How innovation labs help in the digitalization process

Many large corporations like to partner with start-ups that enrich their business with new ideas and services. Whether product management, customer communication or marketing and e-commerce, the areas in which start-ups bring a breath of fresh air to companies and generate added value are diverse. However, these partnerships are not always easy. One side consists of a company, in which employees sense competition and have “always done it this way”. The other side consists of start-ups that often run into obstacles with their highly agile way of thinking in large companies. Digitalization hubs and innovation labs can be places for these two worlds to meet. We asked Christian Lindener, CEO of Wayra, the Telefonica Group’s innovation lab, how this works best.

DMEXCO: When start-ups work together with large corporations, there are often frictional losses. How do you best reconcile different mentalities and corporate styles?

Christian Lindener: First of all, it is important to clarify the expectations of all sides: What are the benefits for the start-up and what are the advantages for the corporation? Do both parties have clearly defined goals and are there any suitable structures to facilitate successful cooperation? This primarily applies to the corporations, but the start-ups also have to be sure they are truly “corporate ready”. These issues must be clarified in advance. The start-up then needs a unit that brings it to the decision-makers and budgets in the corporations and protect it in this way.

DMEXCO: Your start-ups extensively work with agile processes. Do you still have to do some persuasion work at Telefonica, or have the major corporations learned this by now?

Christian Lindener: It is our daily bread to present what is new to companies again and again, to convey the advantages and to make it clear to them why start-ups work the way they do—even after seven years. They don’t learn this on their own, but we can convince them with fascinating examples.

DMEXCO: What kind of products or services have already emerged from the cooperation? Can you name one or two concrete things and explain the benefits?

Christian Lindener: A good example is the Lisa chatbot, which automatically answers 70 percent of all customer queries via an AI platform and thus relieves our hotline. Our current focus for Lisa is on solving service issues and making customer interaction smarter. In the process, we are gaining experience and closely observing what our customers want. Or the start-up ebot7, which we were able to scale via the O2 brand. Here, too, the focus is on the use of artificial intelligence, automated query resolution, and process workflows using machine learning algorithms. We also have some disruptive projects in the pipeline. We’ll be talking about this very soon.

DMEXCO: What are KPIs or how do you measure whether a collaboration between Telefonica as the “customer” (that’s how you describe it on the website) and the start-up is working well?

Christian Lindener: Well, on the one hand it’s about hard cash. We measure how successful a partnership ultimately is based on sales figures, savings and new products. At the same time, we observe the parameters that are difficult to measure. These include how successfully we build and operate an ecosystem and a community within the framework of the partnership, and what the ultimate appeal of this ecosystem is.

DMEXCO: In your experience, how do digitalization projects work best? What are the recipes and tips for companies, and what are the key factors when it comes to cooperation between the partners?

Christian Lindener: In my experience, a well-prepared process is crucial for project success. Projects must be selected sensitively and based on criteria such as possible impact and the chance of realization. It is also important to have a balance in terms of the maturity or progress of the different projects. In the end, a clear and courageous decision must be made: termination, scaling or spin-off.

DMEXCO: In the Capital Ranking you were recently honored in particular for being able to scale digital concepts and projects quickly and sustainably—for making them big and successful. How does this work in concrete terms?

Christian Lindener: At a very early stage, we start defining the right fields of technology for the company group. We have developed our own processes for this as well as a team that specializes in thinking differently. This combination ensures speed. At the same time, we have an excellent and resilient network of investors, ecosystems and other vehicles to identify the best start-ups. And then we push our company group to top speeds without losing sight of our goal. We scale the start-up via our various regional companies. However, we are not afraid to terminate projects prematurely if they do not meet our expectations. All in all, we’re generating cash for the company group… a lot of cash.

DMEXCO: Speaking of regional companies: Wayra is active in ten countries, which makes it one of the rather rare international digitalization hubs. Do you have any insight into the differences between mentalities and markets?

Christian Lindener: Yes, of course, there are big differences. We are talking about completely different ecosystems, each of which work differently. In Germany we have a very mature start-up ecosystem and good universities that produce outstanding companies. We are particularly strong in the B2B sector here. Brazil, on the other hand, has more than 200 million inhabitants and is one of the emerging markets with catching up to do—a huge market for B2C start-ups. Financing dimensions also differ greatly. In Colombia, 100,000 euro can go a long way, while the same sum in the German high-tech sector only lasts for one to two months.

The bottom line: Innovation with a financial impact

Digital hubs can be a good idea for large corporations and not only as a way to be perceived as a modern company with agile processes and innovative strength that is attractive to younger employees. Ultimately, a digital lab can pay for itself even if one or two services or features are created that would have been suppressed by a company’s “we’ve always done it this way” mentality. After all, the atmosphere of such an innovation lab is often quite different from the working environment of the company behind it.