Taking the road to innovation
Many communications service providers (CSPs) in the Asia-Pacific region have thrived over the past few years. Fueled by the rising middle class, demand for mobile phone and data subscriptions has soared. However, even before this rosy background recedes, CSPs' business models are under threat, and innovation has become more important than ever, especially as convergence continues to blur the line between competitors and collaborators, and CSPs must work harder than ever to compete.
The International Telecommunication Union reported that mobile phone subscriptions in the Asia-Pacific region grew by 325% between 2005 and 2013, reaching 3.5 billion. This represents almost half of the world's mobile subscribers. Meanwhile, mobile data traffic across the region increased 95% in 2012 alone; and that by 2017 mobile data use in Asia will account for 47% of the global total, according to the Cisco Visual Networking Index (2012-2017 forecast).
Despite the growth, CSPs are challenged by fragile consumer loyalty, intense competition from new internet players, plummeting growth in mobile phone subscriptions and convergence, with a global marketplace dynamic in which different companies and sectors are being brought together, both as competitors and collaborators, across traditional boundaries of industry and technology. How can CSPs survive - let alone thrive - in this new environment? The answer is clear: innovation.
CSPs need to find ways to increase revenue through new business models and deliver superior customer experiences. Companies in the past have successfully changed strategies to grow sales by meeting new customer needs, including through converging voice and data services. In the future, new business models may harness the growth in rich customer data to unlock new revenue streams with commercial partners.
But innovation is one of the toughest tasks for all companies. According to Accenture research, more than 80% of corporate executives said they are unhappy with their company's innovation efforts. Their top reasons for innovation failure included a lack of customer relevance, slow speed-to-market, incorrect pricing of new products or services, and lack of new or unique value propositions in the innovation offering.
To make sure they stay on track in terms of innovation, CSPs should consider a number of guidelines that will keep them on the path to successful innovation.
1. Keep customers at the forefront
We've seen companies pay more attention to what their competitors are doing rather than what their customers want. It is critical, however, that innovation is driven by customer needs. Although CSPs may recognize this instinctively, some CSPs aren't equipped to collect meaningful information about their customers.
Instead, they lack the processes required to engage with their customers and glean useful insights into what they want. Also, when CSPs do speak to customers, they may not share these conversations with other parts of the business, such as marketing and product development.
The good news is that it's never been easier to find out what customers are thinking. With the rise of social media, feedback - particularly complaints - is instantaneous. Companies don't need to go very far to hear customers' thoughts. The challenge is to understand and analyze these comments in a holistic way to drive valuable innovations in products and service delivery.
2. Take informed risks
Some operators fear innovation. They don't fear the potential successes of course; rather, they are terrified of failure. Companies are quick to withdraw R&D budgets at the first sign that innovation efforts are not paying dividends.
The response is to favor small-scale, incremental innovations that are less likely to fail - but are more likely to have marginal impacts on customers. CSPs will typically need to take risks to have any chance of reaping substantial rewards, but these modest projects do not offer the levels of growth potential that companies may require.
3. Match the right intentions with the right capabilities
Successful innovation needs to be underpinned by the right mix of recruitment, training and incentives. But some CSPs place more value on people with functional and technical capabilities over those with skills in innovation. This misalignment between innovative goals and workforce capabilities can hinder the development of breakthroughs that improve customer experiences.
4. Plan to succeed, rather than fail
Many companies lack the effective planning processes needed to drive innovation. For example, we've seen CSPs launch new offerings into the market without a comprehensive strategy. This forces critical internal teams (such as sourcing, finance and manufacturing) to play catch-up, and engage in costly, inefficient and sometimes competing activities that could have been avoided with more orderly planning.
Some companies are also hamstrung by the absence of a decision-making authority to direct cross-functional collaborations. This can slow the innovation process, lead to duplicated efforts, and result in poor utilization of available resources.
The result is that companies will face increased costs and longer lead times to take products to market. These operators are typically burdened with unnecessary projects, and find it difficult to cull underperforming efforts and prioritize more valuable launches.
5. Acknowledge failure
While companies are averse to failure, they can also be unwilling to acknowledge when a potential innovation has failed. CSPs should develop the ability to identify failures early on and create strategies to quickly and efficiently remove products or services from development or the market. There is little point trying to salvage reputation or funds that have already been spent on an innovation with limited future prospects.
The way forward
Some CSPs have a track record of successful innovation. In looking at what these companies have done, we have identified strategies that underpin the pathway to effective innovation.
Firstly, CSPs need the right infrastructure to develop and deploy innovative services. CSPs across Asia are already investing heavily in LTE networks to drive innovative products and services. Companies also can use their network infrastructure to better understand customer-use patterns and create innovative concierge applications that integrate location-based services, retail offers and social media.
In addition, CSPs need the right organizational structure to support and encourage innovation. Companies should embed an innovation mindset at every level, including hands-on involvement from CEOs, formal processes to share and evaluate ideas and a reward system that provides incentives for valuable innovations.
Finally, CSPs s should foster innovation by forming alliances and collaborating with external partners. This open innovation approach allows companies to take advantage of the skills and resources of a large pool of potential allies. For example, some CSPs in North America, Europe and Asia are collaborating to create a wide-range of innovative mobile applications by drawing on a deep pool of ideas.
There's no doubt that innovation is an expensive, risky but potentially rewarding game. It is also a necessary game that operators should play to confirm they continue to grow in an increasingly competitive environment.
Montgomery (Monte) Hong is Accenture's managing director for Global Communications Industry and Asia Pacific Communications Industry lead, Luc Grimond is a senior manager within Accenture's Communications, Media and Technology Strategy practice. For more information, here.