Discovery Newsletter: Perspective, Chase Koch

January 1, 2018

Just 10 years ago, Nokia was the company that defined the mobile industry. It was on the cover of Forbes magazine, boasting about one billion customers. Today, it is non-existent.

During that same decade, Amazon’s value increased more than 3,100 percent. It has become a daily part of hundreds of millions of lives and is the dominant online retailer. How can two iconic companies have such wildly different outcomes? I believe the answer is simple.

Amazon embraced a core value of “customer obsession” and reinvented our purchasing experiences. It made significant investments in technology and other capabilities, and by doing so, transformed from a bookstore into an “everything” store.

Nokia ignored the customer’s desire for something better, which turned out to be a touchscreen smartphone. By the time Nokia woke up and tried to change, Apple had already eaten Nokia’s lunch.

Koch Industries’ vision is to create products and services that customers value higher than their alternatives while consuming fewer resources, and to do this faster than our competitors. That’s a huge challenge, especially given the accelerating pace of change in today’s world. 

As my father stated in April’s Discovery, Koch Industries must make this vision a reality through a technology-driven transformation that touches every business, capability, customer and employee of Koch Industries. And we must do this faster than we ever have before.

NEW BUSINESS, NEW CUSTOMER
In my role as the business leader for Koch Agronomic Services, I often met with growth-stage technology entrepreneurs who were eager to learn more about Koch and explore partnering with us.

A few themes consistently surfaced in our discussions. They wanted to understand more about Koch’s global platforms and where their technology could be applied.

As they learned about Koch Equity Development’s successes with Infor, Solera and Molex, they became more curious about access to our unique capital resources. The private nature of Koch, which fosters a long-term mindset and the ability to move quickly, also piqued their interest.

All of this feedback created the opportunity to build a new business that not only served both their needs and ours, but was aligned with Koch’s vision. We took the leap, and Koch Disruptive Technologies was established.

THE NEW NORMAL
Businesses across Koch are embracing technology now more than ever.

Georgia-Pacific is using new lathing technology to process wood more efficiently. Molex is combining hardware with software to launch new drug delivery devices that increase dosage precision and improve health outcomes. KCTG is using 3-D modeling to manufacture more-efficient burners with fewer emissions.

But technology is transforming more than just manufacturing.

Our legal team is experimenting with Artificial Intelligence to accelerate and improve our legal processes. Koch Supply & Trading is experimenting with blockchain technology to remove friction from the trade settlement process at lower costs. GP is building a new direct-to-customer e-commerce platform. The list goes on.

So, what is KDT’s role in all of this technology-driven transformation?

Our role is to find and invest in high-growth technology companies that can transform Koch’s core capabilities, create new capabilities or expand Koch into new platforms.

There are a few questions we consistently ask when comparing a new opportunity to the existing market alternatives: How does the technology transform the cost structure? How does the technology transform the customer value proposition (including features, benefits, convenience and experience)? Can the company capture a significant portion of the value it creates?

TWO-WAY STREET
No customer relationship will last without mutual benefit. KDT has two sets of customers — entrepreneurs, and Koch businesses and capabilities — and seeks to create value for both.

For entrepreneurs, our goal is to be the preferred capital solutions provider, offering selective access to Koch as a “laboratory” and capturing opportunities with integrity, speed, efficiency, certainty and confidentiality.

For Koch businesses and capabilities, we want to develop access to new networks and talent, unique knowledge, and opportunities that are complementary to what Koch is already doing.

Like any Koch business, KDT will test, evaluate and refine its vision and focus areas over time.
When it comes to finding new ways of using new ideas, I’m confident our future can be every bit as exciting as Amazon’s already has been. In fact, because of our Guiding Principles and ability to reinvest 90 percent of profits, our potential is far greater than most.

To achieve that potential, let’s make sure we all work together to find opportunities that can make a real difference.

 

Chase Koch is the president of Koch Disruptive Technologies (KDT), a subsidiary of Koch Industries, Inc. KDT’s role is to originate and invest in high-growth technology companies that transform Koch’s core capabilities, create new capabilities or expand Koch into new platforms. Chase serves as a board member of Koch Industries, Inc. and the Charles Koch Foundation. He also serves as chairman of New Leaders, a unique network that focuses on developing and experimenting with new, innovative and disruptive solutions for social change. This group offers its members an opportunity to expand their business and philanthropic networks, leverage their impact, and learn from business leaders how to grow principled and profitable businesses.