How Daimler’s Lab1886 Develops and Rolls Out New Businesses

By Kelsey Alpaio |  November 15, 2018

The invention of the automobile dates back to the 1880s in Germany, when several engineers were racing to create a new kind of personal transportation.

Among them was Gottlieb Daimler, who was employed at the internal combustion engine company Otto & Cie at the time. Daimler pitched an idea to his bosses at Otto: Why not build smaller engines that might open up new market segments? His idea got shot down, and so he left the company to create the first modern gasoline engine on his own. The company he founded is now known as Daimler AG, and headquartered in Stuttgart, Germany.

Susanne Hahn, Head of Lab1886 Global. © Daimler AG

“If Otto had an incubator in that time, maybe Daimler would have stayed within Otto,” says Susanne Hahn, Director of Lab1886 Global at Daimler AG. “That’s our story. We expect that all our 290,000 employees have innovation in their DNA, in their blood…We try to keep them internally and make [their ideas] bigger.”

That was the rationale behind Daimler AG’s Lab1886, the organization’s internal innovation hub launched in 2007. The vehicle-maker, which owns luxury car brand Mercedes-Benz as well as Freightliner Trucks, utilizes the lab to help explore trends in mobility, and take ideas from ideation to the marketplace. But Lab1886 isn’t just one space — it’s a network of offices built to help Daimler employees worldwide “ideate, incubate, and commercialize,” in Hahn’s words. The lab has locations in Stuttgart, Germany; Berlin; Beijing; Sunnyvale, Calif., and Atlanta, Georgia. Atlanta is the newest of the bunch, having opened earlier this year.

Hahn sat down with InnoLead to discuss Lab1886, how the company inspires and supports its employees to innovate, and why they chose Atlanta for the lab’s newest addition.


Ideate, Incubate, and Commercialize

Hahn says Lab1886’s innovation approach comprises three phases: Ideation, incubation, and commercialization.

“Lab1886 is an integrated company built with an end-to-end innovation process and hub,” says Hahn. “We ideate, incubate, and commercialize all the new business.” The ideation process happens in a few different ways, but it always starts by considering trends in the industry.

“Today, we are facing a lot of mega-trends like digitalization and globalization, to name but a few,” says Hahn. “All these technological and social regulatory movements will change the automotive industry in the next 10 years significantly, either if it’s…electrification or autonomous driving cars. We already have, within the Lab1886, a bunch of products and growth checks in place to find solutions in this challenging time to just get prepared for the future to come.” Employees can submit ideas based on these trends and challenges to the company’s internal crowdsourcing platform. They are then vetted on the platform by fellow employees, with the best ideas and suggestions being forwarded to the company’s “shark tank” panel of experts. If an idea is selected by the panel, it is sent on to the incubation phase.

“When one of our nearly 290,000 employees has got a great idea, which finally made it through a really tough selection process, the finalists are relieved from their normal line function, and are able to work 100 percent focused, with all the help they need and a perfect fitting team,” says Hahn. This “tough selection process” in the incubation phase puts ideas and the teams behind them through various feasibility and scalability tests. During this phase, the teams are also given coaching, co-working space, and funding to develop prototypes and pilots.

Daimler Trucks North America, located in Portland, Oregon.

The final phase is commercialization, where ideas that have made it through the incubation phase are either transferred into the appropriate line of business or spun off into their own companies. Hahn says that the original ideator also has the potential to become the CEO of the new company. “For those who don’t make it to the CEO [role], it is just a great learning as they [now have] a full-packed backpack of entrepreneurial spirit, and act like, hopefully, an ambassador in their line function to also bring that pioneering spirit into the corporate world,” says Hahn.

Incentives to Participate

Hahn says that although they do offer cash bonuses for individuals and teams that make it through the incubation phase (tied to various KPI’s and measurements), money is not the main motivator.

“Just to work with 100 percent focus, with all the support they need within our lab, not getting disrupted or distracted by the cost-efficient programs, or political issues, which you normally have in a corporate environment,” says Hahn. “You just can work with 100 percent focus on your idea. That should motivate the right people.”

Metrics and Successful Projects

One of the campaigns Lab1886 ran on their internal crowdsourcing platform was called the “100 Million Challenge.” Hahn says the name aimed to give a glimpse into the the size of idea they were looking for.

“It could be a hundred million in revenue, a hundred million new customers, a hundred million clicks… just to give them a hint to think beyond several borders,” says Hahn.

The challenge targeted 160,000 employees and attracted more than 900 ideas from individuals and teams across the organization. After allowing employees to vote for their favorite ideas on the platform, three employee-chosen projects were moved into the incubation phase, along with three others selected by Hahn’s team. She said that there are currently 30 projects running in parallel in the lab.

How does her team measure the success of these projects? Hahn says they have a list of more than 77 measures that fall into four categories:

  1. “This first one is to show the economic potential, the business case, market economics, funding requirements…” such as “When should [venture] capitalists also assess the projects?” and “Is it valuable?”
  2. “The second is, is it really feasible? Is there a draft of product? Do we have a road map? Are there potential prototypes to come up with in a few months?”
  3. “The third thing is, is it desirable? This reflects our customer’s needs. For example, the value proposition, customer friction, and also the question, ‘Why should we enter this new market segment?’ In this part, we check the competition side. Is there a startup that is much further in the process, and maybe [working with them] is better than building it on our own?”
  4. “The fourth part is the right to play. This reflects strategic questions. For example, ‘Is the idea somehow linked to the strategic agenda [and] timeline? Does it really fit into our environment? Does the concept, for example, allow us to tap into desirable customer segments or markets and so on?'” 

Volocopter and Car2Go at the grand opening of Lab1886’s Atlanta location. © Daimler AG

Using these measurements, Lab1886 is able to determine whether an idea is best integrated into a business unit, spun out as its own company, or if a partnership or joint ventures is the ideal route.

For example, one company that has spun out of Lab1886 is Car2Go, a peer-to-peer car sharing platform. The platform became its own legal entity in 2008, and now has more than 2.5 million customers. Another project, a travel optimization app called Moovel, was also spun hatched at Lab1886 and spun out.

One external partnership Hahn mentioned was with the German startup Volocopter, which is helping Lab1886 explore the world of urban air taxis and vertical takeoff vehicles.

“This is a completely new market segment and, of course, we do not have that technology within Daimler,” says Hahn. “The partners, the team, and also the technical points convinced us to go in much closer collaboration together with [Volocopter].”

In terms of projects that are integrated back into the business, Hahn mentioned an idea regarding the way auto parts are reconditioned and resold, which is environmentally and economically beneficial for the organization. This idea was integrated into the global sales business, and Hahn says it’s been profitable.

Why Atlanta?

With the newest addition to the Lab1886 network, Hahn said Atlanta was a natural choice.

“Atlanta is one of the major hubs,” says Hahn. “It’s just a perfect location for us to connect to different regions, persons, and trends.” It’s also the location of Mercedes-Benz’s USA headquarters.

“The city is packed with talent,” says Hahn. “It’s absolutely a rising star for tech talent. …It has a thriving startup culture… Over 230 new companies were produced alone out of the pipeline of Georgia Tech, for example. That’s very impressive. It’s rising. It’s growing. On the other hand, it’s also very international and [a] corporate-friendly environment.”

With organizations like Coca-Cola, Delta Airlines, Home Depot, and others located in Atlanta, Lab1886 is in good company.

“The pioneering spirits of the startup world and the established resources [and] infrastructure of the corporate side makes it really so perfect. It reflects, also, our motto at Lab1886 that we want to utilize and develop the best of both worlds,” says Hahn.

Hahn also described how the different labs across the globe interact and share insights. She said it’s useful to have these labs in different markets, as each location can move forward with locally-relevant projects.

“We globally bounce ideas [around], and exchange knowledge and learnings,” says Hahn. “We also do people development. Our motto is to act like a family in giving a helping hand. When tech talent is needed, for example, in Atlanta, we can maybe help with tech talent which we send over from Berlin, or the other way around. This creates a highly-effective innovation network.” But in addition to attracting new talent and creating connectivity between the labs, Hahn says that it’s important to stay “really strongly focused on results.”