Deutsche Telekom in 2016: Driving Disruption from within the Industry

Deutsche Telekom in 2016: Driving Disruption from within the Industry

By
Robert A. Burgelman, Debra Schifrin
2016|Case No.SM255| Length 39 pgs.

In 2016, Deutsche Telekom’s CEO Tim Höttges was steering the €69 billion telecom incumbent in new directions and seeking to disrupt the industry from within. The company’s tagline was “Life is For Sharing.” Its goal was to be Europe’s leading digital communication services company that was most trusted by consumers and business customers for safely sharing content. Höttges wanted to achieve this by having the best network, the best service, the best products, and the best customer experience. The company also aimed to be the preferred provider for business customers.

A major part of Deutsche Telekom’s strategy involved building up the company’s core business—its network—by increasing infrastructure investment 20 percent. Höttges described this as his “big bet,” saying the network was the basis for everything the company did. Even as it built out the network, an ongoing challenge was finding the right software talent to support the growing software IT components of the network infrastructure. With that in mind, Deutsche Telekom was also developing capabilities on top of network connectivity, such as security, device management, privacy, and global reach capability. While focusing its innovation on advanced network capabilities, Deutsche Telekom was shifting resources away from efforts to internally innovate in competition with Internet-based players. Instead, it was now intent on winning by partnering with companies like Microsoft, Spotify, and BMW to bring new capabilities, innovations, and services to customers.

European and German regulations created significant constraints, and external competition remained fierce from both telecommunications companies and so-called “Over the Top” companies such as Google, Facebook, and WhatsApp.  These companies had diverted billions of dollars away from traditional telecommunications companies, enabled by telco companies’ infrastructures. To counter that, Deutsche Telekom needed to strongly align strategy and execution.

Learning Objective
The objective is for students to learn how large, complex organizations in highly regulated industries can develop strong corporate strategies in the face of disruptive technological challenges and intense competitive pressures. Students will also learn about the opportunities and challenges inherent to building out and supporting internal innovation teams.
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