Inside Koch Industries Inc. is a capability the company calls Koch Labs, a kind of internal entrepreneurial accelerator helping the largest privately held corporation in the country put new ideas to the test.
That includes potential innovations and technologies from companies that Koch invests in, as well as ideas from throughout its existing businesses.
In this exclusive interview, Steve Feilmeier, CEO of Koch Investments Group, says that Koch Labs, which you can read much more about here, is putting one of the core business philosophies of company CEO Charles Koch to work in the real world:
Is it best to think of Koch Labs as an entity or as a concept? Koch Labs is a specific capability that started within Koch Disruptive Technologies in 2017 and has begun to expand elsewhere at Koch. It’s an application of the Republic of Science theory in practice, demonstrating that knowledge sharing is essential for scientific and social innovation and progress. Essentially, this capability allows us to provide our external partners with support beyond capital investment by connecting them to Koch’s global scale as a potential customer, capability provider, technology validator, or any other aspect that might create mutual benefit for both parties.
Koch’s scale and breadth of operations can create significant value beyond just writing a check.More broadly, the idea of “Koch as a Laboratory” is a key mental model for all Koch employees. Charles Koch continually encourages employees to experiment, innovate and transform, and a key part of that is thinking of your role, your business, and Koch Industries itself as a laboratory to discover better ways to do things, building knowledge networks within the company and across the world to create value in society.
How does the Koch Labs process work? The key to this is, again, the concept of Koch as a Laboratory, which actively encourages employees to experiment and transform what we are doing within our roles and across Koch. So, there are a variety of methods to make that happen, including: organizing knowledge areas focused on specific subjects; developing internal tools to connect employees more efficiently to resources and knowledge; and empowering and encouraging employees to vocalize and champion their ideas. The Koch Labs capability spends a significant amount of time networking throughout the organization, identifying subject matter experts across our wide range of operations. These SMEs can serve a variety of purposes, from helping Koch evaluate a potential technology, providing guidance and knowledge to one of our partners, or even serving as a doorway for an entrepreneur to test and refine a solution to a problem or opportunity Koch is actively working to address.
Are there particular leaders for Koch Labs under the KDT umbrella? Byron Knight has been a key figure within KDT leading the set-up of our Koch Labs capability. They have a very capable team including Bill Bender, Navin Maharaj, and Annant Patel, which has grown and refined the capability over time to work with the majority of KDT’s 20-plus portfolio companies. More recently, we’ve begun spinning up extensions of this capability in our other investment groups, including Koch Strategic Platforms. In fact, the KSP team is working with a recent investment partner, EVBox, to bring their innovative EV (electric vehicle) charging station technologies to the U.S., using Koch’s expertise and U.S. locations as a critical element in their future expansion plans.
Speed-to-market is always crucial with good ideas. How does Koch Labs help accelerate the process? The key component here is the application of the concept of mutual benefit. Startups are well known for iterating and refining technology at a breakneck pace to create better solutions. Testing solutions in a real-world setting can be a significant barrier to entry and success. Thinking of Koch as a Laboratory opens the door to one of the largest metaphorical sandboxes on the planet. Koch’s operations employ 120,000-plus people across 70 countries, so if you have an idea or a technology that’s solving a problem, we’re probably experiencing that problem somewhere. We’ve had several examples already where an investment partner has discovered a whole new application, or even completely pivoted their technology to a new industry as a result of working within the Koch Labs framework to test and refine. From our point of view, that real-world application is a game changer in terms of speed-to-market, and ability to focus on the customer needs of your product.
For those outside entrepreneurs that get plugged in after investment, what’s the reaction to the resource of Koch Labs? It’s been overwhelmingly positive. The investment market is red-hot right now, and companies pretty much have their pick of funding sources. Koch Labs enables us to bring something unique to an entrepreneur that’s often more valuable than capital investment. And again, Koch also gains from the collaboration beyond just a dollar-value return, so it’s mutually beneficial in the long term.It’s the ability to collaborate with global knowledge, capabilities, markets, that a company might not otherwise be able to access.
Most entrepreneurs, whether they’re still in start-up mode or running a multi-million-dollar company, are driven by a vision to create value for their customers and prove that their products and services can solve real-world problems. Koch Labs helps them realize that vision. And the capability isn’t standing still. The team is constantly looking at ways to transform and refine to better meet the needs of both internal and external partners.
What’s the biggest lesson you think outside entrepreneurs in Wichita can learn from the way Koch Labs works? I think any way you look at it, the biggest lesson goes back to what Charles Koch laid out in his book "Good Profit:" Always focus on mutual benefit and creating value for others. If you look at what we’re doing with Koch Labs, it’s all about how we can use our unique position to create value for our investment partners through the lens of the Republic of Science. It’s not a way for us to expand our bottom line at the expense of others, but instead it’s a framework that allows us to find opportunities where both Koch and our partners succeed. And society also benefits as a result because these incredible companies have access to broader opportunities to improve and refine their ideas. So that’s what I would say is the biggest lesson, and I see it as fundamental to business as a whole. Focus on creating value for others, and the success will follow.
What comes next for Koch Labs? We think the process gets better as we continue to encourage our employees to think as entrepreneurs and embrace transformation. The key to this approach is in activating knowledge in one area to interact with knowledge in another and create something mutually beneficial to both sides. That type of engagement is most valuable when it’s a bottom-up approach being driven by those who are doing the work and owning the knowledge, not as a top-down mandate from leadership. As we continue to expand the Koch Labs capability – not only into our other investment groups but also across the enterprise, we can begin to build larger internal and external knowledge networks, focused on using this approach to create mutual benefit.
