Ovum’s recently published Innovation Radar series painted an interesting picture for telco innovation in the second half of 2010.
Among the 300 new service launches that we tracked across the fixed and mobile market segments, the major trend was that telcos are now innovating more collaboratively than they did in the past.
This view supports some of the views expressed in the Institute of Telecommunications Professionals’ (ITP) “Making innovation work for you” seminar at which Ovum spoke at recently.
In an environment where the pace of technological change is rapid, the telecom industry is carving a niche for itself by nurturing an adaptable structure that can support innovation, rather than seeking to create the next “killer application.”
This structure creates an environment in which individuals, small businesses, telecom vendors, and the wider society can unleash their innovative potential.
There are many answers to the question around what constitutes a telco’s core asset. While the access network has traditionally been viewed as a telco’s primary asset, evidence from the market and the growth in fixed and mobile network sharing show that this may have been overemphasized.
Instead, a telco’s brand, retail network, customer relationships, and mineable customer information all combine to create a structure that is difficult to replicate by non-telcos. This collection of functions, alongside the physical network, is a telco’s core asset.
However, telcos need to turn this core asset into a “killer structure” by making it adaptable and malleable for multi-purpose use. By forsaking the pursuit of a killer application, the telecom industry has accepted that the market prefers an open, unconstrained, and democratic platform such as the internet.
Telcos can no longer hope that some sort of “walled-garden” portal will suffice for the market. Instead, they will need to provide access to voice and data networks, with all the ancillary support assets, to enable other stakeholders to build new services that users actually need.
To achieve this, telcos will have to review their current fixation on the physical network. While the physical network is the bedrock of the adaptable structure, telcos need to build intelligence, efficiency, differentiation, user-centric data management, customer relationship expertise, and end-to-end service management on top of the basic connectivity that their networks provide.
If telcos can achieve this, they will create a unique and sustainable competitive advantage in the marketplace against aggressive adjacent players whose strengths tend to be at the software platform and application layers.
A robust network, strong brand, ubiquitous retail presence, and good customer relationships will always be essential for telcos when selling their core voice and data products. However, these assets are also ideal to help bring innovative products/services from other providers to market.
They increase a telco’s strategic and operational flexibility, enabling them to “sweat their assets” while playing a critical role in the innovation value chain. Therefore, it is not surprising that the standout new services in the second half of 2010 involved telcos leveraging the adaptability and pervasiveness of their networks, brands, customer relationships, and retail presence to enable service innovations in the market.
Crucially, Ovum perceives that there has been a shift in the mindset and approach to collaboration. While telcos have traditionally adopted a “command and control” attitude to their partners, their attitude is now becoming increasingly complementary.
Telcos can no longer expect to always be the dominant, indispensible partner in all relationships. Instead, they will become more of a facilitator or enabler by making their adaptable structure available to help bring new services to market.
This change in mindset was evident in the Mobile Services Innovation Radar: 2H10, where social networking initiatives (e.g. with Facebook and Vkontakte), mobile payment solutions (e.g. AT&T’s AprivaPay and Econet’s life insurance service), software-as-a-service initiatives (e.g. Vodafone Web Tools and 3’s 3Säker Surf), m-health solutions (e.g. Sprint’s ResolutionMD and O2’s Tisnova pece), and the emerging trend for services management (e.g. M1’s mFix and Verizon’s XATA Turnpike) all displayed a more collaborative approach.
In the Fixed Services Innovation Radar: 2H10 examples abound in cloud services (e.g. Tata’s pact with Google and RomTelecom’s My Office), e-health initiatives (Telus’ offer of Microsoft’s HealthVault), and the numerous “connected homes” and video communication solutions (e.g. Vodafone TV Connect and Liberty Global’s “Horizon” connected home gateway).
The pre-eminence of the adaptable structure for telcos is going to become more pronounced as telcos move towards the future of SMART (operators that provide services, management, applications, relationships, and technology) and LEAN (low-cost enablers of agnostic networks) players.
For LEAN players, an intelligent platform will enable them to offer differentiated wholesale connectivity solutions to their different customers. This could mean offering a fast connectivity service to providers that offer time-critical solutions such as m-health, while offering a slower service to providers that offer delay-tolerant solutions such as smart metering.
For SMART players, the entire proposition is contingent on an intelligent platform that is able to deliver high-end solutions directly to end users.
Emeka Obiodu is a senior analyst in Ovum's Mobile Strategy Practice. For more information visit www.ovum.com/