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November 2018, Amsterdam

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Deutsche Bahn builds start-up culture into its digital DNA

The German national rail carrier is investing in start-ups to keep pace with rapid technological advances, and it’s proving to be a win-win, writes Sally White

How does an established megacorp like Deutsche Bahn (German Railways, DB) develop the toolkit needed to drive its next phase of growth in the rapidly digitalising travel market? For a start, its strategy includes teaming up with digital start-ups.

It may come as a surprise that a multinational with sales of over €42 billion, more than 180 years of history and providing services to over 12 million customers a day across 15 European countries, thinks it can learn from start-ups. Yet, this is now part of Deutsche Bahn’s DNA, says Mathias Hüske, the firm’s MD of digital business. Hüske, who will be speaking in Amsterdam, is also chief digital officer of the group’s distribution and ticket sales business.

For DB, control of the disruption that digitalisation brings is particularly important as the German government aims to digitalise its core market, German rail, for example with the recent initiative Digitale Schiene Deutschland.

Deutsche Bahn benefits from the sense of entrepreneurship, innovation and the disruption potential of the start-ups who look upon an ‘old market’ with fresh eyes

Digitalisation means rapid changes at unprecedented speed. Large corporations, such as DB, often take longer to recognise opportunities, to implement them, and adapt them to their business model. Hüske acknowledges, a partnership between DB and start-ups is a win-win for both. On the one hand, start-ups profit from access to data, markets, customers and DB’s network. On the other, “DB benefits from the sense of entrepreneurship, innovation and the disruption potential of the start-ups who look upon an ‘old market’ with fresh eyes.”  

Words of advice

Partnering with start-ups to meet the challenge of securing the next phase of growth is increasingly recommended to corporates by the tech consultants. Global think-tank EYQ, part of consultants Ernst & Young, says: “Right now, the balance of power is tipping away from large corporations toward agile start-ups. The start-ups often deploy new digital technologies to level the playing field with industry incumbents who are weighed down with massive investments in infrastructure, processes and customers.”

New technologies are not only enabling further digitalisation of the core business of rail transport, but also opening paths to new business models, DB points out, adding: “This is apparent in the mobility market like almost no other. In Silicon Valley alone, more than 60% of start-ups have a focus on mobility.”

DB is not only partnering with start-ups. It has technology and industry partnerships with other major groups, including Germany-based waste management group Alba, engineering and technology conglomerate Siemens, Swiss Railways, Anglo-German travel group TUI and rail equipment group Bombardier Transportation. 

A fresh-eyed approach has meant widening its market. For travellers in Germany, DB is no longer simply presenting itself as their daily chauffeur, but offering services as a digital travel companion - via apps, on-board entertainment or with customer care through social media.  

DB is developing a two-pronged approach – physical transportation and full digital customer service before, during and after the journey. There are new rail-based products and services on smartphones and brand-new forms of mobility that include on-demand smart-city services on the road or autonomous minibuses for local transport.

Getting start-ups on track

The heart of DB’s start-up activity is its DB Mindbox in Berlin, an accelerator lab set up three years ago as part of the group’s digitalisation programme. From within this, DB runs StartupXpress, a programme in which young entrepreneurs are sponsored for 100 days with workshops, mentoring, jobs and €25,000 in financial backing.

“The goal is the ‘proof of concept’, that is to say, to check whether the respective solution of the sponsored start-up brings the hoped-for results in the railway context,” explains Hüske, who will share more in Amsterdam.

DB Digital Ventures is providing venture capital for collaborations with startups to promote disruptive innovations in mobility that will benefit DB's customers in the long term. The funding rounds are not restricted either to rail alone or to German entrepreneurs – they are open to global competition and are also aimed at helping the development of smart cities.

For example, one of the US businesses it has backed is New York startup GoKid, which runs a carpool platform for driving children to school, sports and other after-school activities, safely and on time. Another is San Francisco-based Ridecell, which has developed an intelligent software platform for operating car sharing, ride sharing and autonomous fleet management.

Many of the 40 start-ups DB has funded to make rail travel more attractive are already turning out new products

DB makes this claim: “We believe that mobility and logistics of the future are smart and energy-efficient: ordering a shuttle via app to get to the station, picking up and returning packages without long detours from a smart locker within the station, last mile urban logistics by means of cargo bikes. Many of the products described above are core products of DB – thus DB is a natural supplier of smart city solutions.”

Then there has been backing for Beirut-based Myki, an offline password manager that securely stores your sensitive data on your smartphone: the Myki app connects with your computer in a P2P encrypted manner to auto-fill your passwords and create secure backups of your data. And it has backed Naventik in Germany, which is aiming to pave the way for safer car SATNAVs.

Of course, the DB is not neglecting rail travel and many of the 40 start-ups it has funded to make rail travel more attractive are already turning out new products. In an official line the company says: “The Internet of Things (IoT) applications, drones, 3D printing and virtual reality are helping to achieve the aims of the ‘Zukunft Bahn’ (the future of railway) programme, which sets out to provide better quality, punctuality and customer focus.”

To hear more about how Deutsche Bahn is getting on the digital track, join us for EyeforTravel Amsterdam at the end of November

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