Q&A With Cogniac | SAP.iO Interview Series

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January 4, 2021

Rheaply’s VP of External Affairs, Tom Fecarotta, met with Vahan Tchakerian of Cogniac to discuss their organization’s mission and involvement in the SAP.iO Foundry Cohort.

This is Part 1 of 3 in Rheaply’s discussions with other SAP.iO cohort members. Read the other Q&A’s with Ivaldi and Wise Systems

Cogniac Q&A

Tom: I’m going to steal this first question from an investor who asked us this. Give me the high school version of the boilerplate and the version for a college student who maybe knows a little bit about AI.

Vahan: I always try to simplify things down. So we know our business, right, but when we introduce it to a new set of people, it’s always like, “what is AI?” Because AI is so universally used — everything is about AI today. For our purposes, we offer an AI platform — a software platform — where we’re working with a combination of neural networks and a deep learning component to automate visual inspection tasks. So anybody doing any sort of inspection is a candidate to use our solution. What’s really beneficial about what we do and how we do it is we’re offering a superhuman level of accuracy in work. In today’s world, inspections and products are super complex — at this rate, humans are missing stuff. We’re not only able to catch these things but catch them quickly, so we are really preventing any sort of downstream failures, etc. — that’s one of the benefits, along with more efficiency.

Tom: James, anything to add to that?

James: No, as Vahan mentioned, it’s going above and beyond what a human is currently capable of — that superhuman aspect is one that we tend to focus on. It’s a game-changer in the visual inspection world because it’s doing so much more at such a high level and operating at such a high degree of accuracy that it’s going to fundamentally change visual inspection and the AI industry within the manufacturing verticals we work in.

Tom: Yeah, that’s really interesting. Talk to me a little more about the application itself. Walk me through the use case for an end user and what that experience looks like.
Vahan: Sure. What we’ve tried to do is make the engagement super simple, to the point that there are no data scientists required — it’s literally technician-level work. Let’s say I’m talking to a potential customer — they have a subject matter expert on a given use case, and what the subject matter expert would need to do is label a few images. In traditional machine vision, somebody would be required to label tens of thousands of images, if not hundreds of thousands; in our case, it’s a few hundred images in what we call established ground truth. Everything we do is teaching with examples, right, in the simplest form. 

Let’s say we’re looking at a cast part — there’s a good part and a bad part. We have to have enough examples of a good part and a few more of a bad part to establish the ground truth of what that looks like. Then we upload that in our platform and the platform starts to make predictions against that data. So consistent labeling is key, and also key is having enough of a dataset of images where you establish ground truth to get the engine running through what we call AI creating AI. So then we look at these predictions, and the subject matter expert says, “You know what, this is kind of close, this is not close,” and so forth. Then there’s some fine-tuning back and forth between the subject matter expert and our platform, and within a couple weeks you’re looking at 95, 98, 100% model accuracy. So that’s the benefit of getting there really quickly, and if you’ve gone down the wrong path, it’s really easy to re-establish yourself and how you do your labeling.

Tom: Is this set into a maintenance system or some kind of internal system that can tell users about the health of item within a warehouse? What does the integration set look like?

Vahan: When we find something that is outside of the norm or there’s an issue, we would send an alert in any way the customer would want to see. Our platform is cloud-based or can be on-prem. Most of our customers are in the cloud. With a cloud solution in a manufacturing environment where someone needs super fast response, alerts — under a second, for example — then you would incorporate what we call an edge appliance. This edge appliance is basically doing the processing of the application at the edge — and if it finds something that’s outside the norm, it can send an alert to any user in any form that’s needed.

Tom: Wow, that’s really cool. I think we’re similar in the respect of wanting to make the process of finding things and understanding their utility easier, and in your case, you’re also working to determine what is potentially needed to improve a particular asset for people. And I think that’s really interesting.

This is a perfect segue into sustainability. 

I’d love to know how your company plays a role in sustainability – and are you partnering with other organizations that are thinking about maintenance as a way to feed into circular-focused technology?

Vahan: Sure, I’ll start off. We ask ourselves this question as well. From a sustainability perspective, when you’re reducing waste, it’s good for the environment, right? So, again, in the businesses we’re involved in, we’re catching problems early on. Let’s talk about an automotive case — for example, there’s a given part of a car, say a door panel. If you don’t find the defects on this door panel, you’re now using a defected part down the manufacturing line. Sometimes if you catch it a little later, maybe at some point you can do some rework, right, but if you don’t catch it in time or can’t rework it, you end up scrapping vehicles, which is just wasteful in itself. So we reduce waste. We’re increasing efficiency in manufacturing, we’re addressing defective materials early, so we feel like our technology is really helping companies get more efficient and not have as much waste.

James: I think that’s the perfect example in the automotive space. As Vahan said, if a defected part moves down the line without being identified, there’s additional manufacturing, additional work, and additional energy that go into physically moving that part along the line. By catching that earlier, it’s helping drive sustainability and minimize wastage. I’d say minimizing wastage more so than driving sustainability is where Cogniac plays at this moment in time.

Tom: That’s really interesting. I would imagine, too, that re-manufacturers and material recovery facilities would be really interested in your platform because it could help them understand exactly where assets are within the value chain, what’s defective, and if something is defective, how to feed it into another system, and so on… this whole “Right to Repair” movement is so critical, and I think what you’re doing is in direct relation to that. Is that an area that you guys are looking at right now?

Vahan: What we look at is your ability in the manufacturing process to go after the low-hanging fruit first. For us today, the low-hanging fruit is this general industrial section and manufacturing section. Now, there are tangents to that, because let’s say we bring on a customer, which we have, in the mill industry, processing wood and so forth, where one of the applications is grading paper for recycling processes. So they buy bulk paper and grade it on a scale of one to 10 — we make it easy for them to grade things that need to be recycled and determine how they can use a given product, let’s say from all-white paper to very dark paper and things in between. Vision can be used in a variety of ways, the key being to get a good image, or a good enough image, to be able to discern or make a prediction against a given asset.

Tom: That’s brilliant. What we keep hearing in circularity discussions is mass balance and understanding how to incorporate extended producer responsibility into the supply chain — the value chain. In the product lifecycle, what the best application for a given resource, and why? In your case, it’s about understanding where the potential defects and opportunities for maintenance are.

Bharani: Yeah. Vahan, one thing I was thinking about is how the biggest thing for us as we decommission assets or move assets to storage, there’s a lack of data in terms of what maintenance looked like previously vs. what triggers we need to consider when we’re putting it back into reuse. We were thinking down the road with Cogniac that could be a potential partnership — having this AI technology could help give that data, because it would be inspecting things and indicating when a part, or a part of the equipment, is getting more defective as it gets to its third, fourth, or fifth usage. That data would be super valuable for this circular initiative.

Vahan: This is the fun part of collaboration and these cohort programs. These great companies are all focusing on their bits, and then in the cohort programs, you can’t but start making these relationships, and, out of those, 1+1 could equal 3. So, you have something great, we have something great, how can we combine those two to deliver a different solution in itself, right? For me, that’s what’s so exciting about being in accelerators and working with a lot of new, innovative companies. The key is you have to love innovation.

Tom: Absolutely. I’m even thinking about synergies related to carbon offsets, CO2 equivalency, and the fulfillment process. If we’re able to rescue an asset within an organization from the landfill and it’s recirculated in some manner, people want to know what the sustainability impact of that was. Historically, what Rheaply has done is illuminate the value recaptured, the waste diversion impact, but going into greater detail on what that means from a CO2 equivalency standpoint is something that we’re really interested in, and likewise, we want people to make procurement decisions with as much knowledge as possible. If they know this was last addressed on a certain date and has these defects, and maybe there are things related to the asset that would potentially lend itself well to a different application, or maybe a different user group, that could be a huge benefit.

I’m going to flip back to SAP for a second. How did you find out about the SAP.io NY Foundry, and what led you to apply to become a part of the cohort?

Vahan: We’re an investor-backed company — we just completed our Series B. And in the process of going from Series A to Series B, we were actually introduced by one of our investors to SAP’s investor group. Nothing materialized there, but SAP got interested in our solution and wanted to see if we wanted to be part of this cohort innovation program. One thing led to another — we’ve been part of other accelerators, and they’ve been a great source of qualified leads and so forth, so we thought partnering with SAP was a no-brainer. And there’s a vast channel there available to us. Of course we all have to work it, right — results are not going to come automatically — but there’s a lot of fit between what we do and what SAP’s typical customer might be. So that’s how it came together, and it actually came together pretty quickly.

James: Just to add on to that, given this cohort cycle’s focus on underrepresented founders — obviously Amy is a female founder in tech — we felt a really strong pull to get involved.

Tom: Absolutely. Yeah, I know that was a priority for this particular cohort. That’s really interesting. If you don’t mind me asking, Vahan, can you tell me a little more about the stage you’re at in terms of financing? 

Vahan: Yeah, so we just closed our Series B — we just raised $10 million, so to date we’ve raised $20 million. And we would expect that in maybe 12-18 months, we’ll have another, much larger raise. At this point what we need to do is to scale our customer-facing group. To date, it’s just been me and one other business development person, and what we want to do now is go geographically, globally and find the right people in the right space that are domain experts and tackle areas where we’ve had success and increase that success. So once we get to a certain level of revenue, that will help us expand further, go to a Series C round, and really put the company on afterburners, if you will.

Tom:  Do you have a wishlist of products, feature updates, partnerships, or other things you’re hoping for for Cogniac in the future? I know you mentioned growth and finding those niche markets, but where do you see the company going a few years from now?

Vahan: I think the key for us is more feet on the street, first of all, so we can get more wins. So, for instance, we’ve had success in rail, in automotive, in warehouse management, and so forth — how do we now increase that? How do we turn one customer into 10 in that same vertical? And that also allows us then to start diving into other markets we maybe have not addressed yet. 

The other one is that with this funding we would get more developers, so we would start looking at additional applications or accelerate applications that are already on our roadmap to deliver more quickly. So this additional funding just helps things go faster.

The key is focus, right — when you’re a small company doing something well, stay focused and don’t get distracted by the shiny object, because every day you’re going to see a shiny object. If you’ve got a good path to a good solution against something that you’ve proven that works, stick with that — of course, if an opportunity that’s really compelling presents itself, you have to look at that, but the key is to stay focused, because that’s how you consistently have a good foundation and grow from there.

James: Something mentioned to me the other day by Amy or possibly Chuck is this ability to really productize what Cogniac is delivering — at the moment there’s a lot of independent pilot studies, which I’ve seen lead to client studies now. As Vahan mentioned, there’s a couple great case studies and great clients in automotive and rail industries. Now we have a product that works for the auto industry — let’s go and hit that hard and once you penetrate that — as you guys know, the hardest thing is getting through the front door and getting to the decision makers — once we’re in the front door, let’s go sideways and let’s start to push Cogniac technology not just into one factory but into 10 global factories. So really start to focus on the productization of the industry that we’re in; and then, now that we’re building a nice foothold into four or five key industries, let’s start to look at what the next industry or next situation of the technology should be, and what does that unlock for us. That feels like the direction the business will be going in for the next 12 months.

Tom: Really interesting. As we were talking, I was thinking of a question we asked Wise Systems  — how have you guys thought outside the box in terms of keeping engagement up, keeping things light and fun for the team during the pandemic ?

Vahan: It’s hard, right, all of us have been working from home since March, when we have an office in downtown San Jose — in fact, we just took on a new office with more space for the growth we’re experiencing, but we don’t expect to be working there until late spring at the earliest. But all of us are working from home — in the software world, you have the luxury of being able to contribute individually. From my perspective, I’ve been in the sales world for 25 or so years, and I haven’t been on a plane in eight or nine months, and it’s so strange. It’s tough to not be able to build those personal relationships. At the end of the day, it’s a Zoom call — you start, you end. It’s very tactical, task-oriented. I miss being in front of customers and really seeing their plans and so forth. It’s been challenging, but we get together as a company weekly at a minimum and share stories and what we’ve been doing. COVID has certainly hurt everybody in this process. By now I would have made at least two trips to the UK by now, had a chance to sit with James and Rich, break bread, have some laughs, and build the relationship in a different way — our relationship has been a Zoom relationship, which has been great, but that extra bit of seeing people face to face is something I really miss.

Tom: You mentioned, James, productizing — 2020 has been Rheaply’s year of coming up with different ways of thinking about how assets move from one building to another, and even the way we position buildings and the nomenclature on the platform. It’s been an opportunity to catch our breath and see what we want this platform to look like in 2021 and beyond, so it seems like you guys had a similar year in that regard.

James: Yeah, and I think companies really need to focus on where they can drive value out of new tech. Technology and innovation shouldn’t be seen as a cost but as a value driver, and I think that’s really interesting, because if you take some of the industries Cogniac has been working across, they’ve been hit quite hard by the pandemic. The auto industry has been hit quite hard, car sales have gone down across the globe, so you would expect car companies to be in a mindset of “We’re not selling as many, so let’s cut back and save our overhead,” but actually if you can really focus on the value that you drive as a business and as a software and as a service, you can still make those sales. And actually it’s a really interesting conversation to be having with people right now, because if they can drive value, make savings, and find efficiencies in the current market, when things return to normal in 12, 18, or 24 months, that value and those efficiencies are only multiplied. And there’s huge savings to be had in time. So I think for us, and for you, it sounds like, it’s a really interesting space to be looking at. It’s now when companies need to be focusing on driving value and finding efficiencies. In a downturn, it’s more important than in a cash-rich economy.

Tom: Absolutely, especially with the state of supply chain management. It has to be done. According to McKinsey, the typical consumer company’s supply chain creates much greater social and environmental costs than its own operations. Supply chain impacts account for more than 80% of greenhouse gas emissions and more than 90% of the impact on air, land, water, biodiversity and geological resources. Given the material complexity of today’s products, if you’re single sourcing from one country, there’s too many leakage points, too many causes for concern along the value chain. You have to be thinking of the utility of parts and components or rerouting those items, because the shares of the material have a stronger value in certain locations than in others.

James: Thinking of your technology solution, because you obviously are focused on the circular economy and minimizing waste and improving all aspects of warehousing and everything else, are you finding that having that purpose-driven company is becoming more important to clients you’re working with and ultimately the clients they’re working with? I think there’s been a fantastic shift in the last five years, let’s say, towards people genuinely recognizing sustainability and “the green agenda,” let’s call it, to bucket it as one. But actually the companies that are putting it at the heart of what they do are really starting to move forward. The value in those companies is really starting to track an upward trajectory. I’m interested to see if you’re finding that a rich vein and if you’re finding that your clients and your clients’ clients are demanding this type of service within that.

Tom: Yeah, if you just follow where the money is going — I mean, there’s been a 10x increase in funding for circular economy initiatives in the last four years. The biggest companies in the world are talking about implementing circular targets either by 2030 or 2050. They’re going beyond carbon neutrality in some cases and talking about carbon-negative solutions and what they can do to pull carbon out of the atmosphere. You either recognize that there’s an issue and do something about it, or you continue doing business as usual, but I think you’re going to see that the companies who have been operating by the “take-make-waste” model will eventually be on the other side of innovation. 

James: And you become irrelevant if you’re not doing something about it. You won’t be in business.

Tom: I really do believe that. I appreciate you guys walking us through your technology. I think what you’re doing is really interesting — I’ve personally heard users say, “If we only could tell us what the long-term utility of an instrument is” I think there are certainly opportunities to collaborate. I hope we can continue this conversation.

Bharani: Yeah, it was fantastic, and thank you for taking the time.

Vahan: You’re too kind — thank you.

Guys, really appreciate this exercise. It was fun. Keep the channels open and let’s see what this SAP engagement yields for all of us. 

Tom: Thank you, guys.

This is Part 1 of 3 in Rheaply’s discussions with other SAP.iO cohort members. Read other Q&A’s with Wise Systems and Ivaldi.

About Rheaply

Rheaply was selected to be a part of SAP.iO’s Fall 2020 NY Cohort to help further drive innovation in the procurement and supply chain industries. Rheaply’s Asset Exchange Manager (AxM) is working to integrate with SAP products and be available on the SAP marketplace for existing customers to utilize. Through this platform, existing SAP customers will be able to start implementing a circular economy within, and outside, their organizations.

Rheaply’s partnership with SAP is just a small step towards the United States realizing the potential $630 billion dollars in savings.

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