give them a series of product development opportunities, access to our innovation labs and domain experts, and the ability to deal with some of their immediate friction points. This will allow them to buy attraction, rather than promotion. By solving real problems, we begin to effect this transformation from the edge to the core of the company. We fully understand that the core of the company is paying the bills in the here and now. We want to build some businesses and some capabilities at the edge that can become tomorrow’s or the next half decade’s core businesses in success. We understand that we are dealing with transformations that go well beyond what one considers to be a technology transformation. Instead, it is a behavioral transformation because we are dealing with the human condition. Organizations that are older and relatively successful have a natural immune system within the organization, which healthily resists anything that has to do with potentially disrupting their core businesses. That aspect has to be dealt with intelligently as well.
High: As I previously noted, your company focuses on AI, machine learning [ML], 3D printing, and robotics. Could you provide a thumbnail sketch as to why you have chosen these as areas of focus?
Reichental: We chose these areas because we believe that at the convergence of generative design and additive manufacturing, robotics, and AI/ML, lies the unlocking of another transformation of manufacturing. Industry 4.0 preparedness or capability is truly the outcome of integrating these technologies together. These technologies are important because they are beginning to lay a serious and scalable foundation for the factory of the future in terms of digital fabrication of parts without tooling or mold. This entails the ability to make millions of identical parts and millions of one-of-kind parts massively customized on the same equipment. Additionally, these technologies allow you to think about flexible manufacturing, short run, and the promise of digital inventory. Earlier designs are stored in CAD files on the cloud, and when you need to manufacture something, you will do it as you need it, when you need it, and where you need it. You even have the possibility of teleporting your inventory because you can send a digital file across the universe to another destination and print it there. In doing so, you forego the cost of trade, duties, and some of the trade issues that are faced today. There are real opportunities, not just to digitize and liberate manufacturing as we know it, but additionally to create a new paradigm in supply chain management, inventory, and design functionality. For these reasons, I thought it would make sense to bring these key exponential technologies together to create innovation labs at XponentialWorks. In doing so, we would look to attract some of the world’s foremost domain experts. This approach was additionally designed to help natives and immigrants learn the language, build the narrative, and develop the muscles and skills so they could successfully disrupt their own businesses.
High: You previously mentioned that you are a parallel entrepreneur, so XponentialWorks is not your only venture. You are a General Partner at Cognitiv Ventures, the Chairman of Nano Dimension, the Executive Chairman and Co-founder of Nexa3D and NXT Factory, the Vice Chairman of Techniplas and the CEO of Techniplas Digital, and the Co-founder and Chairman of Centaur Analytics. Further, you are a board member of the XPRIZE Foundation and a faculty member at Singularity University. Upon reading that list of organizations, how do you divide your time? How do you make all of this work in parallel?
Reichental: I try to be disciplined at planning and allocating my time because time is the only aspect I have to manage. I try to gravitate into the areas and responsibilities in which I can move the needle, make a difference, and put a business or company on a different trajectory. Similar to how I struggle to find balance, meaning, and relevance in my life, I struggle with how to allocate my time. Every day, I have to wrestle with how to allocate my time and with how I put myself in a position in which I can create and make, rather than exclusively being in places of oversight, advice, mentorship, and guidance. For my own sake, I need to remain creative and innovative. In the past three and a half years, it has been working extremely well. It is perfectly imperfect in the sense that at the end of every day, I wish that I had more time. At the end of every day, I am not willing to let go of any of the activities that I am doing.
It is important to have perseverance and even optimism. I understand that the daily failures and mistakes just get us closer to breakthroughs and discoveries. Some of this is just about having instinct and experience. Nearly 40 years of doing this type of work in various shapes and forms teaches you that perseverance pays off. Typically, with the benefit of some time, you can find solutions that pivot a company and a business model. There is no such thing as real failure if you learn from it. I continuously tell my early-stage CEOs, “Please do me a favor and teach me some new ways to fail. Teach me some new ways to make mistakes. Just do not repeat the ones that I already know.” Even that is easier said than done because some people do not learn unless they experience it for themselves.
High: You previously mentioned that part of this is time management. What are some of the hacks you have developed in order to make sure that you are productive and fulfilled in the many areas that you are undertaking?
Reichental: First and foremost, I try to use project management tools, and there are quite a few good ones today. I use Asana, which works well for me, and I convinced my ecosystem partners to use this platform so we can see what is going on in real time. I have a full-time staff in the form of an executive assistant and an operations person who help me plan my daily and weekly schedules. Specifically, they help me plan my time allocated to portfolio companies, clients, travel, and other areas. I have an extremely busy mind that is constantly working to help me make some changes in real time. At the end of a good day, I have a few hours left to do my own creative work and keep myself in a place of mental and spiritual fitness. On not so good days, I have a few aspects that do not get done, and I can be immensely critical of myself. That said, if I look at it over a meaningful period, it is going relatively well. I am in my early 60s, and I have learned a little bit about myself and the world. Because of this, I am in a good place of professional acceptance. I know when something is as good as it gets, and I do not need to improve it further. If I do a little bit less, I will likely be a bit irritable, but if I try to do a little bit more, I will likely get myself totally out of balance. I am where I need to be. I am running a marathon, not a sprint.
High: Part of the necessary ingredients to allow you to scale is having great teams in each of the ventures that we have discussed. Could you talk about what you look for in some of the entrepreneurs who join your companies?
Reichental: This aspect is at the heart of any successful team or enterprise, whether it is in business, sports, a nonprofit, or a tribe. Applied financial technologies can put businesses on different trajectories, they can create disruption, and you can harvest the upside of that disruption. However, it is ultimately all about the people, not the technology. When you see the scaled companies, you bet on the people, not on the technology. Selecting a group of entrepreneurial-kindred spirits is a work in progress, and it is similar to hiring and recruiting. Mistakes are made, and I have certainly made many recruiting and hiring mistakes along the way. You learn a great deal about people and their own perseverance and ability to overcome, adapt, think outside the box, and work with others. We live in a world in which individual contributors cannot impact a company as much as team players. You need strong enough team players who can individually push the envelope and stand up to the rest of the team when they believe that the business, the company, or the product are about to take a turn for the worse. Some of it is textbook, and some of it is a little magical in how you create the environment and chemistry that gives birth to an incredible company. Ultimately, it does not always work. In our portfolio, we have a few teams that are exceptional, and they are moving much faster. Periodically, depending on the season, some teams may lose some of that magic, go into a rut, or fall into a ditch. These are the situations in which the strength of the human and the ecosystem are tested. In early-stage companies, this is extremely visible, and every now and then, it requires an intervention. I could not do a fraction of what I am doing today if I did not have an outstanding team that is thoroughly autonomous and open to periodic intervention, ongoing guidance, and mentorship. If they were unable to autonomously run short distances and continue to build their endurance and fitness, the company could not scale.
High: The Venn diagram of your portfolio of businesses has a fair amount of overlap. Could you talk about some of that overlap and synergies?
Reichental: That is at the heart of how we build our ecosystem. When I set out to start XponentialWorks, I decided to primarily focus on areas that I understood well. These areas include generative design, additive manufacturing, artificial intelligence, and robotics. Specifically, I decided to focus on their application into the world of manufacturing, supply chain, nutrition, health, and well-being. Most of the early-stage companies in our portfolio are extremely complementary. They all compete for capital from time to time, both internally and externally. However, they likewise collaborate well together to advance the overall workflow, all the way from design to manufacturing.
One of our promising companies, ParaMatters, works in the area of light-weighting topology optimization and generative designs. ParaMatters collaborates with Nexa3D, NXT Factory, and others on design and manufacturing workflows on a daily basis. In trade shows, it is not unusual for us to go with Techniplas, which is a $500 million revenue traditional automotive supplier. We additionally bring in companies such as Apollo Robotics, which works in high-speed data acquisition for land surveys. We use Nexa3D, NXT Factory, and ParaMatters to show the power of the ecosystem. We show how a large company such as Techniplas is digitizing itself using generative design for light-weighting, which is critical in automotive. Techniplas can implement 3D printing in their stack for jigs, fixtures, assembly gauges, and robotic attachments for the hundreds of injection molding processes we have in the various Techniplas factories worldwide. Further, we are showing how we work with young early-stage companies such as Apollo Robotics. They are building multisensorning capabilities, such as LiDAR, thermal, and video cameras, and they are applying that to automotive applications. Sensors and high-speed data acquisition are required in many different fields, particularly in autonomous mobility. You can see how the ecosystem is a force multiplier to all the constituents. In the case of Techniplas, it becomes an interesting variable R&D component because it is not a fixed cost to the large company. Instead, it is variable, it is on a project basis, and it taps into some creative resources and ready-to-apply technologies.
High: Your entrepreneurial journey is far different than those who are bitten by the entrepreneurial bug in their early teens or 20s, and most of these individuals do not pursue a traditional career path. In your case, you immigrated to the United States from your native Israel in your early 20s, you joined Sealed Air, and you were there for more than two decades. You rose to the role of Vice President and General Manager of the company’s shrink-packaging business. Could you talk about the advantages of your path to entrepreneurship? Further, why did you choose to go off as an entrepreneur in your early 40s?
Reichental: When I came to the United States, I was looking for a job, and Sealed Air hired me as a development engineer. At the time, the company only had a few hundred employees, and they had roughly $80 million in revenue. In many ways, it was an entrepreneurial startup in its own right. We had a terrific CEO named Dermot Dunphy, who I was blessed to have as a mentor, teacher, and friend for many years. Dermot touched and connected with me early on by telling me, “We will never become a commodity, and we will use technology and innovation to make packaging relevant and sticky. We will develop a razor and blade business model for packaging, and we will use technology and file many patents to do that.” He had a vision of turning Sealed Air into the high-tech company in packaging. In those days, we did not have the Silicon Valley narrative, and we did not think of ourselves as a startup because we were already publicly traded as a young company. In retrospect, this is where I learned many of the disciplines and cultural attributes that would currently constitute a highly successful high-tech company. I learned by doing, so it was the best school in the world. I had the opportunity to quickly move from Engineering to Marketing, from Marketing to Operations, and from Operations to global responsibilities. I was first stationed in Europe, and I then moved to the Asia-Pacific region. From there, I got a great deal of exposure to dozens of M&A deals, and I got to lead and integrate these deals. This allowed me to deal with transformation, integration, and cultural revolution. Along the way, we grew from a company that had roughly 400 employees and less than $100 million in revenue to a company that had 18,500 employees and $5.5 billion in annual revenue when I left.
As to why I left a company I spent 22 years at, I was on a trip to London to check on some of our operations in England, and I got a call from a headhunter. He started telling me a story about this little company in Southern California that was working with a new technology. He told me that the company had some revenue, but it needed to be massively transformed and was running out of cash. Because it was in an interesting field, I took a look. I quickly discovered that the company was called 3D Systems, and it had massive debts and no cash to finish the year. While it had many complications, it had incredible technology that could one day change the world. Outside of the early adopters and the active community, few people knew what 3D printing was in 2003. I looked at the company, and I realized that there was no telling if this company could be transformed. With all of my operational, executive, and technological management experience, if I left Sealed Air, I knew that I could be out on the streets within a year. However, I realized that something was gnawing at me from the inside. I had a feeling that this was my opportunity to take everything that I learned in the Sealed Air school and apply it to something much more meaningful. For a few weeks, I was torn between the safety, comfort, certainty, and traditional progression, versus taking this leap of faith and high risk. I was fully aware that if I did so, I was more likely to fail than succeed. I decided to go for it, which was counter-indicative to my corporate upbringing, but I never looked back. It has been an incredible personal journey, and I have learned a great deal along the way. I continue to learn and grow, and I am sure that my life would look immensely different had I stayed with Sealed Air. Sealed Air has continued to grow and prosper, and it doubled in size again. At 3D Systems, we grew the company roughly 6X in revenue and approximately 13X in shareholder return. The biggest learning was that I have much more to learn and that I should never be afraid of starting anew and creating new opportunities and businesses.
High: You spent your childhood and your professional life in two different countries that have been successful in integrating immigrants. One could certainly argue that is one of the reasons why Israel and the United States are two of the biggest entrepreneurial cultures in the world. In these cultures, there is a wealth of people who want to go on a crazy journey with you. Could you reflect on how that has impacted your success as an entrepreneur?
Reichental: They likely factored a great deal. That upbringing, the operating environments, the marketplace, the cultures, and role models in my life significantly shaped and informed who I am. I was born in January of 1957, so Israel was all of nine-years-old. I have experienced a great deal of inventiveness, perseverance, adaptability, and flexibility on a daily basis, so it has become second nature. Moreover, I have seen many people fail around me.
I then came to the United States, and I experienced this all over again in a more professional, organized, and disciplined way. I got the best of both the startup nation flavor of entrepreneurship in Israel and the United States flavor of entrepreneurship. In the end, I became a hybrid of both cultures in a way that allows me to take the learning from the best of both.
As my two Israeli-based partners and I got involved with Cognitiv Ventures, which is an Israeli-based venture fund that invests in early-stage Israeli companies, I had the opportunity to come full circle. I got to experience the new breed of Israeli entrepreneurs, who are much more seasoned and experienced. In fact, many of them are serial entrepreneurs in their own right. They are much more global because many of them start their businesses in Israel and aim for Silicon Valley exits. That is continuing to stretch me and allow me to continue to grow.
I have a strong anchoring in technology, I invented quite a few technologies, and I hold more than 35 patents personally. That combination of business operations, technology, the ability to invent and understand how the inventive process works, and what it takes to productize and commercialize it gave me a unique perspective. I not only saw how entrepreneurship works, but how to harness it, harvest it, and deliver it in meaningful products, services, and business models. Regarding entrepreneurship, technology, and innovation, in my experience, business model innovation is even more important than technology innovation in this day and age. I have seen many high-tech companies with incredible products fail, and I have seen incredibly successful companies with lesser products. The latter has a superior business model or growth market strategy that succeeds well beyond the technology. My advice to young and mature companies is to continue innovating your business model because the useful shelf life of your current business model is less than five years.
High: Do you have any advice on the method of investigating that for organizations? What journey would you suggest they go on to continue to reinvestigate?
Reichental: There are tried and proven methodologies to business model innovation. This starts with understanding exactly what business you are in, how you plan to access the market, and through what channels you plan to do so. This entails asking if you have existing channels that you can access, such as online and brick-and-mortar resellers. Further, you have to ask;
- If you are building a product company, a service company, or both;
- How you can make your business more sticky, meaningful, and a must-have in the life of your customer;
- If you can introduce some element of recurring revenues into your business;
- How you blend products and services into a unique experience. In this day and age, people do not want just the product, they want to be part of the journey and experience. Because of this, you need to determine how you make your product relatable to your customers;
- How you make sure it does not get commoditized. This involves how you capture your fair share of the value that you create into the marketplace. As your competition shows up, you have to compete on enough dimensions to de-commoditize and capture enough value. To do so, you have to price correctly and create different levels of adoption.
All of these questions are immensely important. It has been my experience that most companies spend the majority of their resources and time on product design, product development, product manufacturing, supply chain optimization, and cost control. As a result, they do not spend enough time making sure that they differentiate in their go-to-market strategy, in capturing the value, and in building a long-term sustainable business that has some de-commoditization mechanism built in.
Peter High is President of Metis Strategy, a business and IT advisory firm. His latest book is Implementing World Class IT Strategy. He is also the author of World Class IT: Why Businesses Succeed When IT Triumphs. Peter moderates the Technovation podcast series. He speaks at conferences around the world. Follow him on Twitter @PeterAHigh.
May 28, 2019 at 11:24AM
Forbes – Entrepreneurs