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If it ain’t broke, fix it: How a unicorn transformed itself to stay at the top
German data processing company Celonis might have reached unicorn status in 2018, but its founders knew they could not afford to stop innovating. What made them overhaul an already-successful business strategy?
It is 2021, and Celonis has already revolutionized process mining, a technology which uses log data from a business’ IT systems to visualize processes as they really are, uncovering inefficiencies: within a decade, its software and business model have propelled it from a student bedroom to unicorn status. But founders Martin Klenk, Bastian Nominacher and Alex Rinke are focusing on a new challenge.
They are about to respond to a changing tech landscape and increasing customer demand by creating an execution management system (EMS) that requires them to rethink core features of Celonis’ business model – including its approach to collaboration and external partnerships.
What can other businesses learn from what happened next?
1. Listen to customer demand
The question of whether to create more specialized features for specific industries had come up again and again for Celonis. Clients including Dell and BMW that had already achieved success with Celonis’s software had been asking for more specialized tools.
But Celonis estimated that 80% of customers were using its services for managing orders and accounts payable, which supported the case for making products that could be used in any industry. Specialization might attract new customers, but Celonis was reassured that industry agnosticism would still create plenty of business.
There was another reason why the company had not specialized by industry. Originally, end users had been responsible for addressing areas of improvement identified by the Celonis software based on their own sector- and company-specific expertise – which minimized the need for specialization.
But the rise of AI and robotic process automation (RPA) was creating an opportunity to add task automation features to the software. This would make customers’ gap-mitigation activity more consistent. The company’s growing and diversifying user base became increasingly hungry for new, use-case-specific features, as well as ways to fix the gaps identified by Celonis’s tools. Industry specialization was back on the agenda for Celonis’s leaders and investors. And they now had the opportunity – and the incentive – to create more industry-specialized tools.
But the question of how to do this was not so simple: it would demand a wholesale revamp of the business model and a new approach to collaboration with external developers.
2. Build an ecosystem to support change (but work out what should stay in house)
Celonis took these customer demands for industry specialization seriously, which for Chief Technology Officer Martin Klenk meant overhauling the software that had been the backbone of Celonis’s success.
The company already knew the value of cultivating an ecosystem of partnerships: in 2015, it had partnered with SAP, which gave the startup access to a much larger salesforce and boosted its influence. The new platform would accommodate as many vetted external software applications as necessary, as well as data sources that would go beyond those associated with traditional enterprise resource planning (ERP) and customer relationship management (CRM) systems. The Celonis Execution Management System (EMS) was born.
“Amid a rapidly changing technology landscape and a business world racing to catch up, Celonis was not afraid to improve upon success to take its products to even greater heights. ”
The system, along with its broad new ecosystem, gave Celonis the opportunity to business to solve problems in real time, while relieving the pressure on its teams to develop industry-specific and use-case-specific features for clients.
But this did not mean that Celonis looked to its ecosystem for everything. It was careful to retain control of the fundamental capabilities that ensure its continued success. Outsourcing RPA features to ecosystem partners, for instance, would reduce the speed of their development. Klenk felt that RPA was so fundamental that he insisted these capabilities be built into the core software.
3. Consider different approaches to tap into a new customer base
Celonis realized that to grow and serve an increasingly varied customer base, it needed to bring consultancies on board. These firms would provide more industry or function expertise and the enterprise change management needed for Celonis’s software to be implemented successfully.
So Celonis created a new digital consulting department to support consultancies such as PwC and Deloitte in their work. To make it easier for consultants to use the software, it provided short project-related licenses that allowed consultants to bring in the software to make tedious tasks much less onerous. And in 2021 it launched its Celonis for Consulting+ program, which increased its reach by allowing consultancies to use its tools for free – up to a certain threshold.
These changes are part and parcel of Celonis’s willingness to flex its business model as the situation demands. Amid a rapidly changing technology landscape and a business world racing to catch up, Celonis was not afraid to improve upon success to take its products to even greater heights.
Key takeaways
- Decide carefully if product specialization is for you - this can help you to stay focused as you scale up, but sometimes it is better to be flexible.
- Invest time in building your ecosystem, but consider very carefully what you should keep in house.
- Capture more business by understanding the business models of new customer sectors and being flexible enough to meet their needs.
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