At a very diverse and animated T8 debate among more than 30 top communications industry executives held at Management World 2011 in Dublin this past May, there was general agreement that change is necessary and urgent and that innovation is the key.
This was underlined in a report published by Juniper Research the week after the Dublin event. It stated that revenues billed by operators will be more than $1 trillion annually by 2016, but that mobile network operators’ costs will exceed revenues within four years unless they take action.
Against this backdrop of soaring costs, we are moving into an era where “users will want any type of information at any time on any device they choose, sometimes while doing 140 km [almost 90 miles] an hour on the autobahn or freeway – it’s our jobs as engineers and technologists to be ingenious and figure out how we are going to enable this,” was how the CTO of one of the world’s largest telecom groups put it. No doubt the speaker’s CFO is equally exercised about how they are going to make a sustainable profit from doing it too.
This report seeks to look at barriers that are preventing progress, present some different approaches to this trillion dollar question, suggested by some of the industry’s most eminent executives and other sources, and some general principles of innovation.
One key topic is the barriers to innovation within operators. They largely seem to come down to corporate culture, which particularly with the financial crisis that started in 2008, appears to have exaggerated the conservative, inward-looking corporate culture, to have even more emphasis on the work ethic of ‘keep your head down’ rather than do anything to draw unwanted attention to oneself by putting forward ideas that run contrary to day-to-day operations or corporate trends.
Grand corporate plans and the boardroom are rarely the birthplaces of innovation, but if properly run, they should, one way or another, provide an environment in which innovation is possible and nurtured. Ideas that are massively successful are often incidental or accidental or just plain lucky, and timing is all.
The point is not to worry that you don’t know exactly what you’re looking for, just to have the wits to recognize the possibilities of a good idea when you see one and have the courage to try it out. In particular, realize that putting out ‘work in progress’ is a great idea (Google+ being a great example), if it is described as such – you’ll never get a bigger lab than the outside world or better feedback than from the general public. It might not be polite or what you were expecting, but that doesn’t matter.
A great example of user feedback spawning a massively successful business is how one of the world’s largest payments-handling companies grew out of a single-currency, premature, e-commerce initiative after it became clear from early-adopter, overseas users (who were not even the intended audience) that there was huge demand for a cross-currency processing facility. As one financial services industry veteran observed wryly, any of the banks “could have set up such a service on a single PC” at that time in the mid-1990s, “but they didn’t because they were institutionally unable to grasp the opportunity – and promptly lost out on a multi-billion dollar market.”
The ideas of failure being good, if handled in the right way (that is fail small, fail quickly and learn well) and not to worry about knowing exactly what you are looking for are supported by two powerful books published in the last year by heavy-hitting economists John Kay and Tim Harwood. After all, SMS and prepay are great examples of hugely successful services that got massive, if unexpected, support from customers that operators were savvy enough to adopt and adapt to underpin the more than $1.4 trillion business that is telecom today.
There are different possible approaches to succeeding in the next phase of the industry, from running a ‘dumb pipe’ business, which is far from a ‘dumb’ or simple undertaking – it will require massive scale, great operational agility and innovation to keep costs down low enough to make a profit, at least in the short term – to what network operators have to offer as enablers, in terms of scale, experience and services they can provide to over-the-top providers (who the industry needs to stop seeing as the enemy, and embrace as creators of traffic it’s possible to make money from) from billing, to identification and authentication services.
As one attendee pointed out, “As most of our economy moves to a digital base over the next five to 10 years, all those capabilities, not just moving bits, but all those transactions, all those customer relationships, all those identification and authentication pieces, if you only took a fraction of a penny for each of them, you’d be a very rich company, hoping and praying for more Googles to come along, because they would create more traffic for you."
Also critical is the successful use of incubators, protecting those with ideas from the potentially stifling parental culture, and at very successful uses of social media-type internal communications that are paying dividends, in one instance to the tune of $50 million in the first year, in part from simply listening to employees and disseminating information, fast, across the entire organization which spans 17 countries and territories.
Another interesting area considers general principles regarding innovation, starting with the old joke, “How many psychiatrists does it take to change a light bulb?” The answer is “None, it has to want to change itself”. And so it is with service providers; innovation will only come if they create the conditions to allow it. The recurring theme throughout is that service providers have many fantastic options open to them, but they will only translate into success if they are prepared to embrace innovation.
The forthcoming Quick Insights report, Innovation: The Trillion Dollar Question, will be available for download this month. Click here for more information.
Annie Turner is managing editor at TM Forum Research & Publications