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Reorganizing to Innovate More Competitively: Key Lessons From Deutsche Telekom

Title Author(s) Type Topic(s) Comments Date
Reorganizing to Innovate More Competitively: Key Lessons From Deutsche TelekomFonstad, Nils O.Working PaperAssessing and Communicating IT Value
Digital Innovation
IT Investment and Portfolio Management
Abstract: Beginning in 2015, Deutsche Telekom changed its approach to innovating in several important ways. Faced with demands to improve the value generated from its investments in digital innovation projects, the company cut back on the areas in which it pursued innovation, and mapped those remaining to a holistic framework. It also introduced a flexible innovation funding track inspired by venture capital; required shared ownership of innovations; and encouraged more integral involvement of external experts in innovation. By 2017, Deutsche Telekom had realized important benefits from this new approach. This vignette describes the key changes that Deutsche Telekom made in prioritizing, funding, and governing innovation projects, and offers important insights for any organization keen to strengthen its culture of innovation.

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April 13, 2018

Great paper by Dr. Fonstad. It illustrates so many issues with structuring, and re-aligning innovation endeavors in bureaucratic large businesses where R&D tends to dominate the silos of invention largely on internal projects.

The efforts of DT to properly target, prioritize, balance and creatively finance their projects and both internal and external stakeholders is remarkable to see. The processes involved were surely cultural at heart, as with all innovation without that culture in place no innovation is optimized.

Of note to me was that DT’s targeting and refinement (reduction) of a multitude of distractive innovation projects that consume budgeted planned funding was the defining moment when they realized innovation waste was rampant. This action bolstered the efforts and emphasis on what was value oriented. Without these scattered (leaderless? or un-focused) projects hampering the traditionally confused bureaucratic process, and a management out of touch and of little faith in their innovation program, the status quo was not justified.

The DT restructuring balanced risk against reward of their new interdependent “Stack” by allocating projects that centered across all stakeholders from employees to customers at both ends of their product integration. With a “Blue” effort largely affecting faster gains of ROI and a foot in the future, and with the “Green” entrepreneurial bleeding edge at a lesser percentage they kept a foot in the future to avoid future shock of disruptive innovation hitting their bottom line too hard yet allowing them to get the entrepreneurial bleeding edge view. This interdependent stack innovation investment risk was reduced and mitigated by such a re-balancing act, or, should I say a targeted “commitment” act.

Innovation takes commitment and fewer projects allow for more focus. The diversity of external SMEs is surely a positive factor and with buy-in by customers in the majority of their percentages invested across business sectors (internal and external) no one was “ignored”. Thus the buy-in was from customers on both sides, and all the way to the top of management now having faith that this was worth the time and money to create near and future value ROI ~ It changed the entire culture! A rare thing indeed for at least those passionately involved in their innovation programs, and the business erudite, about the necessity for innovation and creative processes to survive in the age of digital innovation.

DT succeeded at what is fundamental about innovation. I am fond of saying: “The easiest place to innovate is within innovation itself. If you cannot do it there, you will not anywhere else and you better start worrying!” DT innovated on it’s innovation spectrum portfolio. It can be done!

R&D tends to get the planned funding so the entrepreneurial aspects of fiscal buy-in across internal and external (customer) stakeholders was a creative move and also balanced the risk reward interdependent stack. We would like to think that commitment follows the money. But that is not always the case and R&D can very well tend to fall into group think and lazy progress as funded and protected fat cats for lack of a better analogy. This adds competition with such a balanced approach and externally funded focus, independent of what the R&D teams do, it enhanced a balanced competition offending no one, but supporting both vectors instead of only internally focused projects. The resulting 4+1 strategy is a smartly balanced profit-timeline approach as they concentrated on minimizing long term risk and maximizing short term value.

Though they took a SCRUM approach (most of this is IT based so I can see that made sense) this is in their toolset to lean into the innovation rebalancing and to pivot to known value.

I ask one thing if possible to share. I would want to know what tools (creative thinking processes) they may have used in their innovation processes. If you have any insights into that can you share them? Some say that is the secret sauce but the real secret sauce is the people and talent they bring to the table (internal staff, external customers, and independent SMEs). It would also be beneficial to know of any failures along the way (generalities are fine).

You also mention the leaders “blogged” and that shows me that they were engaged with their personnel not off in some distant office sulking, but part of the process. Leaders set the tone after all is said and done and this says a great deal about how the culture changed from top down and bottom up (just like the ideas and funding flow). What type collaborative tools did DT use internally and with external customers? What was the distance between teams what or how much was virtually done on these tools?

Thank you for such a great paper and the thought process you have illustrated with the investment of innovation across business sectors. I have been following your work in this arena here in MIT-CISR. Good luck on that vector and keep the pedal down.
Very Respectfully,
Lawrence M. Grega
Certified Innovation Researcher
Creativity & Innovation Evangelist
Marketing & Innovation
Lifelong Student of Creativity & Innovation Profession

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