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The tech boss who 'x-rays' businesses
00:17:27
We meet Alexander Rinke, whose billion-dollar firm uncovers how businesses really run
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- [00:00]
Will Bain
This BBC podcast is supported by ads outside the uk.
- [00:06]
Ryan Seacrest
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- [01:44]
Will Bain
Hello, I'm Will Bain and welcome to meet the founders from Business Daily on the BBC World Service. This is where we speak to innovators around the world and about the ideas, risks and realities of starting a business. Today we hear from someone who took a somewhat academic concept about improving the process of how we do business and turned it into a multi million dollar reality. It's an idea which he piloted on a friendly local radio station in Munich with pleasantly surprising results.
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Alexander Rinker
It was like an aha moment for them. They were like wow, we've never seen our looked at our business like this. And so we got excited about it, but we didn't get any investor. People didn't believe that those three young guys could start a software business.
- [02:26]
Will Bain
So that's our guest today, Alexander Rinker, the founder of Celonis here on Business Daily. Doing business can involve hundreds if not thousands of different processes, from paying people to shipping goods, raising invoices and customer service. The problem is, and it can be a big one, not all these systems Talk to one another. So it can be difficult to fathom where inefficiencies in that process actually lie. Alexander Rinker was part of a small team that led to today's big company, Celonis. Their vision was to create a software system that would look across the different business processes and effectively perform a data X ray to identify weaknesses and recommend ways to make them more efficient. It's called process mining. And what began as an idea while he was at university has turned into a company called valued at around $13 billion.
- [03:19]
Alexander Rinker
Our mission is that we make processes work for people, for companies and for the planet. And if you've ever been stuck in a bad process, then you realize how important it is to make customer experiences better, to make businesses more efficient, and also to make everybody that works in a business happier. Because nobody likes to be stuck in a bad process.
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Will Bain
Take us right back to the start, then the light bulb moment. Because it wasn't just you, was it? It was with friends, me and my
- [03:46]
Alexander Rinker
two co founders, we were in Munich at. At university, sort of two things happening at once. One of my co founders heard about process mining in a university lecture. And process mining back then was purely academic field. There was maybe like 10 researchers mostly driven out of Eindhoven in the Netherlands that were thinking about this. And then at the same time there was project that we did sort of as freelancers next to college, that we wanted to help a business, local business, actually a radio station, believe it or not, so local radio station in Munich, to optimize the IT processes. And what we learned pretty quickly is that the business actually didn't have good transparency about how the processes worked. Right. So you would go and ask, what's the process? What can we improve? And you'd ask three people. It's almost like if you ask three lawyers, you'd get five different answers. You know, one person thought the process was broken over here, one person thought it was broken, another part. So process mining, the idea is, well, every business generates these digital footprints. When we use IT systems and technology, could we use that to automatically discover how the processes in the company actually work? I like to call it an X ray for businesses. Right. When a doctor goes in and asks a patient what hurts with their knee, they don't just rely on what the patient tells them. They also have an X ray to get some data on what's actually broken. And I think that's a very good analogy. For our first product, it was this X ray that you can put on top of any business process, whether it's customer service or it or selling or purchasing or manufacturing and will give you an accurate picture of how the process works in reality, not how people imagine it works, how it works in reality.
- [05:24]
Will Bain
Just strip that back a little bit further again then. So the process mining idea and that example of that first product that you designed using the idea, what does it do? What is it looking for?
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Alexander Rinker
It looks for these digital traces. And the way that works is you can think of any process. Let's take if you order something on Amazon, right, there is objects and events. So the objects would be the shopping cart or the item you order, or the. If you have a customer service process, it would be the customer and then you have events. Right? The events are sort of what happens in the process. So you put a new order in, Amazon confirms the order, you make the payment with your credit card, you get the shipment to show up at your door, maybe you return it or you dispute it, or there's a quality issue. All those things that have my events, what we do is that we find traces of these objects and events as they sort of move through the company. So it doesn't matter which systems you use or even if some things are not in any system, they're just sort of manual and emails and Excel sheets, et cetera. But we find those objects and events in a highly automatic way and then we paint a visual map of how the process actually works. So much like a traffic map, right? And you see here sort of everything is great, it flows through this flow, but then you see all the deviations, customers that get stuck, maybe orders that get delayed, service issues, where it ping pongs from one team to the other team. I don't know if you've ever done that. When you called your bank or your airline, you ping pong three different teams, nobody solves your problem. So we point out all this in a data driven way and you can very quickly go from sort of very high level view into every little detail to understand how you can optimize.
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Will Bain
And then is it up to your customer how they go about solving that? Is your job solely to kind of shine a light on it?
- [07:12]
Alexander Rinker
Well, it used to be. Obviously we've been going for 15 years and by now the system does a lot more. So we've really evolved from this process mining tool into a whole platform around what we call process intelligence. And this doesn't just give you this living, breathing picture of your processes, it automatically observes your processes in real time. And if something's wrong, we can actually have an AI agent Solve this problem. It can trigger an AI agent and say, here's the process, it's stuck. It can feed into an automation that then solves this problem.
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Will Bain
Right. So it just does it.
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Alexander Rinker
It just does it. Exactly. So there's a wide range of capabilities that we offer in our platform and then with partner technologies that we enable to have much more intelligent process.
- [07:56]
Will Bain
After that first test go with a radio station, quite a risk, isn't it? Quite a test of friendship as well. To go. You know what? One, we can work together. Two, we're onto something here. Three, how do we fund it? So how do conversations start like that with a friend?
- [08:15]
Alexander Rinker
We still are three co founders and we really got excited about this idea. But obviously to your point, we all had other plans. Right. I wanted to do a master's. Both of my co founders had already a job offer and it felt a bit scary at the time, but when they saw their process in reality, it was like an aha moment for them. They were like, wow, we've never seen our looked at our business like this and pretty exciting. So we got excited about it. And then I was just turned 22 at the time. So it's like, what's the worst thing that can happen, right? The other aspect was the funding and that was actually really tricky because we thought, okay, maybe we get an investor, but we didn't get any investor. Back then the venture capital scene was much smaller, especially in Germany, and people didn't believe that those three young guys could start a B2B software business. You need a network, you need a few gray hairs. So back then it was really hard and we actually bootstrapped the company for the first five years. In Germany, you have to put in $15,000 to start a business. Twelve and a half thousand euros. You, you can't do it like in the US where you just do it with $1. So each founder to put up $5,000. And I didn't have $5,000 at the time, so I bought my part from one of my co founders and, and yeah, it was, was scrappy for sure.
- [09:30]
Will Bain
Bootstrapping. Just explain that term for our listeners.
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Alexander Rinker
So bootstrapping is a term when you build a business and you don't have outside money. So the only thing you can do is you can get revenues and then reinvest those revenues.
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Will Bain
Terrifying. Exciting.
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Alexander Rinker
Both stressful, honestly, both. Every day we were updating, you know, all the cash that's coming in, all the cash that's going out to pay people and offices and everything. And you know, we Always need to make sure that we have more cash coming in than out and that we never run out of cash because that's how companies go bankrupt. They run out of cash. So it was definitely challenging, but it was also a lot of fun.
- [10:05]
Will Bain
Was it better, do you think, to do it with friends, with people you knew you could be blunt with?
- [10:10]
Alexander Rinker
Yeah, I mean, I think that's a good question. And, you know, I've invested in a few startups over the years and the founding team dynamics are always tricky because. And I think a lot of startups fail because the co founders don't get along. And in our case, I think we got really lucky that we get along great. And, you know, actually had a meeting with both of them just this morning for an hour and a half. And, you know, we are all active in the business and it was a really strong relationship. I mean, we, we knew each other, but we weren't like super close friends when we started. And we became very good friends over the years. And I think it's really important to have blunt conversations, right? What do we want to do? How do we work together? Who focuses on what? And you can have that transparency and trust.
- [10:53]
Will Bain
Do you have to continue to work on that as well?
- [10:55]
Alexander Rinker
Always? Yeah, always. It's always work in progress. Right. Like every relationship, you know, it's like always got to work on it, spend time. It's something that you really need to nurture, for sure.
- [11:04]
Will Bain
You're listening to Business Daily on the BBC World Service.
- [11:09]
Ryan Seacrest
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- [11:40]
Will Bain
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Alexander Rinker
Another pina colada? Yes, please.
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Will Bain
Open a new retail location with 36% more square feet.
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Alexander Rinker
Fantastic.
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Will Bain
Hire 36% more help.
- [11:54]
Ryan Seacrest
You're hired and you're hired.
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Will Bain
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- [12:03]
Alexander Rinker
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- [12:07]
Will Bain
Shopify.com setup I'm Will Bain and in Meet the Founders today we're talking to Alexander Rinker from Munich, Germany about his journey from a startup put together with two university friends to a multi million dollar software company that weeds out inefficiencies in a company's processes. He's the co founder and co chief executive of Salonis. And after a difficult start with no sign of seed corn funding forthcoming in his home country of Germany, Alexander and the team began to look further afield. And soon things began to really pick up.
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Alexander Rinker
The reason we went to the US was more because it's the biggest market, you know, for end customers. A lot of large businesses are based in the us A lot of decisions get made there.
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Will Bain
Do you think it matters? I was listening to Sir Nick Clegg, Deputy Prime Minister in the uk. But more interestingly for this conversation, former number two really at Meta, to Mark Zuckerberg, really concerned about this idea that talented companies and their people are sort of having to turn to the west coast of the United States for that kind of venture capital money because the pots are so much deeper there. And I just wonder, is that something we should be worried about in Europe? I mean, does it matter?
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Alexander Rinker
Many companies like Celonis have a global ambition. You know, we don't look at ourselves as a US Company, we look at ourselves as a company with a global ambition. And, and we operate in many markets across the world. I do believe that when you look at Europe and the European startup ecosystem, that more venture capital would help. And we, I think, continuously need to work on that. For example, in Germany, there are still rules around not being able to invest pension funds in venture capital. It's relaxed a little bit. But you know, if you look at pensions, right, that's a huge portion of the wealth of a country. And in the US those pension funds are behind many of the large VCs. And I think Europe has to catch up. There's a lot of wealth in Europe, but we need to make sure that we invested in the next generation of technology and that we create more technology companies because there's a lot of good talent here, right? There's a lot of smart people, there's good universities, but certainly the capital infrastructure in the US is just amazing. You see companies raising seed funds of 30 or $50 million for what that basically means is that an Investor gives someone $50 million, even though the idea is 90% chance of failing. A lot of Seed companies never make it, but that type of venture capital infrastructure is far ahead of where it is in Europe, in the US And I think we've caught up already, but there's still large room to catch up.
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Will Bain
When was the moment where you guys kind of thought, okay, we're through the surf here, wear off?
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Alexander Rinker
It's funny, you always evolve, right? And there's always new challenges. So it's not that you ever think, okay, my job is done, you know, it's, it's. But clearly there are those, like, critical milestones. So when we signed up our first few big customers, we really felt, okay, we have strong product market fit, because if you don't have it, you can't scale. And if you try to scale before you have that product market fit, it's going to be really problematic. So I think that was a big thing. And, you know, more recently, as we saw this large interest and evolution and really breakthrough around AI, we really found that Celonis can provide an essential foundation for that. Because the problem with AI is that AI doesn't know the context of each individual business. It's trained on a lot of public data. They're very smart. But as companies try to adopt them, these LLMs lack the business context about what's going on within the company. And we provide that in a really unique way.
- [15:41]
Will Bain
And that issue in particular, it's an enormous one for countries and companies all around the world, isn't it? This productivity challenge, which, in essence, you guys are trying to end, clear up, iron out when you look at that data. And I don't know if you ever do kind of sort of sit back and look at it as a sort of broader set. Are there persistent patterns of what is going wrong or where? As you talked about earlier, these bottlenecks spring up.
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Alexander Rinker
You have a lot of legacy systems, and now what people have is companies have this web of different systems that were built over 50 years, and it's quite a mess. And there's not one system that's capable of doing all this work, right? So you're executing your processes across systems, and in some ways you've also retrofitted your processes into those systems because of limitations that those systems had. And I think that creates a foundation where it's very hard to use AI and where it's very hard to be highly automated and productive. You know, we come in as a process intelligence platform to provide that foundation that then can drive automation and AI. So I think one of the clear patterns is that the system landscape companies have created over the years is not fit to be flexible and composable enough to really leverage AI and automation, obviously.
- [16:59]
Will Bain
And some of the companies you've talked about are very high end tech examples. And it can work with something as old as beer and brewing as well.
- [17:06]
Alexander Rinker
Yeah, I mean, we help, for example, Paulana, which is one of the most famous brewers here, to deliver part of the 6 million liters of beer at Oktoberfest and to do that more efficiently. Right. They have a large supply chain and manufacture the beer and then they have to deliver it and make sure that it gets to people. And there's a lot of process that goes into that and they're optimizing that with Celonis. So, you know, they even have an underground delivery system. It's very unique. And yeah, they're looking at that through Celonis to optimize and be efficient.
- [17:35]
Will Bain
What first attracted successful founder to tie up with famous beer brand?
- [17:41]
Alexander Rinker
I might even have one myself later.
- [17:44]
Will Bain
What comes next then for you guys? Because it feels like that the challenges are just enormous and unique and feel like even technology struggle to keep up with the pace of what's changing with them. Right. The politics of tariffs, for example, or where conflict perhaps springs up to change supply chains again, or the pace with which we're changing in terms of energy transition or electric vehicles or whatever it may be. How do you keep up in that kind of race?
- [18:10]
Alexander Rinker
We focus on what we do best and that's what making processes work for people, organizations and the planet. And that's a mission that's increasingly important because processes are changing, as you said. Right. Because of all those things you mentioned, and also because of AI is a huge opportunity for organizations to take friction out, get much more productive and really get ahead. And I think every company will have to change quite substantially to embrace this. And I think Celonis can provide part of that foundation to enable that. So. So we're very excited about that opportunity and fully focused on doing what we do best and growing the business.
- [18:46]
Will Bain
And it seems at the moment that the easy option to that is to take people out of it. From everything you've talked about through the program so far, that doesn't seem to be your view, actually, that actually just sort of, you know, stripping headcount or whatever isn't actually necessarily the right answer.
- [19:01]
Alexander Rinker
You can obviously automate things that are being done manually today and that way reduce how you deploy people in certain areas. But I think if you engineer your company the right way, that actually allows you to grow and play offense and redeploy those people in other areas to do things that are uniquely human. I don't believe that AI replaces what's uniquely human. It can do things that we do today, but that actually gives an opportunity for companies to drive growth and play offense. But it is definitely a transformation. And I think again, Sylonis can be part of what enables that, very substantially so. But clearly the job profiles are going to change.
- [19:39]
Will Bain
And on that human side, could you have done it without your friends, without your partners?
- [19:43]
Alexander Rinker
Oh, absolutely no way. I would have gone very far.
- [19:46]
Will Bain
That was Alexander Rinke speaking to us from Munich, Germany. That's it for this week's edition of Meet the Founders with me, Will Bain. The producers were Luke Jarman and Craig Henderson. And to listen to more conversations like this, just search and subscribe to Business Daily wherever you get your podcasts. And you can get in touch with us as well by emailing business dailybc.co.uk thanks so much for listening.
- [20:14]
Alexander Rinker
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