Why Groupe Galeries Lafayette Launched an Accelerator Program

February 6, 2017

To get from Paris’ flagship Galeries Lafayette department store, unveiled in 1912, to the Lafayette Plug & Play startup accelerator, launched in 2016, it’s only about a 20-minute stroll down Rue la Fayette.The accelerator seeks to attract the best fashion and retail-oriented startups from around the world — as well as get pilots going with Groupe Galeries Lafayette, a 15,000-employee retailer with outlets from Paris to Beijing.

The exterior of Paris’ Galeries Lafayette department store, circa 1912.

But Edoardo Manitto, VP of Corporate Development and Innovation at the French retailer, knew that even a kilometer-and-half’s distance could potentially kill the new initiative if he didn’t establish the right connections between the company’s core retailing business and the new accelerator.Groupe Galeries Lafayette is one of the largest European department store operators, with 56 locations in France, as well as international locations in Dubai, Berlin, Jakarta, and Beijing. The 120-year old private company is family-owned. It recently acquired several digital businesses, including InstantLuxe, an apparel reseller, and BazarChic, a private sale website.

We spoke with Manitto in January 2017 as part of our IL Live series of conference calls.

My Role

When I joined the company [in 2014], basically the executives, the family, thought it was important to do innovation, but they didn’t know much what it meant. So when I arrived, I had to create my own role.

A Café Cuillier location in Paris.

I think for all of us with innovation in our titles, understanding the inner workings of the company is very important. Certainly, being sponsored or anchored at the top of the company is also important.In my case, I report directly to the president of the group, who’s the chairman and owner of the company. I think it’s a precondition for success, because there are so many challenges and sometimes so much friction that if you’re not strongly supported by the top, it’s a very difficult role to carry out, to impact and to create some impacts.

Starting a New Business

The idea behind [Cuillier, a business Manitto launched] was really to build on the specialty coffee trend, and build a new brand with physical stores. It was very much kind of innovation-lite, if we want to call it that. The going-in assumption of my role was, “OK, in innovation you’ve got to create new commercial concepts.”

I said, “OK. Excellent.” I’ve looked at the market. I’ve studied a few niches. I proposed a few ideas to the board. Since at the department stores we’re also in hospitality, they said, “OK. That sounds like a good idea. Go off and develop the company.”We’ve opened the first one in our own location. [Now, it] has four independent stand-alone outlets in Paris. It’s a first step for the company. It wasn’t something that was too digital. It was actually very physical. It was far enough from their core business that it [fell] under the innovation umbrella.

From that early test, we moved on to better and bolder things — although I still do run and take care of that business, which is doing very well.

Why Reach Out to Startups?

We are very much a brick-and-mortar, 120-year-old iconic institution. We’re slow, not agile. [We have] legacy systems. Everything you can think of a traditional business, we represent.

At the same time, I was scoping [things] out, probing, trying to work with our executive teams, and trying to put them in contact with startups, present them new concepts, try to inspire them, create reports, bring them research. Basically, in a nutshell, I was trying to shove innovation down their throat. That, in my case, didn’t lead to anything very productive.I said, “OK. That’s not working.” I sat down with the president, who said, “OK, we’ve tried 10 different initiatives, [and] none of them is taking off. We really need to do something radically different than what we’ve done. We need to build a separate organization. We need to create a real demand for innovation from the business, and we need it in a separate physical space.”

We started working with this idea, and I quickly landed on this idea of putting our business, which is a globally recognized brand, at the center of an innovation ecosystem. Today, the innovation ecosystem is embodied and defined by startups.We said, “OK, we’ve got to build something where we bring Paris, the fashion capital of the world, and Silicon Valley, the technology capital of the world, together. A program where we can learn, put our assets at the service of startups, and at the same time, profit from this relationship.” We wanted to build a real exchange and channel of communication with this new ecosystem outside our walls, and try to understand what role we can play in it, how we can contribute, and how we can benefit.”

I decided to build this innovation platform — because it’s really more than an accelerator — called Lafayette Plug & Play.

Edoardo Manitto.

I did due diligence before embarking into this program. My going-in assumption was that Galeries Lafayette, as a retailer, as a global brand, could bring its industry competencies.From the very beginning, I was looking for a startup expert, or an accelerator expert, or somebody that works with startups. I did some due diligence with companies here in France and some players in the US. When I met Plug & Play, we really clicked together.

I think our philosophy of bringing together the corporate, startups, VCs, and really creating an ecosystem around specific verticals — that was something that they’d already put in place at their head office in Sunnyvale, California.[The cost to launch the program was in the] low six figures. I’ve also built a small fund with Plug & Play where we invest…in a limited number of the companies. Unlike Y Combinator or 500 Startups or other incubators, we don’t take equity coming in the program. The program for startups is completely free.

We give them a space. We give them all the mentoring. We give them all the advice. We [help them establish] relationships with our group and other corporates, and that’s all free. It’s obviously a very attractive proposition for them. With the ones that we feel have most potential, we do invest.

Creating an Open Ecosystem

What we’re building is not a corporate accelerator. I actually believe that corporate accelerators are not very interesting, both for the corporate and for startups. Because they tend to be exciting initiatives for the first 18-to-24 months, then there’s not real expertise behind it. They fall out of fashion very quickly.

We are building an accelerator program, an ecosystem around our industry, where Galeries Lafayette is the anchor partner, the anchor sponsor today. But it’s an open ecosystem. So we actively invite and welcome [participation from] other retailers, brands, in all their shapes and form, in all their channels.[At] Lafayette Plug & Play, we’re a small team of seven people. Our customers are the startups. We actually spend an enormous amount of time in the field getting to know the startups, creating a very qualified deal flow for our program.

We really go out to find the best startups. We don’t solve for any corporate problems, at first….If you solve for business problems, those business problems are very relevant, and they’re today’s problems, but you…don’t look for new business models. You don’t look for the really disruptive innovation. That’s what we try to do.

Generating Demand from the Business

We launched in September 2016. We’re [now] sourcing for a second batch. We’ve run the first three-month program. We had seven French, one US, one UK, and one Danish startup. We have physical space, so the program is anchored in a physical location. We have 10,000 square feet in the city center of Paris, where we have co-working, where we have the space for the accelerator program, where we run regular events, and so on.

When the executives come and the team comes [to that space], everybody gets excited. They really see things. They get to interact with the startups, with ideas that they haven’t been exposed to before, and it’s a safe environment. That generates this demand that did not exist before.Innovation departments often tend to push innovation in the business. I’ve created a system that generates demand. The business now comes to me and says, “Oh, what you’re doing is very interesting, very relevant. Can you help me do this?” Or, “Can we come and spend time in the space? Can we run our off-site in your space? Can you help me find a specific startup for my problems?” I say, “Of course.”

We now have a CRM [database] of 700 startups. If an executive from supply chain comes to me, it’s very likely that we have a startup that solves their needs. If it’s not in our CRM, we go out and find it. Thanks to the partnership with Plug & Play, if we don’t find it in Europe, we’ll likely find it in the US.

Building Bridges

The dome inside Galeries Lafayette’s flagship location in Paris.

I’m trying to build bridges at several different levels of the organization, and through several different initiatives. First of all, our board is involved in the selection of the startups. We go out. We have a pipeline of 200 to 300 startups.We whittle down to about 30, which then physically come into our space and pitch in front of our executives, in front of VCs, and in front of entrepreneurs. That’s the first element. So the startups that are selected have already been in contact with our board.

Second level, mentoring — we have a comprehensive mentoring program where there are, again, VCs, entrepreneurs, industry experts, and our executives. They take an active interest.We have a weekly schedule for the program, and we’ve dedicated Friday mornings to meet-ups with different teams [from] our group, where they can come. They can interact. They can discover. To do all this activity, I have one person whose only job is [being] the relationship manager between Lafayette Plug & Play and [the businesses of Groupe] Galeries Lafayette.

Measuring Success

I’ve put a couple of very simple metrics [in place] from an engagement point of view. How many people are coming? How many people are coming back? How many mentoring sessions do we run? That was really the basics.

We wanted to create engagement between this activity and the business. [So the] second level is the number of pilots that we run. To be honest, before running this program, I couldn’t put together any startup, however interesting it was, with the business.We’ve accelerated 10 startups, and out of the 10, in three months, we had three live pilots, which was an incredible success. Three is enough. My goal actually was two.

All of [the pilots] are still running, and actually, one of them is becoming a contract…

‘You’re Nuts. I’m Going to Fire You.’

I did [almost get fired before launching Lafayette Plug & Play.] Before getting it off the ground, I went to my chairman and I said, “My idea is [that] we run this program, [but] it’s completely open. It’s open to our competitors. There’s no exclusivity. It’s going to cost [this] much. Believe me, trust me, it’s going to create engagement. We’ll run pilots.” Obviously, the big goals that I haven’t talked about, [were that] we are really going to change the culture of the company. From an internal point of view, that’s the big goal, and it’s hard to measure.

At first, he said yes. Then he thought about it. He came back a few days later and he said, “You’re nuts. I’m going to fire you.” I said, “Hold on. Before firing me, give me another week and I’ll tell you exactly why this is a great idea.” I came back to him. Luckily, he didn’t fire me and he went for it.

A ‘Gear’ Between Startups and Corporates

There’s nothing wrong with starting your own [accelerator] program, but [servicing startups] is a job on its own. Don’t try to improvise it, because the startups will find you out very quickly. You’ll get B- and C-grade startups, not very interesting. Your business won’t get very excited, so it’s not going to work, irrespective of how much money you put into it.

It’s not about how much money you throw [at it], but the level of quality [and] service that you can put into it.If you want to join another program to interact with startups, I think it’s a great idea. Especially in the US, there are loads of opportunities. Plug & Play runs 10 programs across 10 different verticals. We’re associated with their brand in retail, but they run IoT, insurance tech, fintech. They’ve started food tech, media, mobility. They run a number of those, where they have multiple partners across the different programs. The great benefit is you get with your peers across other companies in your industry and other industries. It’s like InnoLead — you get to exchange ideas, share ideas, share experiences and best practices, and you create a community.

I believe you need a filter or a gear in between startups and corporates. Because corporates have scale, but they are slow. They don’t have speed. Startups have the speed, but they look to become big. What we think we’re quite good at is being this filter in between the corporate and the startup and sort of creating this safe environment. We understand both sides, so we allow them to talk in a way that they both understand.