Advance.org CEO Maria MacNamara sat down for a conversation with Warrick Cramer the former CEO of Tomorrow Street, Vodafone’s global innovation centre based in Europe. In this role he was able to negotiate the formation of the first ever public private partnership between Vodafone and the Luxembourg government. He’s now in Australia, consulting and working with a number of startups.
Warrick Cramer has been an entrepreneur his entire working career. “I started multiple businesses, made a mobile payments system which ended up going global and sort of just went through that as my career. Eventually I was in Europe and was tapped on the shoulder by Vodafone and had a look at their whole innovation” said Cramer. What he quickly found was something that wasn’t clearly defined. Cramer says: ” What I found very quickly, talking to alot of people, different organisations, part of that journey was innovation was always seen as something as a bit of a shiny toy. It’s the area within the organisation, it’s all the cool stuff, it has a play, and from a delivery point of view it is very, alot of the time not clearly defined in terms of what the outcomes are.”
The transformation
He quickly realised his job was really to think about how he could refocus the innovation and activity. The first part of that was really thinking about how we define innovation. Cramer says: “Looking at innovation, when we talk about it and everyone looks at startups, they always think about the early stage startups, people running around with the ideas, working out of home, and got an idea and no product…but Vodafone [like many large organisations] was really great at bringing in startups, but killing them. We were brilliant at it.”
So he decided to focus on later stage companies, series A +, because early stage startups are high risk. Cramer says “the burnout rate for every 100 you might be lucky to get one or two ideas that really get commercialised. The risk is quite large and a lot of corporates don’t have that risk appetite.” The definition of Series A is different in other parts of the world, so Cramer used the US definition where “Series A typically is any one that has institutional investors and typically from USD10 million upwards in terms of investment.”
“I saw the benefit there because no one else was doing it anywhere else in the world at the time and I did not want to take equity. The minute we took equity it opens up a different conversation. What ends up happening is, you have to go through the whole board, the governance, the red tape comes in and you get stuck in legals and everything else for 12 months. Then by that stage, technology has gone, its old, its finished” said Cramer.
The model at Tomorrow Street
The model that he built for Tomorrow Street, is focused on a win-win and draws on his personal experience as an entrepreneur. He points out that “if we can’t add value then we should not get paid as an organisation.”
“It’s very different from a corporate way of thinking, but the idea was to show the staff and to demonstrate to the startup that we got skin in the game here. If we’re going to bring you on board, we are going to put a lot of resources behind you to industrialise your business model. Roll it out.” said Cramer.
Cramer observes that in his experience, VCs don’t like dealing with corporates because they see it as high risk. He observes “typically corporates bring in startups with VC backed funds and they usually can destroy them and so the VCs end up losing a lot of money. Typically that relationship has been strained.” Cramer wanted to avoid that happening, so having this new model delivered a good outcome for all stakeholders.
“I used to say, I’m not going to erode your equity … if we don’t grow you we dont get paid at the end of the day. We need to you to grow. From the startup perspective, they were getting access to different markets. It was quite a unique model and it works brilliantly.” he says.
Why Luxembourg?
Cramer observes that he went to Luxembourg because Vodafone centralised the procurement activity about 10 years ago in Luxembourg and it does not have a network there, which meant it was “like Switzerland, quite an impartial place.”
From the procurement perspective Vodafone had done a brilliant job. “Just to give an idea of scale, when I was there it was about EU26 billion, so a really sizable organisation. So it meant anyone that wanted to do a deal with Vodafone globally had to come to Luxembourg. So for me it meant I had all these major suppliers from around the world coming in and all the senior executives and C level executives flying in to sign sizable contracts within Vodafone within Luxembourg. What a better place to put innovation because what do startups need, they need access. They need access to corporates, executives, and that was the reason why I placed it there. The other reason was, I needed a government that was forward thinking and that was quite fast to act. One of the things that I looked at was, you can sit there and build the best model for innovation and you can look at attracting the best talent from around the world, but if the conditions aren’t right for them to come in, they’re not going to come.” said Cramer.
“When I started doing the research, it came down to the simplest things that most of us wouldn’t think about. I have a family moving from the US to Europe, ok, and they’ve got a family. I have to think about schools, think about housing, think about little things like a drivers license, how they are going to get that. All those little, niggly little things which cause a lot of stress for a lot of companies. So I needed to work with the government to make that simple. I was very fortunate with the Prime Minister and Deputy – they were really great at listening to what we had to say and actioning it. They made it easy to get a visa. They also made it easy to set up a company. That made a huge difference for us” said Cramer.
Vodafone as a customer
Before bringing startups into Vodafone, he realised he needed to prepare the organisation to reserve the startup. Cramer says “I was fortunate when I started Tomorrow Street that I had board support. This made it alot easier for me. I picked people from different vertical functions within our organisation to form a group that could represent different vertical functions – legal, operations, technology. When we were looking at startups to bring them in. They were part of that decision making process, it was not my team doing it in isolation, it was all of us collectively.”
Cramer added “What we also did was we invited the government into that process as well to be part of that process. It was me building that stakeholder community, so once they came in, then it was ok, well, everyone now has decided on a collective, so now we have to get behind it to help them. Whether it’s the legal framework they need, or financing, or whatever it might be, having that group there was very essential;. It also put in advertently put pressure on the startup because all of a sudden they knew there was all these people baking the. Then you have the VC on the other end who put all the KPIs and money for the startups, so all of a sudden they’re seeing what we’re doing. So it just built a very solid foundation for us to go forward.”
Lessons learned
“When we first started out, we underestimated the stress of them moving into a different geographic location. What didn’t work was the speed that we wanted them to move. That was probably the part that we had to adjust because, as you can imagine, I had teams, 26-27 countries, so when we brought in one of these companies, doing 50 million or 100 million revenue, I could deploy them out to those markets very quickly. But we found we couldn’t do it too fast, so we had to build the strategy.” said Warrick Cramer. The focus would then be placed on deciding “what market will we go with first, what are the key success criteria we need to define, then let’s look at the other markets. Initially we didn’t do that, we were over excited in terms of what we wanted to achieve and we wanted to take it out into the world very quickly and we had to slow it down” said Cramer.
Preparing the board
Cramer explained he had to do alot of education and reset expectations in terms of time frames because the ROI from innovation takes a lot longer than a quarter. It was about taking them on the journey. His focus was also on shifting their thinking in relation to failure, Cramer wanted “failure seen as a positive, not a negative”. He wanted to avoid having the person who failed, being hung out to dry. He wanted people to share the knowledge, to understand why it went wrong. He also wanted to expose the boards to an understanding of products that went beyond the standard set of telco offerings. Cramer needed to shift the the culture within the organisation.
What kind of startups are considered by multinationals?
The startups considered have one key criteria – that they are scalable. “Is it something I can take to multiple markets? That was the criteria for us. Vodafone, now with India, is probably just short of a billion customers globally. So could we use that base? If it’s only going to work in one or two countries we are not going to look at it. It has to work in 10+ countries.” he said.
Cramer has been spending a lot of time in the community here, volunteering his time and doing a lot of pro bono work. He has found many opportunities – especially with COVID. He thinks it is really about thinking about how they can take their services and product outside of Australia. “If they apply that mindset from day one, they’re more likely to be a lot more successful in my opinion.” he said.
If you are a startup working with large organisations is difficult. “When startups come in here, we’re thinking about, how we de-risk. What I mean by that is, who they are partnering with. At the end of the day, startups will come in there and think they can do this, they know their tech, but in actual fact we’re never going to let them touch the network. We’re going to want one of the big four, or some other SI accredited supplier to come in and manage that risk.” said Cramer.
If you are a startup working with large organisations, they will be asking:
- who’s backing them?
- do they have the ability to scale or will they come under financial distress?
- the diversity of the team?
- whether it is a dispersed workforce, or if it’s in Australia, “do I have to wait for them to wake up to get things done?”
- what sort of service levels will be provided?
- do they have the multi-lingual skills? – “Not thinking everyone speaks English – you need people that speak other languages fluently.”
- do they have an understanding of UK/US law (they don’t often work with Australian law)?
What’s happening globally?
We asked Cramer what he was seeing around the world. His response wasn’t one that we had expected: “I had a call this morning actually, in the valley this morning, really interesting, some of the questions coming out are really around legal frameworks for companies. Thinking about liabilities, if they do force people to come back into the offices, and someone does get sick and die, then who’s actually liable and what’s that going to look like? What can you do to manage that? They are also thinking about Government financial assistance programs and a blended approach to manufacturing so that your supply chains don’t come to a grinding halt just because one component is made in another country and you don’t have the skill set locally” he said.
The other big challenge that’s being discussed is how to connect with companies at scale? “In the past, you would fly in to Silicon Valley, set up a 100 meetings and fly out. Now obviously that’s not possible. So the question is how do you do that now? What are those platforms and how do you give those startups airtime? A platform for them to then present?” said Cramer. “These are the discussions we’re having in the Valley at the moment” he said.
What markets are you excited about?
“The obvious ones are Edtech and Medtech at the moment, which I think Australia, is quite good at.” he said. “In terms of them taking that forward globally, I don’t know how well they do in that, I didnt in my time at Tomorrow Street, see too many Australian companies in the MedTech space.” Cramer also thinks the Australian market is immature when compared to the rest of the world. “It’s all a bit hit and miss at the moment, I haven’t seen an area where I can just go and say, ok well they are actually the gurus on deep technology which I can plug into globally. I haven’t really seen that here at the moment, so I think there’s quite a number of different areas that, so many opportunities, it’s crazy.”
Further information
Warrick Cramer built numerous businesses from the ground-up in the automotive, mobile payment, and advertising industries. Warrick’s passion for and experience in innovation and business development ultimately brought him to Vodafone, where he devoted his entrepreneurial mind-set to revamping innovation at the heart of Vodafone. His vision to create a technology development program materialized through the creation of a Global Innovation Centre for Vodafone. Warrick has been seen as a pioneer and thought leader in corporate innovation and has won numerous global awards for his efforts.
Warrick spoke with Advance.org CEO Maria MacNamara on 21 May 2020.
Read Warrick’s Article: Driving innovation post Covid-19