Telefonica’s moonshot unit emulates Alphabet’s X innovation lab
By Rodrigo Orihuela / BLOOMBERG
In THE heart of Barcelona’s burgeoning start-up scene, about 70 people work on technology-centred solutions to problems that affect billions, such as alcoholism and electricity shortage.
The cast includes entrepreneurs, specialists and a visual artist, but it’s not venture-capital backed. It’s Spanish phone carrier Telefonica SA’s answer to X, Alphabet Inc’s innovation lab.
Known as Alpha, the former monopoly’s initiative is part of chairman Jose Maria Alvarez Pallete’s push to experiment with radically new lines of business, a unique fixation in a sector whose track record of losing to the tech giants means that most telecommunications companies (telcos) are now largely sticking to their knitting.
“Alpha is where the future of Telefonica is going to be written,” says Pablo Rodriguez, the unit’s CEO, a computer scientist by trade who holds a Masters in Physics and previously worked at Bell Labs. “It’s an endeavour where we are going to increase the level of ambition, where we are going to do things that are meaningful.”
Alpha occupies two floors of the ZeroZero skyscraper that hugs Barcelona’s main east to west Diagonal avenue and overlooks both the city and the Mediterranean. While the building serves as Telefonica’s Catalonia headquarters, Alpha sits at arms’ length from the rest of the company, which doesn’t disclose the unit’s financials.
There’s a creative feel to the office: Brightly coloured notes stick to planning boards; posters adorn the walls; plants cascade off desks; virtual reality goggles are used to test projects.
On any given day, researchers working on so-called moonshot ideas might be taking a Los Angeles field trip to learn from graffiti artists, visiting an Airbus Inc plane factory, building and maintaining a vertical farm or working on an app.
One group is devoted to drumming up dozens of ideas a year and whittling them down to one to take to Telefonica’s board for funding approval. Chief innovation officer Maurice Conti, the team’s leader who spent most of his career pre-Alpha working on design and in robotics, says his top fear is “not thinking big enough”.
Alpha projects must ultimately have commercial applications and some of the most advanced are in healthcare.
One moonshot may be getting close to delivering a market-ready solution. Alpha and the Massachusetts General Hospital developed an app to treat people suffering from a mental condition called body dysmorphic disorder (BDD), which causes people to obsess over an aspect of their body they perceive as flawed. The app, called Perspectives, is in testing and will be presented to the US Food and Drug Administration for approval for commercial use.
Traditional therapy for BDD can require dozens of sessions and there are a shortage of specialists, according to Sabine Wilhelm, the chief of psychology at Massachusetts General Hospital. Users are presented with a combination of images, questions and answers when logging on for cognitive behavioural therapy sessions, and they can also consult with a therapist. Alpha’s expertise in making engaging user interfaces was key, Wilhelm says.
Perspectives is the second app from Alpha’s healthcare division, run by neuroscientist Oliver Harrison. The first, was created to treat alcoholism, based on a medical therapy called attention training.
“There’s a challenge with great ideas sitting on the shelves,” Harrison says. “What we are really focused with now is creating a channel, a consumer service, that can help to bring those tools to millions, tens of millions, hundreds of millions of people.”
Pallete was inspired to create Alpha after a trip to Silicon Valley, the heart of an industry that’s upended telecommunications carriers’ revenue streams globally over the past decade by pushing into voice and messaging services. Telcos have been trying to find ways to fight back.
Telefonica is striving to foster a more digital, entrepreneurial culture, even after some notable missteps: A division called Telefonica Digital revealed at the carrier’s investor day in 2012 has quietly been shelved; a Firefox handsets partnership with Mozilla Corp floundered after less than four years; and a US$1.15 billion (RM4.78 billion) venture-capital fund to invest in the telecommunications sector globally announced in 2015 never took off. Other digital efforts are harder to evaluate.
Telefonica has invested hundreds of millions since the start of the decade through start-up accelerators and venture-capital fund, but it doesn’t break out returns. The company launched a voice assistant powered by artificial intelligence this year, without disclosing financial details.
Attempts by carriers to vie with tech companies like Facebook Inc and Apple Inc in new business areas have often come up short, says Victor Font, CEO of consultancy Delta Partners. “It’s very difficult for the telco industry to compete with tech giants in innovation,” Font says.
When it comes to moonshots, Telefonica is up against a giant, Alphabet, which has yet to notch its own definitive wins after eight years experimenting. It may take years to assess whether Telefonica’s Alpha is successful.
“We are doing things that are meaningful, that will require patience and take probably five to 10 years to mature,’’ says CEO Rodriguez.