René Obermann began his working life as an entrepreneur in the mobile telecoms field. After a painful experience attempting to partner with BT, and a fateful decision to sell off much of his stock to Hutchison-Whampoa, René eventually sold out his holding entirely and joined Deutsche Telekom; a move that he calls the “biggest shock of his life.” In this presentation he explains how startups can get the most out of their links with bigger companies, and warns that the difference in mindset isn’t so much big versus small as slow versus fast.
René Obermann is Deutsche Telekom’s CEO but he hasn’t forgotten his formative experiences of founding and running his own mobile telecommunications company in the 1990s. As CEO he recognises that Deutsche Telekom is “too large to be fast, nimble and innovative – so we need to rely on more outside innovation.”
With 160 million customers and 235,000 employees in 50 countries, Deutsche Telekom has enormous reach. But its profit-model is being eroded by substitution from fixed line and mobile telecoms to VOIP, by regulatory pressures and by price intervention. “The complacency of the past is no longer there,” says Obermann. Deutsche Telekom needs to work with startups to find new revenue streams.
But he knows from experience that partnerships between large and small businesses can be painful – and it isn’t the larger company that suffers the most. In the early 1990s Obermann experienced what he refers to as wasted months while they negotiated what they thought was a straightforward partnership agreement with British Telecom. “We went to so many meetings [and kept thinking] now it’s the last meeting then it’s done. But they were not aligned – different decision makers who were not aligned [within BT].” While he lost valuable time he also learned a valuable lesson about running the investment process in parallel with other companies.
After the BT experience, Obermann was pleasantly surprised that Hutchison-Whampoa were able to take a stake in around two months. But again, he learned an expensive lesson – because they didn’t have M&A advice, Obermann ended up stock far more than he should have. “Don’t be penny wise and pound foolish,” he warns, advising the entrepreneurs in the room to hire expertise when it comes to matters financial and legal.
When it comes to building partnerships between big and small companies, Obermann says that an understanding of each other’s culture is essential. Big companies need to understand the mentality within small companies, he says. They need to understand that smaller companies are informal, intuitive and can’t afford to waste time. A few days’ delay can be the difference between life and death.
But larger organisations can’t be too intuitive. They need to spend a lot of time on analysis before they can invest, and investment decisions must be made at multiple levels of the organisation. “Don’t skip the middle layer,” warns Obermann. “You need to work the hierarchy… Don’t think that just because you spoke to the senior guy that everything is going to work out smoothly because that’s just not the case.”
Investment time frames are also longer with larger companies because they have to prioritise, to decide how your product can fit around legacy systems.
It seems like the cultural chasm is insurmountable. Why would a startup want to shackle themselves to an “elephant” like Deutsche Telekom? Obermann says that the answer is “reach”. Deutsche Telekom may be a huge company, but he also likens it to a “big lever.” The company has access to an enormous customer base and a wide range of distribution channels.
Learning from his experience, Obermann has tried to make the process of partnering with Deutsche Telekom as nimble as possible. In the talk he gives details of the four programmes that they use to promote inward innovation: venturing, partnering, incubation and enabling. From providing one of the largest corporate venture funds available to opening up platforms and networks to developers, Deutsche Telekom is trying to reach out to innovators.
Obermann also has three other pieces of advice for startups:
- Build your team carefully. Ask yourself if each new hire fits the team in attitude and in work ethic. Take time over recruitment and don’t be afraid to let poor fit employees go.
- Allow yourself time to think about the big picture and resist being swamped by day to day details. “I made too many mistakes by not taking time to think,” he confesses.
- Delegate administration to professionals - trying to save money on expertise will cost you more in the long run.
Watch the video to see how René Obermann’s experience of both big and small is leading to synergies between Deutsche Telekom and between 25 and 50 new startups a year.
This is a talk posted from HackFwd’s Build 0.10 event. For more talks like this, head to Passion Meets Momentum.