How Vodafone unites VC, New Products & Marketing

By Scott Kirsner |  May 20, 2014

Serial entrepreneur Fay Arjomandi joined Vodafone Group in 2011, and shortly after that launched the “xone” program for the $73 billion telecom company. Xone is intended to bring together venture capital investing, startup partnerships, new product development, and marketing, says Arjomandi, who describes it as “a startup inside Vodafone — just one that knows so much about Vodafone and how it works.”

Vodafone is the world’s second-largest telecom company, with 419 million subscribers and 91,000 employees. Arjomandi acknowledges that the telecom ecosystem is in the midst of major upheaval, with changing customer expectations, all kinds of new devices and software, and increasing sensitivity around price and value. What she’s trying to do with xone is “create an ecosystem of new vendors for the future that can grow with us.”

Below, Arjomandi describes how xone (pronounced like “zone”) is set up and shares some slides. We’ve also included a video overview of xone.

We officially launched xone in September 2011. The “x” stands for embracing unknown exploding opportunities.

We look for companies that have value for Vodafone and we fund them. But once we fund them, we start working with them very closely. We give them team members for software and hardware development, usability testing, and integration. And then ultimately we do an internal employee trial, and then launching them as a xone brand, testing them with actual users. Then, we decide whether users like it, and whether we should scale it or not.

Until end of 2012, we were under the R&D organization. But starting in January of 2013, xone moved to the commercial side. I report to the Director of Consumers Services now. We got the mandate of expanding the xone brand to consumers as a beta brand, so we can launch things under the xone brand in several countries — Italy, Spain, Germany and Egypt — and test them with real users who can give us feedback. We basically created a mini Vodafone inside of Vodafone.

From 2011 to today, we have evaluated nearly 2000 companies, and worked with about 15 companies under this new model of incubation, and about 20 companies under our more traditional venture portfolio. We’ve had about 5 co’s with exits, and four where they signed commercial agreements with Vodafone. And since we moved under commercial last year, we’ve launched five products, including an online commerce site, eShop.

Our work is not template-based, where we put $50,000 into each company company, and say, ‘Sign this agreement.’ It’s much more customized to the need of startups and partners. You can’t call us incubation, venture, or an accelerator — it’s a convergence of all these pieces.

When we bring them onboard, that’s the moment we have an intention of bringing their product to some pilot or commercial agreement. We’re a point of contact for people outside the company. My team is based in California, and we have about 25 people across R&D and commercial. But in total, we have about 120 people who are working to bring these solutions to market.

As a company, we feel like consumers are in the driver seat. We want to make sure that consumers decide which of these solutions they like, and which they don’t. In the era of connected consumers, you can see consumers making the decision on products. One-way marketing doesn’t work any more.

When we invest in any company, we’re not like a financially-driven VC. They want a 10x or 20x return. For us, the most important thing is that we see that customers are using [the product], or it enhances our network. Our goal is to have the best network and the best-quality network. So we measure based on those aspects. How many customers are using it? What is the engagement rate? What is the rating we get from customers? We also look at number of bugs and complaints. Every trial has a set of KPIs (key peformance indicators) that we set at the beginning. But we can adjust the KPIs as we go if we feel some of them may not be relevant.

We do take revenue numbers into account, to see what customer respond to and like, but the most important thing is engagement, uptake, and what customer responded to in terms of business model.

When we look around the startup world, we are looking at things like artificial intelligence, network infrastructure, machine-to-machine communication, digital content distribution, mobile commerce, mobile health, and data analytics. Our ultimate goal is to reach mobile Internet personalization, where your phone and the content and services on it feel like they are delivering exactly what you want.