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Re-envisioning industrial design simulation
13 January 2021
Interview with Dr Martin Schifko, Founder, Engineering Software Steyr
Winner of 2019 Pegasus awards in gold for “Most promising company in Austria” and US market “Start-up of the Year”, Engineering Software Steyr (ESS) has also been awarded considerable Austrian and European public funds. This is because the company’s approach and application of software to simulate the effects of wind, water and solid material, through a process known as computational fluid dynamics (CFD), is changing the face of industrial design.
Pressure to reduce carbon footprints in manufacturing processes as well as product design use is driving strong demand for ESS solutions. Founded in 2015 and situated in Steyr, Austria, the company already has a team of over 40 people from nearly 20 different nations working on the future of simulation. It also has subsidiaries in Poland and India.
4iP Council spoke to Dr Martin Schifko, ESS founder and CEO about the drivers behind his company’s patented innovations, their market and success and how ESS established its IP strategy with the support of Austria Wirtschaftsservice AWS, the promotional bank of the Austrian federal government and a 4iP Council ecosystem partner.
What inspired you to found ESS?
I founded ESS by buying out the rights to the software that I developed while working for Magna Powertrain. Magna’s business does not revolve around commercial software development and it became clear to me that to evolve my work as I saw possible, I needed to found my own venture.
What distinguishes ESS’s offering from existing solutions?
Until now, CFD has required considerable third-party intervention which can slow down the development process and hinder effective data interpretation because the person doing the analysis isn’t as close to the product as those engineering it. The solutions ESS creates and patents are more user-friendly so they remove bottlenecks by enabling designers and engineers to control simulations themselves. This means that they can apply their expert understanding of the design or process they are working on directly to the outcomes of the simulation, make immediate improvements and finally validate them by quickly re-running the simulation.
In the automotive sector, where our software simulation capabilities are highly advanced, engineers use it to develop car simulations without prototypes. They can picture the behaviour of the developed product before it is real and identify and understand the drawbacks. If you can see drawbacks early in a stage that is flexible you can fix them very quickly and cost effectively.
Who is using your software?
Anyone who is building something new. The software can simulate the effect of an earthquake or a flood on a building for example, or the effect of air flow on an object or in a room. It can be applied to both production and to object optimisation. For instance, the paint job for one car uses 600 kWh. Applying ESS software to the production process has enabled our customers to reduce this consumption drastically. Furthermore, with our new patented paintshop technology the energy consumption per car body can be brought down to 200 kWh. To put this into perspective, considering the current rate of global car production of 80 million cars per year, the energy saved will be equivalent to the amount of energy two nuclear reactors provide in a year.
Simulation of patented new paintshop technology
Audi, BMW, Daimler, include over 40 automotive manufacturers using our software today. It is also used by other industries such as oil, gas and mineral processing. Increasing pressure within these industries to reduce carbon footprints in product design, manufacturing and use is driving demand. Securing our future by developing and deploying applications that reduce Co2 emissions is an ESS focus.
What were your biggest challenges during and since the start-up phase?
In Austria, software does not have a value. This makes it very difficult to secure the boundary conditions necessary to operate. It feels like digitalisation is blocked on the question of valuing software. When talking to financial institutes about operating cost loans, the software property is valued at 0 EURO. The reason stated by the institutes is that in the event of bankruptcy it wouldn’t be possible to determine the value of a software.
The situation is different in Germany as credit institutes value software. They organise a superordinate organisation having the knowhow to evaluate software in such scenarios. In USA, the situation is even better, since the company value is mainly derived from the software. From my point of view, this is a global distortion of competition and the European Union needs to catch up, followed by all their members.
Also, with the CV19 pandemic we saw a negative effect of globalisation as business from Asia shut down from January followed by Europe in March. Since July, however, there has been a surge in our sales as customers are choosing ESS software as the new way to simulate.
I am a firm believer that everything bad has a flip side. Look at gender parity, for example, the increased level of home working empowers many mothers to remain in or enter employment.
How have the Austria Wirtschaftsservice (AWS) and other public funding organisations supported ESS?
The loan AWS gave us was key for the initial buy-out and because our field is high-tech we have been eligible for working capital. Also, AWS guarantees liability, helps to fund patents’ registrations and provides strategic advice. We also receive funding from FFG, the Austrian Research Promotion Agency, and from successful tenders for European Commission funds, including the Horizon 2020 programme which has awarded us over €1.5 million.
How did AWS support ESS and what advantages does this bring?
The AWS program was very helpful for the whole development of IPR inside ESS. We as an SME didn’t have the full awareness of all items and subitems related to this topic. Experts from AWS not only showed us the importance of a full IPR coverage, they also derived together with us a method how to implement. The AWS program further helps us to allocate resources to this topic, we couldn’t do without this program. The awareness of such instruments being implemented already create a well-being, because we know our protection is much better than before.
What has been your experience with intellectual property?
Registering patents for software is not straightforward, so we originally went for journal publications. We then began to bring in more linkages to the process making our innovations eligible for patents. Today, we focus on patents that support the reduction of Co2 emission or that relate to public health issues and we file in Austria using the Patent Cooperation Treaty (PCT) which give us flexibility. We have four approved patents and have registered a further 15. Recently, we founded a new company named Immune Technology Steyr (its2protect.com). This company exploits some of the registered patents. ITS focuses on fulfilling the vital requirements of the public health care system.
In addition, we have contracts around employer confidentiality as well as a system for data management with access rights. Recently, with support from AWS, we employed a dedicated person to focus on all aspects of IPR. AWS has also supported us in the development of a market matrix which helps with patent choices as it enhances our understanding of market potential and competitor landscapes.
How important is IP strategy to the future of your business?
Patents are a fantastic signal. We offer software solutions to support manufacturing and underlying processes. Patents show that we as a software vendor have a high technical understanding in addition to the capability to develop commercial software applications. They build trust. They also offer great potential for taking an innovation into the market through techniques such as licensing which is an area we are currently exploring.
Do you use open source software, and if yes, how are you dealing with open source licenses and protecting their IP?
We have ideas around open source and I believe the market needs better optimisation but we’re yet to embark on a project.
What market evolutions do you think are the most significant for the industries you serve and how does your work play into these?
Reducing the Co2 footprint is a main driver of innovations today. In this context, it is interesting to look at developments in electric cars. The Co2 footprint is centred around the run-time of the car, not the whole cycle from conception to end-of-life and after. There is a need to look more closely at how materials get recycled and reused. For me it isn’t yet clear how the cycle will work for electric car batteries. There are so many questions. Let us assume 50% of the cars on the street are e-cars. In 50% of the crashes e-cars will be involved and once they are burning it is getting tough, particularly if such crash is happening inside a tunnel. What will happen to materials like rare earth and certain other important minerals? Newest developments show that the life time and strength will soon achieve a feasible status, which is good. Safety and reusability still have a longer way to go.
Similarly, as our CMO Prof. Eslamian says, an A++ fridge is an indicator of energy consumption. Nobody talks about the loss of exergy. Energy is neither created nor destroyed during a process. Energy changes from one form to another. Exergy indicates the energy that is available to be used. Loss of exergy is an irreversible process. Though many machines of today claim even A+++, their efficiency from exergy point of view is a real disaster. If end users have more visibility of total life cycle impacts, their choices will be more informed from a sustainability standpoint. Companies are responding to today’s legislation.
What is your advice for other inventors and SMEs?
Be cautious of inventing without having had discussions with customers or if your dialogue is solely based on existing customers. I believe it is key to be in a dialogue with both the actual and future market. If you don’t do this, your ideas may not get market traction or arrive on the market at the right time. I’ve found it helpful to read regulation as means of alignment to the future.
What is your advice to policy makers trying to foster innovation?
Try to travel mentally 30 years ahead and look back. This will give policy making a completely different world perspective.
The views expressed in this feature are those of the interviewee and may not reflect the views of 4iP Council or its members. The purpose of this feature area is to reflect thinking on the topic of intellectual property and enable open discussion.