Ken Olisa: Disruption, the Royal Family and other innovation stories

Bill Boyle
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Ken Olisa, the founder and chair of technology merchant bank Restoration Partners, is one of the key European entrepreneurs helping to drive innovation. Bill Boyle spoke to him about the choices telcos must make if they want to survive

Ken Olisa

Olisa: The Queen’s Lord Lieutenant of London

Ken Olisa, the founder and chair of technology merchant bank Restoration Partners, is one of the key European entrepreneurs helping to drive innovation. Bill Boyle spoke to him about the choices telcos must make if they want to survive.

According to Ken Olisa, the average telco is culturally risk averse – for a number of reasons. One of them is legacy technology. He says: “I remember someone declaring many years ago that you should never interfere with a telco’s business support system (BSS) since if you broke it, you’d never be able to fix it, as the person who designed it probably died 20 years ago. If that’s your experience of your own IT you are going to be risk-averse.” The other reasons stem from the failed working methods telcos seem reluctant to drop.

When Olisa was chairman of cloud company Outsourcery, Vodafone asked if they could provide a unified communications system. They wanted to supply it to their customers. Olisa says: “We were excited. In anticipation, we went to the market, raised the money necessary – £20 million – built a system, gave it to them and waited. Three years later they still hadn’t launched the product. I found out at that point that this was not unusual for a telco. However, we suffered because of this indecision.”

Olisa remembers it as a painful experience, but is very clear not to put all the blame on Vodafone.

The process is what was flawed: “Very often a telco will come up with the idea for a product, such as a unified communications solution It will then funnel it through several layers of product managers. Then a clutch of internal and external partners become involved, who all add their unique changes to the product then there is a companywide reorganisation and years later the offering appears so malformed no one can use it.”

Olisa says: “Innovation is mostly driven by legacy-free smaller companies and start-ups such as Airbnb, which looked at the entire old hotel model and said: ‘You do it this way – this is crazy. Why buy all that expensive real-estate and employ staff? Why not do it this way?’ Uber reinvented the taxi business without having to own any taxis.”

How, therefore, can telcos generate innovation? Why do corporate venture capital set-ups not work?

Grow your own innovators

Olisa warms to his theme: “Now there are two ways you can do this. Grow your own innovators or bring them in. What the telcos usually do is – stupidly – set up corporate venturing activities.” This originates, Olisa contends, because telcos are weak on offerings and people, while being strong on what he calls base and brand.

Olisa is critical of the methods the big telcos have traditionally used to drive innovation. “What they do is take a few of their key internal innovators, maybe a few people who are their most visibly irritating, rebellious and noisy, and set them up as a corporate venture capitalist.

“They give them some money to invest – and a set of corporate rules in how to calculate IRRs (internal rates of return) or instructions in how to ‘get something useful for us’ in corporate venture land. And off they go in search of innovation.”

The first thing they do is take off their ties because the dress code no longer applies and they are mixing with the cool entrepreneurs, he says. “In this brave new world their principal worry is how many shirt buttons to undo – one or be really hip and undo two!  Then they go off into the wilderness with no experience of investing or scaling up businesses and armed only with a cheque book.   For three years they worry about how they can make a fee on every deal and a better IRR than their venture capital competitors, forgetting that their reason to exist was to find innovation for their telco’s customers.  “They then discover that the mothership moves too slowly for them to compete effectively with other VCs and that they are in a hopeless state of limbo.  So they go back to their corporate leaders and complain.  Their bosses review the absence of either an acceptable IRR or any meaningful innovation and either re-absorb them or fire them.  Or usually, both.

“The final indignity sees the management of their portfolio – the companies that they have invested in –  being passed to the telco’s finance department ending up with the entrepreneurial investees becoming thoroughly demoralised as their dreams of a partnership made in heaven disappear in a fog of monthly spreadsheet reports to their new masters.”

“That journey from the romance department to the finance department is a sad one for all concerned – and yet it continues to happen time after time.” Says Olisa.   

Dotcom bubble

Olisa is speaking from long experience. He started his career at IBM in the 1970s and moved to Wang Laboratories in 1980. He founded technology merchant bank Interregnum in 1992, which he led through dotcom storms to a listing on the AIM market in 2000, just as the dotcom bubble burst.

Olisa is now a non-executive director of Thomson Reuters.  Last year he was named as the most powerful black person in Britain in the annual Powerlist, which lists Britain’s most influential people of African and African Caribbean heritage.

In 2015, he was made Lord Lieutenant of London, appointed by Queen Elizabeth II on the advice of then Prime Minister David Cameron.

The title gives him an office in Whitehall, London’s government district, and control of a team of 90 people. It puts him in charge of all visits made by the royal family within Greater London – with him even standing in for them on some occasions.

But away from tradition and back to innovation: the present model doesn’t work, says Olisa. With the UK and European model, venture capitalists are betting that the one company or entrepreneur they pick will be the winner in their market sector.

Poking at a big hive with a long stick

But Olisa says: “They are blindly poking at a big hive with a long stick. It’s not working.” So what is the future of innovation? Olisa explains the difference between European innovation and the US version with a true story: “I was in a bar in Silicon Valley a while ago talking to a Venture Capitalist. I was expounding at length about the internet of things and what a rich seam of inspiration it will be for entrepreneurs.”

The VC was not in the slightest interested, so Olisa went to the bar to get another drink.

“When I got back, he said: ‘Selling shoes over the internet is the next big thing.’ Being a Brit I poured cold water on the idea – and asked him how he would make sure they fitted the customer? He said the customer downloads a template, measures their feet and sends it back.”

Olisa was sceptical and had another drink. Soon after he got back to London he read about Amazon buying Zappo shoes for $1.2 billion.

“This shows that successful innovation starts out what the consumer wants and then finding a fresh solution and an efficient way of selling to them. By adding externally sourced innovation to an established business with a large customer base, the behemoth can steal a march on its competitors, and as long as you can deliver on the growth you do well. And this applies to  carriers in spades. Lose your customers’ attention with the same old, same old – or your future will mirror the utilities – and we all know what happens to utilities.”

The Silicon Valley system

Olisa argues that the future for innovation in Europe must take a different path. That’s because Silicon Valley is a closed system and unique.  Amazon, Google, Apple, Facebook and the other big pro-innovators know that winning means acting at speed.  They use their scale to exploit new products and services the bulk of which will be from smaller, nimbler businesses obtained for them by an active venture capital community. Although Europe, has many large companies, they are handicapped by a culture of NIH (not invented here) which rejects externally sourced ideas and the absence of a US-style VC industry.   

“Uber, Amazon, et al are huge consumers of innovation – they are totally comfortable with welcoming new companies into their ecosystems which powers a focused path to growth. Uber was no overnight success – it was ten years and £2 billion in development. These winners attract innovative companies into their orbit and then develop them or absorb them.”

So what is the future for Europe, since we have no Googles or Facebooks of our own?

For Olisa, the problem is not a lack of supply of innovation, which he has always been good at identifying, supporting and creating value from. He works with and champions a lot of high-potential tech businesses.  The problem lies with the inertia of the incumbents.

“Our big companies still hope that they will break the habit of a lifetime and invent the silver bullet themselves.  A complacency which is underpinned by an emotional irritation with the upstart entrepreneurs who are driving innovation.  Admittedly, this isn’t unique to Europe. Ford recently bought its new car operating system (OS) from Nissan because they couldn’t solve the problem themselves.

“Although vehicle operating systems are already being provided by Apple and Google, Detroit car-makers don’t want to be slaves to the Valley upstarts and prefers to buy something as fundamental as an OS from a competitor!  But it’s doomed to fail.   Apple and Google will just keep investing and acquiring innovative stars which guarantees that they will build better OSs and because of their pole positions in the Silicon Valley ecosystem. I predict that Motown Detroit will end up buying from them anyway.”

The solution in Europe is for the major incumbents to build mutually supportive ecosystems with themselves at the centre surrounded by a community of energetic, entrepreneurial innovators with whom they can work to solve identified customer needs.  “We built and manage one of these for Lockheed Martin UK (the Lockheed Martin Virtual Technology Cluster)” says Olisa and the results are compelling – positive returns and customer wins in the first year.  So it can be done.”

But is there really a culture of entrepreneurial innovation in Europe and the UK? “I was recently with Princess Anne [daughter of the British queen], meeting a child of nine who had made a robot that shakes hands. She looked slightly disconcerted. Was there a risk that the handshaking business was going to be taken over by robots?

“But I don’t think the child was trying to make her redundant he was just driven by a desire to discover and invent. Patronisingly I asked him if he could modify the code. Disdainfully he told me that of course he could. I was impressed – he’s only nine. Hard evidence of an improving education system which will feed an expanding tech sector across the continent.   The missing ingredient is an acceptance among the continent’s behemoths that home-grown and traditional corporate venturing can’t deliver but that synergistic ecosystems can.”  Let’s just hope he finds a telco as a client.