Startups: donors of digital transformation

Large companies accelerate their digital transformation through external enterprises.

“Seeking a young company with digital DNA and a disruptive business model, to marry a large traditional corporation with a desire for change and an urge to enhance its survival. Interested in having a ball, writing here. “

And, just like that, a bulletin board will summarize the inarticulate cry of a company that wishes to ensure its sustainability in the current market – its long-awaited digital transformation. However, when they have the urge (but not human or technological capital) to undertake this quest, they must look to an external enterprise.

Digital transformation is not binary lifting, summarized on a website and used in email; it is about incorporating technology across the entire company value chain, and reviewing the strategic approach that is taken towards the ever-connected consumer. And if you still do not understand the necessity for the urgency, you should read the digital transformation whitepaper (in Spanish) that we created at Territorio creativo.

The imperative is on the agenda: a survey of 1,559 executives and leaders from different industries conducted by the MIT Sloan School of Management and Capgemini Consulting in October 2013, noted that 78% of respondents considered digital transformation critical to the next two years, but 63% claimed that the rate of change of technology in their organizations was very slow. Having said that, how does one speed up this process?

For the sake of corporate competitiveness in today’s world, we will review how to make digitization sustainable, inclined towards the Google (acquisition of technology) and Facebook (acquisition of culture and talent) models. And with greater depth, we will address how big traditional companies in the sectors of transport, telecommunications, and banking – to embark on the need for flexibility, and to ensure their survival – resort to the promotion of entrepreneurship and the financing of companies to find new alternatives to the current model.

Google and Facebook: how the big digital players stay young

The heart of the Google’s competitiveness is the technology; not only through its widely-known model of innovation, but also due to the purchase of services that were originally provided by other companies. And if we consider the sort of strenuous exercise that is undertaken by this company in testing products, in the trial and error format, we can see why this has to be done. Simply review the list of mergers and acquisitions by Google, as gathered by Wikipedia, which indicates that Google has acquired 178 companies so far, between February 2001 and February 2015.

Of those acquired, a total of 22 companies (over 12%) are companies that have been integrated into Android services (key to competing with Apple in the smartphones and tablets market), and another 11 (6%) have been integrated into Google+ in an attempt to improve their social networking service, and thus, compete with Facebook. The most recent movement, dated February 24, is a startup called Toro, whose aim was to provide mobile application developers with a platform for managing and optimizing multivariate Facebook advertising campaigns. And now this knowledge, and these resources will make up a part of the Google mobile ads team.

The arm responsible for the monitoring of opportunities for the Mountain View giant is called Google Ventures. This company provides funding and support (design, recruitment, marketing, etc.) to companies at all stages of their life cycles, as well as for various economic sectors, and amongst their investments, they outlined tech-based companies like Uber (transport), Nest (automation), Flatiron Health (oncology), etc.

On the other side of the ring, for the control of the collective knowledge, Facebook appears to put people as the center of their strategy for acquiring companies. The CEO, Mark Zuckerberg, already pointed out ways in 2010, stating, “We have never bought a company for the company. We buy companies to get excellent people;” thus, they establish an entrepreneurial culture that enables the consolidation of the company’s progress. Unsurprisingly, most of the companies that they buy are integrated into the existing structure and they disappear, except for Instagram and WhatsApp, which retain their entity.

However, keeping large entrepreneurs within Facebook seems to be a task that still needs to be undertaken. This company does not have a system called Facebook Ventures or anything of the sort, which would enable it to capitalize on innovation opportunities offered by the existing “Facebook ecosystem” (applications, advertising, etc.) as well as on the talent that exists within the company and which seeks to satisfy its entrepreneurial ego. Turning to the network of former employees alone indicates what a good chunk they formed. According to the Tech Crunch review by Leena Rao and Josh Constine, between 2006 and the first half of 2012, this group would have raised $271 million in venture capital, and in the first half of 2012 alone, they’d have $130 million of that total.

The selective buying of an insurgent

Traditional companies such as AVIS (rental cars) and Daimler (maker of Mercedes-Benz) have moved towards technology with the selective buying of a digital insurgent. AVIS has integrated a more flexible option to its portfolio of mobility services with the purchase of Zipcar, a car rental company – cars can be rented for hours or days, and this provides an alternative to owning a car for the day to day, in exchange for a membership fee from $6 a month. With fuel prices quite like the sword of Damocles, with the space constraints of the metropolis, and with the advancement in public transportation solutions, AVIS has increased its customer base, and additionally, hopes to use Zipcar technology to expand upon their personal and commercial mobility solutions.

The MyTaxi mobile application, which operates with licensed taxi drivers, was recently bought by Germany’s Daimler; this also seems to point to a shift in the business, with more flexible transportation options for users. The company that has been created with the app is a subsidiary called Moovel, which will now integrate the MyTaxi services into a variety of mobility options: long distance railway, public transport in all German cities, carpooling, car sharing and bicycle rentals – everything from one single source.

On the part of the disruptive Uber, which is owned by Google and is facing regulatory problems in its operations, there has been a rapid mutation in functionality and recently, they launched UberEATS – a food delivery service for the best restaurants in a city, with the promise of a delivery time of less than 10 minutes. With technology as the basis, and with the use of active sharing, flexibility is the premise for winning.

Connecting with entrepreneurs

Banking is one of the sectors in which consumers most demand innovation. Critics of their role in the financial crisis are also those seeking added value for an inevitable yet commoditized relationship. In a place where security must be the biggest strength, innovation is often perceived as a risk, and many of the key global players in this sector are advancing slowly towards digital transformation.

However, there are huge innovation movements that are being made in this sector, and in Spain. BBVA, for example, counts on a collaborative model for external digital transformation. Through their Innovation Center (with offices in Spain, Mexico and Colombia … so far), they encourage interaction with the ecosystem of innovation, especially with entrepreneurs, startups and developers.

On a large scale, it has a venture capital fund called BBVA Ventures that systematizes the search for strategic opportunities that can support bank’s innovative agenda through services such as mobile payments, money lending, as well as big data, e-commerce, etc. Their areas of interest include: improving the accessibility and transparency of financial channels, new products and services, and systems and platforms that support the digitization of financial services.

So far, in 2015, the venture capital program has been responsible for investment in Coinbase, the leading platform for transactions with Bitcoin – the virtual currency (i.e. the currency of the future … or one of them?) Additionally, they have also bought a big data analytics startup called Madiva Solutions, which will allow the use of analytics tools to process the vast amounts of data which, from multiple sources, are produced in financial transactions. And thus, they can better understand their users and exploit countless business opportunities. Perhaps one of the most emblematic purchases has been that of Simple, an American business paradigm of simple and user-centered banking, whose technology could save the bank of the future.

Comprehensive development of the market where you operate

Recalling how companies produce value in the digital paradigm, one of the keys is to invest in the market in which you operate, and to learn quickly to enhance the value delivered to users. In this respect, Telefónica has committed to a comprehensive strategy for developing and strengthening its global leadership position, but with a special interest in the Latin American market, where the company gets most of its revenue.
Under the umbrella of Telefonica Open Future, the company supports the entrepreneurship at all stages of the life cycle of an idea:
· Entrepreneurship ecosystems (Think Big, Talentum and Plataforma): entrepreneurship ecosystems to stimulate local economies, supporting talent.
· Business acceleration (Crowdworking and Wayra): tools for business acceleration (financial support, workspaces, knowledge, mentors and partners) that enable the company to identify innovative products that improve the value proposition to its customers and partners.
· Investment in companies (Amérigo y Telefónica Ventures): financing projects with high potential, so that they can scale their businesses and consolidate its internationalization.
This global network of entrepreneurship and investment has supported a total of 500 companies, with a 300 million commitment made by Telefónica, and 62 of their public and private partners. The network is open to all investors and industry partners who want to participate in acceleration and financing of technology companies with high added value. All this is part of the shift by Telefónica from a provider of telecommunications services to a company that aids in the innovation of the global society through technology (its own or startups’).

Memento: people are the key

Digital transformation involves putting people at the center and, with them as the core, to develop technology, services, businesses, etc. Therefore, perhaps it is most critical to have the right strategic vision, and furthermore, to go on to communicate this to the rest of the organization. CEOs articulate a vision and a roadmap towards this change, and will provide the resources with which to achieve them (money, technology and talent). Culture and values … leadership and people.

There are numerous triggers for digital transformation, including the climax we currently live in, that is, globalization, the slowdown in Western economies, the continuing technological revolution and the constant struggle to reduce energy costs and dependence, and to increase sustainability; and of course, the regulatory changes that are demanded by the environment. And while we are subjected to these forces, it makes the most sense to think that every business is directed at technological consumers, and thus, we must procure a business ecosystem around our current model.