Breaking through the innovation barrier

Telecom executives around the globe would be delighted to have their suspicions confirmed if they were to be told that the telecoms industry was pretty good at technology innovation. It may even be true. Unfortunately, when it comes to business, there isn't much that is innovative about technology innovation, and it certainly won't guarantee profitability in a competitive and convergent commercial environment.

The problem for telcos is rooted in the industry's history-monopolistic public utilities where job satisfaction was almost entirely derived from the personal need to strive for engineering excellence, even at the expense of both customers and sound business practice. As a consequence, the majority of telcos still suffer from almost terminal technophilia.

Instead of identifying a business opportunity and subsequently determining the most cost-effective enabling technology (which is how any other competitive industry would approach it), we invariably tend to develop a technology platform "because it seemed a necessary idea at the time" and then try to work out why customers might want it and how much they might pay for it (if at all).

Even the more recently incorporated mobile operators have not been immune, not least because their initial recruitment programs have inevitably cherry-picked senior staff from their predecessors. There has, however, been one glimmer of hope in the mobile sector. The advent of prepaid service provides for the "physical" availability of a product at the point of sale, which permits brand identification to occur in a manner which is identical to that in most other industries, quite unlike the "virtual" product offerings that exist in the post-paid environment. This means that prepaid marketing and branding expertise can be sourced from outside of the traditional telecoms environment, and therefore the mindset with regard to the management of-and interaction with-customers can be quite different. Prepaid, therefore, brings together non-telecom marketing knowledge and telecoms network expertise-a potentially powerful trigger for innovation.

Telcos' capacity to develop technical solutions to complex problems is not in itself a bad thing, but it does rather get in the way of doing much more than paying lip service to being customer-centric. Being able, for example, to determine alpha-churners by utilizing highly complex business intelligence analytics engines is certainly a step in the right direction. But it doesn't usually justify the return on investment nor does it mean that we have got any closer to achieving an understanding of our customers' experience.

Moreover, the dominant mindset of the rapidly aggregating global telecoms ecosystem remains firmly led by the west. The assumption remains that emerging markets are just a poor reflection of the commercial environments prevalent in the US and Europe. Nothing could be further from the truth. Countries such as Pakistan-where the requirement to be profitable on sub-$4 ARPUs hones the cost-effectiveness and attractiveness of any new product offering well before it can reach an eager public-are demonstrating far higher levels of marketing innovation. The west must learn to be humble and-as it is just starting to do-copy successful innovations in these markets if it is to drive its own profitability and competitively. 

Even prior to the inevitability of structural/functional separation - which is going to happen whether telcos like it or not-telecom innovators must evolve beyond "stovepipe thinking" toward a multi-layered understanding of the new product development arena. There are three primary views that need to be captured within the new generation information model.

  • The network view: what resources are consumed? This is necessary to identify the service elements required and calculate the costs associated.
  • The marketing view: what services are available? In what combination? At what price? This is necessary to determine the bundling and packaging of service elements to create customer value propositions that will attract both revenues and loyalty.
  • The customer view: what triggers the service consumption episode? This is necessary to assess and exploit the customers' perceptions of value and the drivers for making purchases, which are never fully aligned with either the cost base or the value as presented. (It is in the context of this last facet that the so -called "X-Factor" companies such as Google, Apple and Amazon have been able to compete so successfully as they extend their commercial footprints into the telco domain.)

Above all else, however, there is one requirement that operators must embrace if they are ever to exploit innovation in the new generation: simplicity. Our internal systems environments, our pricing strategies and our product catalogues are all riddled with legacy pieces and are just too complex to allow for innovation to flourish. To deploy innovative convergent services that deliver a compelling and competitive customer experience necessitates a single view of the customer via a single point of contact. If and when we achieve this, not only will we have enabled a platform for profitable innovation, we may also have cured our technophilia at the same time.

Hugh Roberts is the senior strategist for Patni Telecoms Consulting 

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