German telecommunications giant Deutsche Telekom is reshaping its business to compete in a fully digital world — a future in which consumers expect persistent and free connectivity, with or without a mobile device. By deploying advanced technologies such as AI, Deutsche Telekom is working to deliver better customer experiences and gain stakeholder support to fund further innovation initiatives.
When I arrived at Deutsche Telekom (DT) two years ago, I was tasked with redefining our innovation strategy. It was a challenging moment, as the board had just received recommendations from a management consultant.
Focusing on innovation means focusing on the future. So we embarked on a future-mapping and scenario-analysis exercise to develop our go-forward strategy. Future mapping is a process where we define different future scenarios for our business, assess probabilities and outcomes, and then map signals. It gives our business leaders options to rehearse potential strategies to avoid extinction.
Much of what we saw in those early days was troubling. The world could look similar to today but with everything coming in via over-the-top services. As a result, communications providers will be competing against others that offer these communications and information services for free. Google and Facebook, for example, are providing services formerly exclusive to telecommunications operators. At a certain point, DT will have a hard time expanding, with industry growth rates slowing to about 1% to 2% per year. Being a telecom operator is not going to be enough.
That’s the challenge ahead, and the board of DT understood what to do. We had to challenge the status quo to avoid a slow, agonizing death spiral.
Customers of the Future
We decided to find out what our future customers would want – the kids who are now aged 10 to 16. These are the digital natives, growing up in an always-on, always-connected world. We embarked on a fun journey to find out how they thought the world would look in 2025. We talked to more than 300 kids in five countries, asking them to help us understand what will matter to them.
What we heard was challenging: “Connectivity will be a human right, and access to information will be free.” “Our lives will be fully digital.” “Everything will be networked.” “Robots will help us live better.” And the biggest blow: “There will be no more phones.”
When we reported back, our board members were unsettled. One said if phones go away, our customers will count on us to provide privacy for their information, which made sense. The European Union has been very aggressive in implementing new privacy regulations during the past few years. We could help enforce those and implement the necessary compliance.
Discovering New Value
But you can’t just do things that might lead to a better future; you also have to build up the core and drive value. Like most executives, our P&L owners are focused on short-term results. So, we also needed to focus on incremental projects that would deliver results in the near term while building credibility to experiment with more innovative models. Several ongoing initiatives came out of our future mapping, including:
Reinventing the customer experience at our retail stores. We’re working to improve the store experience by applying technology to emphasize our ambition to be the digital companion to our customers.
Applying artificial intelligence (AI) to provide better, lower cost customer service. The CEO of our T-Mobile Austria unit has championed this initiative. When a customer calls, a chat window pops up and asks what’s needed. If the chatbot doesn’t know the answer, there’s a seamless handoff to a human agent. In fact, we have found live agents sometimes use chatbots to get answers to their questions, as well. We’ve recorded literally millions of chats between customers and agents and selected a subset that we use for supervised learning. Customers will rate the quality of the interaction.
We started the initiative in Austria, and now others within the DT footprint want to apply AI technology in their call centers and stores. For call centers that have been selling phones, we can now start reimagining the in-store experience. These automated agents have super insights to answer questions. We are now bringing AI into the mainstream business.
Creation of an internal €80 million innovation fund. We need to make it attractive for our executives to think about what they might need in three years’ time. We established an innovation board that meets once a month to consider new project pitches or review reports on ongoing initiatives. The fund releases money quarterly. For example, one employee wanted to work on a distributed robot operation system, and we allocated €1 million to develop the prototype. Our people have become much more interested in talking about what they’re working on — they never used to want to share that. The participation and interest level have been great.
Encouraging a Culture of Innovation
It’s difficult to take the legacy organization along with you on a journey like this, but it’s key to your success. You can do cool digitization once you’ve translated these activities into a language the business leaders understand — how it benefits the organization. Technology for technology’s sake never worked — and it still doesn’t. Stakeholders want to know, “What’s in this for me?”
People in the organization need to feel safe with what’s happening, so you need to do incremental things while planning for the future. You can move into AI and augmented reality initiatives when stakeholders understand that the vast amount of your activity is on the conservative side. We call it the blue and the green world. Building a stable and reliable network, for example, is part of the blue world, but we need people who think about robotics and other inspiring services for this network. Improving the core business — that is 80% of what I do. But I’m still looking to the future.
Carriers have the opportunity to play an important role in shaping the future of communications and connectivity. I believe the current form of the Internet is dying or is already dead. There will be billions of devices and trillions of connections between those devices, and we need to be able to establish a connection between point A and B.
The Internet was built to assume you can trust the identity of who you’re dealing with, but that’s not the case today — the attack surface for security is exploding. In the Middle Ages, distance between humans was used to control plagues and wars. We need to achieve the same level of security that distance used to provide, perhaps in the form of unspoofable identities and more privacy.
As I’ve learned, agility and flexibility are not enough. You need to be ambidextrous: innovating for the future while delivering cost-efficiently for the business in the near term. You can’t have short-term thinking, but your model needs to point to short-term results. At the same time, you need to be willing to accept a little pain. If you only do what your competition does, you won’t gain competitive advantage. It’s a constant balancing act.
Dr. Christian von Reventlow, Chief Product & Innovation Officer (CPIO) at Deutsche Telekom AG, is in charge of the group-wide innovation strategy, product development and partnering as well as corporate R&D. He controls the Deutsche Telekom product portfolio and defines the product roadmap for the group, as well as implementation in the market via systematic innovation management and corporate R&D.
Before joining Deutsche Telekom in March 2015, he held several executive positions, most recently as SVP Core platform at Nokia’s map service and navigation system subsidiary Here.com. At Here.com, he supervised the development of the first real-time cloud backbone for high-resolution maps in connected vehicles. Previously, he worked at Intel, where he was responsible for the software development of the first and second generations of Windows 8 and Android tablets, and at Avaya, where he managed the relaunch of the “Avaya Flare” videoconferencing solution.