Innovation. Over the past 30 years, NorCom has had to overcome many difficult situations. But every time, founder Viggo Nordbakk succeeded in reinventing his company. Now he wants to shake up the automobile market with Big Data software.
Data is the oil of the future. This guiding principle of the fourth industrial revolution applies particularly to the automotive industry. "The amount of data generated by today's vehicles is enormous," explains Viggo Nordbakk, CEO and founder of the Munich-based company NorCom. "When a company tests a vehicle, it often incorporates several thousand sensors. They provide a wide range of measurement data, such as the temperature of the lubricant, the engine, the brakes and much more. In a test like this, 30 gigabytes of data are generated after eight hours of driving."
However, if autonomous vehicles are to be tested, the data volume reaches a completely different dimension. "Then you can multiply that by a factor of 2000."
No question - who is able to control these enormous amounts of data opens up a huge business potential. Viggo Nordbakk wants a big piece of this pie. "We have invested many years of development work in our software products EAGLE and DaSense, which can analyze such amounts of data. And have a few years ahead of potential competitors."
Nordbakk has been seeking this lead ever since NorCom was founded in 1989: "In fact, our developments have repeatedly enabled us to open up new markets ahead of all others. This enabled us to generate good sales and profits there. But there have always been changes in the market, so we have always had to look for new topics and ideas".
This is one of the reasons why the entrepreneurial history of Viggo Nordbakk is so interesting. It started in the mid-1980s. At the time, Siemens was desperately looking for engineers. Born in Norway, he began working for the company in the Munich research laboratory. But his existence as an employee did not make him happy. "After three years, it was clear to me that I wanted to start my own company."
So he quits and takes part in a worldwide competition. It is about developing a concept to connect all computers of a network to a homogeneous system. "Actually, it was the beginning of the Internet and the dawn of a new era." Nordbakk is the only one from Europe among the winners. The really remarkable thing about it, however, is that it gave him access to all the proposals submitted. "It was a gigantic amount of documents, about 50 meters of folders, through which I worked my way through. But it was worth it. In the end, I was able to develop a concept that made it possible to build a unified network from many computers with different systems."
With this idea in his briefcase, he now sets off in search of a customer - and finds him at Dresdner Bank. The bank pays him one million marks - and Nordbakk founds NorCom, hires employees and begins building the system, which must also meet the highest security standards. "After a year, we were able to install our middleware DAP, as we called it, on 40000 computers at Dresdner Bank worldwide.
It's a first big success. And one who not only opens the door for him to other banks, but also to public administration - especially to the Federal Labour Office, which is still one of his biggest customers today, and to the tax offices in Germany, of which he soon equips 70 percent with his software.
It's on at NorCom. In 1999, sales amounted to 14.7 million euros, operating profit amounted to 2.2 million euros and growth was in the three-digit range. In fact, things are going so well that Microsoft wants to talk to the Munich company. "But my employee, who had taken the call from Redmond, simply refused and only told me two months later," recalls Nordbakk, who is still clearly annoyed today.
Maybe it would've been a big chance. Maybe a big risk, too. In the meantime, the entrepreneur has founded a joint venture with Dresdner Bank. "It was about developing new applications for our middleware. That was a very good deal for us. They paid for the development for ten years. And we were also allowed to sell the one or the other product that came out of it to other banks." This sounds so good that he decides to float NorCom on the stock exchange in order to contribute capital to the joint venture and hire enough employees.
In the midst of the euphoria of the Neuer Markt, in October 1999, the company goes public. The share price rises rapidly from the issue price of 19 euros to 155 euros. NorCom is now suddenly worth over EUR 1.5 billion. But then the New Economy bubble bursts. Although NorCom managed to double its sales once again in the year following the IPO, tech enthusiasm has evaporated. In the following economic downturn, many investment projects are put on hold. There is also a special problem for NorCom: Dresdner Bank will be taken over in 2001. "But the buyer, Allianz, had his own ideas about what the IT at Dresdner Bank should look like. And we were out," Nordbakk remembers.
This is a challenging situation for the entrepreneur. He has built up a huge cost block, like many other new market companies made expensive acquisitions - and now sales are collapsing. NorCom's figures continue to be in the red, with a minus of EUR 3.6 million in 2003. The restructuring measures initiated did not take effect until 2004, and Nordbank's companies again achieved a small plus. Although he still benefits from consulting and ongoing maintenance contracts, the growth fantasy is lacking. That's not what investors expect from a tech company. At the end of 2004, the share price was only 2.39 euros, the company was worth 17 million euros - only a fraction of what it had weighed a few years earlier.
Viggo Nordbakk urgently needs a new field of activity. He benefits from the fact that he still has a comfortable liquidity cushion from the IPO. "We saw then how the Internet and digitalization were changing the media houses and television in particular," he recalls. "So we took over MaxiMedia Technologies GmbH and started developing an editorial system for the digital production of television programs, a kind of office program for television." This made it possible to plan and control an entire programme with everything that goes with it - text, video, teleprompter or even the light. NCPower, as the product was called, was a success. It is not only used by German broadcasters, but also successfully distributed worldwide - in Russia as well as in the Near and Middle East.
The whole thing has one catch: "It was a comparatively manageable business." For medium-sized customers, it is not about 40000 computers as at Dresdner Bank, but about 40 or 50 workstations that are equipped with the software. "At some point we had most of the television stations under contract, but the media houses themselves were also short of cash. It was too little to live and too much to die." Again the growth fantasy is missing.
The year 2013 will be tight. Turnover is now only around 18 million euros, half as high as in 2010. The shortfall amounts to almost four million euros, and the formerly lavish liquid assets have melted together to around 1.7 million euros. The share price stands at just under 1.60 euros. The market capitalisation is only a modest 3.5 million euros. Now Nordbakk must act urgently. If he doesn't manage to breathe new life into his company soon, he will probably lose it.
The big thing of this time is Big Data. With the spread and increasing mobile use of the Internet, data volumes are also increasing. "Even though it wasn't economically very successful, our trip to the media sector showed us that we can handle such large amounts of data," explains Nordbakk. Finally, NCPower also included functions for editing videos: "This requires an enormous amount of computing power. At the same time, our software allowed many editors to work on one video at a time, so it was basically a big data application."
At this time Viggo Nordbakk is in contact with the car manufacturer Audi. "Actually, we wanted to sell NCPower there. All over the world, when a new vehicle arrived, the company's editors should be able to access and edit a video at the same time. And this with the highest safety requirements. But then someone asked us if we could do something similar for a few 100 million documents. So it's a kind of document management system, but it's backed by artificial intelligence."
The background: Employees spend between 15 and 20 minutes every day searching for documents. This costs the group around 60 million euros per year. Nordbakk's task was to develop software that reduced this search time to milliseconds. "You can do this by having a hundred or more computers search in parallel. In addition, this can also be personalized. The system remembers who is searching and adjusts the results accordingly."
If, for example, an engineer is looking for an airbag, the computer will offer him a different priority list than an employee in the legal department who is searching for documents on the same subject. "This is nothing more than machine learning," Nordbakk makes clear, "we have developed an algorithm that is capable of understanding and interpreting a document."
Nordbakk and his team spend four years on development. The result is thev document management software EAGLE, with which he can assert himself against IT groups such as IBM or SAP and which he will successfully install at Audi in 2017. The contract is expected to cost around five million euros. "But we're still in the project phase there." Currently, the carmaker has installed a team that collects employee requirements and passes them on to NorCom, where they are implemented. "Through this project we have a paid development for the coming years and a reference that hopefully opens the door to more customers.
But since standstill in the tech business means regression, the NorCom founder simply developed this idea further. "We thought that we could simply transfer the basic idea of EAGLE to measurement data. After all, it doesn't matter whether it's about documents or temperatures or something like that." EAGLE becomes DaSense. "With DaSense, we are able to evaluate data collected during test drives in Dubai - on site and in about 20 minutes," explains Nordbakk. So far, things have been quite different: "The data was sent to Germany by plane and only evaluated there. If something was wrong, it may have been determined days or weeks later. Then the tests started all over again. It took time and a lot of money."
The data abundance is no problem for DaSense. "The more data, the smarter the machine and the more likely we are to find anomalies."
It seems as if he has once again hit the nerve of time with his product. Daimler wants to use DaSense in its entire development department. "This was, of course, a kind of accolade for us. We hope that this will also make us interesting for other car manufacturers." Then the business could be quite lucrative for NorCom. This is because the company not only receives a rental fee, but also a payment that depends on the amount of data.
Just like 20 years ago, the atmosphere at the company's Munich headquarters is now once again in a mood of optimism. This was not hidden from investors on the stock market. Over the past three years, NorCom's share price has risen from just under EUR 4 to over EUR 66. The company value climbed from eight to 130 million euros. After a turbulent last half-year, the stock is back at around 20 euros.
One important reason for the strong ups and downs could also have been speculation about a potential takeover. "Of course, our technological development awakens desires," Nordbakk reflects. "Companies from India and China, in particular, keep asking us." But a sale was never an option for him. "I still control about 30 percent of the capital. However, this is not protection against a takeover. That's why we converted the company into a GmbH & Co KGaA."
It's a smart move for the entrepreneur. In the course of the transformation of legal form, Nordbakk Investment GmbH, whose sole shareholder is Viggo Nordbakk, will join the KGaA as general partner. Although it does not hold an equity interest in the KGaA, it will in future take over the management and representation of the KGaA. In plain language: Thanks to this construction, Viggo Nordbakk remains the unrestricted master of the house.
He accepts the fact that some shareholders who had hoped for a takeover do not like this, as does the associated slide in the share price. "I'm focusing on finding new customers for my products. Then the enterprise value will also rise again", Nordbakk makes clear. After all, a partnership with AVL List GmbH, one of the most important automotive suppliers worldwide, was announced in October of this year. However, NorCom does not yet have any estimates as to how high the potential sales of this project will be.
One problem remains: "We are not really a sales and marketing company, but an innovative technology company," admits Nordbakk self-critically. A future strategy would therefore be to work together with a sales partner. "This could work by developing the platform, having a technology partner take care of the customers and implement the custom applications."
Although Viggo Nordbakk does not want to comment on the sales potential of his company, he spoke at the Annual General Meeting of the fact that the automobile companies would come to a data volume of several 100 petabytes in the coming years. A petabyte is 1,000 terabytes.
How much Norcom can cut off from this big cake is not predictable. According to the industry association Bitkom, over six billion euros are turned over annually with Big Data software in Germany. Since NorCom already has its foot in the door at Audi via EAGLE and at Daimler via DaSense, annual sales approaching the three-digit million mark in the long term do not appear unrealistic.
It is not impossible that Nordbakk will reinvent his company on the way there. "I find the blockchain incredibly exciting," he says with sparkling eyes. "Imagine how it's going to go in the future: You have an autonomous vehicle with production costs of 40000 Euro. This must now earn money to recoup the costs for the fleet owner. It can, for example, give other vehicles the right of way for a small fee. The basis on which this happens is the blockchain, because machines can conclude contracts with each other in this way. I'd dare develop the necessary software to do that." ®
Author: Gerd Hübner