The telco innovation problem…
The challenge facing the telecoms industry has been well documented (not least by STL Partners). The solution, the need for telcos to develop a new telecoms ’business model’ is also now generally accepted. For some, the new business model may entail eschewing service development and instead focusing on cost efficiency and network performance – the Telco 2.0 Happy Piper.
For many, however, the desire to compete in the ‘services layer’ remains strong. These would-be Telco 2.0 Service Providers must seek to replace the contracting voice and messaging revenue streams with new revenues from new products and services and customers.
How to develop these new products and services and customer relationships is the $1 trillion question for telcos and their partners.
STL Partners has spent much time exploring both the nature of new opportunities and the processes for realising them. The problem for telcos is that they are not natural innovators. Their raisin d’etre historically has been to build infrastructure and generate returns from services that were only available because they owned and controlled the infrastructure – voice, messaging, and connectivity. The result was very low levels of innovation in telecoms but stable high-margin returns from ‘protected services’.
The Internet has changed the game. Now, voice and messaging and other communications services are available from alternate service providers – the internet giants and start-ups in particular. These new players have innovation in their DNA – they are product and service-oriented; they have sexy brands; they understand the value of customer data and how to exploit it; with lower capital expenditures, they can generate returns on investment with much lower margins.
…and one part of the solution addressed in this report
For telcos to develop competitive enabling or end-user services, whether consumer or enterprise, they need to develop the same skills and relationships enjoyed by the new competitors. As we discuss at length A Practical Guide to Implementing Telco 2.0 and we measure in the forthcoming Telco 2.0 Transformation Index, this requires a fundamental business model transformation that encompasses the whole telco industry: services, organisation structure and processes, partnerships, technology, and the cost and revenue model.
Rather than cover all the elements of the transformation, this report focuses narrowly on the process of developing compelling new propositions and services that deliver what customers want better than existing available solutions. It is based on a simple premise: that innovation and creativity is based on ‘associative thinking’ – the ability to link together ideas and concepts. For example, it was associative thinking in 2006 that led Apple’s iPhone designers to spot how an accelerometer – a widely used device in the transport, construction and medical industries – could be integrated into an iPhone to manage automatic screen rotation and countless applications we now take for granted on mobile.
Two ‘associative thinking’ approaches to identifying Telco 2.0 innovations
1. Existing tried and tested solutions
Rather than start with a blank sheet of paper, one way to innovate is to copy solutions that others have brought to market successfully. This does not necessarily imply a ‘me too’ approach entirely as there is scope, or course, to improve the solutions that others have created. In fact, most innovations are actually an extension of an existing product or service. For example:
- Apple’s iPhone, with its capacitive screen and integrated content ecosystem was a massive improvement on previous smartphones but clearly drew on early work done by, for example, Nokia with its 9210 Communicator and Ericsson with the R380.
- Google’s powerful search algorithm and clean user interface contrasted with the clutter of earlier search sites such AltaVista but also built on their idea of helping people find things on the web. Interestingly, AltaVista has now made a comeback with a slick clean interface that looks remarkably similar to Google!
If there is value in taking another firm’s idea and improving it, what are the sources of such concepts for CSPs?
STL Partners sees three main ones:
1. Your local telecoms market.
Scan the offerings of your competitors and if you spot something that looks attractive or seems to be getting traction in the marketplace, find ways to improve it and launch a better competitive offering yourself. You may remember in the view of Telefonica and Vodafone we mentioned that Freebees was a copy of O2’s earlier Top-up Surprises. Two important points here that Vodafone failed to do:
- Follow fast. The Freebees programme was launched around three years after Top-up Surprises and so Vodafone missed out on being seen as an innovator. Vodafone also missed out on the financial benefits that O2 enjoyed in those intervening years.
- Improve the original concept. Freebees is fine but fails to materially improve on what was offered by O2 – rewards for customers that top-up their prepay account.
2. The global telecoms market.
Look outside your market to other geographies to see what has worked in other parts of the world and then explore how these solutions might work in your own market. Clearly, you need to make allowance for different local customs and behaviours, industry structures, regulations and so on but the global nature of (tele)communications means that things that have worked in one market can often be easily adapted to others. STL Partners carries out this global scouting service for clients looking at what is available from other CSPs, vendors and start-ups and believes it is a sensible low-risk strategy for many CSPs – see on page 17 of this document, for more details.
To access the contents of the report, including…
- The telco innovation problem…
- …and one part of the solution addressed in this report
- Two ‘associative thinking’ approaches to identifying Telco 2.0 innovations
- 1. Existing tried and tested solutions
- 2. Customer Goal-led Innovation (CGLI)
- Case study on identifying Telco 2.0 innovations: The STL Partners scouting service
- About STL Partners
…and the following table of exhibits…
- Figure 1: Sources for tried and tested Telco 2.0 solutions
- Figure 2: The limitations of asking customers what they need when innovating, some examples
- Figure 3: How Customer Goal-led Innovation focuses on real needs and uncovers innovation opportunities
- Figure 4: The STL Partners’ Customer Goal-led Innovation process
- Figure 5: Producing a customer activity map to support a goal statement
- Figure 6: Customer goal-led innovation – activity analysis table, example
- Figure 7: Identifying opportunity areas for innovation, example
- Figure 8: The STL Partners scouting service in a nutshell