The Coordination Age Companies: The First Release

This is the first report in a series outlining companies that we think are lighting the path on the journey to the Coordination Age. Its goal is to deepen understanding of the Coordination Age and to inspire innovation and engagement in this crucial transition.

What is the Coordination Age?

The Coordination Age is STL Partners’ term for the new economic and technological era that the world is transitioning to. In the Coordination Age, the over-arching need of governments, companies and individuals is to make better use of the available resources to “make the world run better”. This means managing those resources to deliver better outcomes, better experiences, and less waste.

Connected technologies, including 5G, IoT, Artificial Intelligence, automation, Cloud and Edge Computing, are key tools to the efficient use, management and distribution of those resources. Resources include time, money, carbon, goods, water, land, buildings, raw materials, energy, and so on.

Why Coordination?

Managing resources better requires multiple partners to coordinate their actions and processes to deliver outcomes for maximum efficiency and effect. There does not need to be an all powerful, central ‘coordinator’. That is often neither desirable nor possible. Instead, there will be a multitude of interconnected processes and players that achieve coordination on demand to deliver the outcomes needed within the ecosystem overall.

Coordination, transformation and technology

Much of the action of coordination will be automated – processes or parties communicating with another automatically for the sake of speed, cost and efficiency, but the whole system will be under the control of people and organisations as it is now.

The Coordination Age is the master key to the puzzle of digital transformation. While the technologies have implied what is possible, the Coordination Age shows what it is for and why transformation is necessary, and what it will take to make it work in practice in real world ecosystems – the how.

Role of this report

This is the first report in a series outlining companies that we think are lighting the path on the journey to the Coordination Age. Its goal is to deepen understanding of the Coordination Age and to inspire innovation and engagement in this crucial transition.

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The Coordination Age 100: Inspiration for change

We aim to profile 100 companies across a number of industries as inspiration for new business models, how to transform a business to succeed in the Coordination Age; and/or as potential partners for the telecom industry. The Coordination Age is well underway and many companies have been built around driving this step change in our economy, or are transforming themselves to adapt to it. Some telcos have already started on the Coordination Age path as we have looked at this in Are telcos smart enough to make money work?, The roles of 5G & private networks and Can telcos create a compelling smart home?. However, for companies not already on this path, it’s hard to know where to start and what emerging technologies, business models and ecosystems driving that are Coordination Age.

What is a Coordination Age company?

  • A Coordination Age company delivers better use of resources to their customers by combining different technology resources such as connectivity (IoT, 4G, 5G, Wi-Fi, etc.)​, cloud/edge computing, AI and machine learning, and automation
  • It operates in a B2B2X environment, bringing together previously siloed data, processes, companies, and customers
  • A Coordination Age company usually operates across physical and digital worlds, but in some cases the resources can be predominantly digital too (e.g. in financial services or entertainment)

Benefits: better use of  / returns on resources

coordination age benefits

Table of content

  • Executive summary
  • Introduction – the Coordination Age and this report
  • What is the “Coordination Age 100”?
    • The Coordination Age 100: Inspiration for change
    • What is a Coordination Age company?
    • Coordination Age natives vs transformers
  • Ten company profiles
  • Coordination Age natives vs transformers
    • Coordination Age natives
      • Octopus Energy
      • Ocado
      • Booking.com
      • Babylon Health
      • Starling Bank
      • Upstart
    • Coordination Age transformers
      • Hitachi Rail
      • Rolls Royce
      • Orange Money/Orange Bank
      • Signify

 

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What can telcos learn from Silicon Valley?

Silicon Valley: The promise of “Open” Innovation and agile experimentation

Until the early 2000s, Closed Innovation, based on a model of internal, centralised research and development, was the de facto way for companies to protect intellectual property and gain competitive advantage. Latterly, assisted by the tailwinds of increasing connectivity, there has been a shift in mindset towards Open Innovation – sourcing and acquiring external expertise, scanning the environment, and tapping into ideas and input from beyond the four walls of the business. Today, the array of innovation models is varied and ever-expanding: scouting, crowdsourcing, idea competitions, collaborative design and development, spin-outs, corporate ventures, incubators, joint ventures, in- and out-licensing of intellectual property, consortia, innovation platforms and ecosystems to name but a few. Increasingly, this activity is taking place in clusters – auspicious geographic concentrations of interconnected companies and institutions – the most famous of which is Silicon Valley.

Thanks to a unique confluence of assets – the presence of tech giants and leading research universities, an abundance of venture capital and skilled labour, a disruptive culture, and a relatively benign regulatory environment – Silicon Valley is one of the world’s leading hotbeds of innovation.

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Hundreds of organisations of various sizes and industries – even those with plentiful local R&D talent in their home markets – have been drawn to the Valley in the hope of importing outside-in innovation, identifying new products and partners, and harnessing its ecosystem to solve strategic problems. Telcos are no exception: since the early 2000s, telcos’ core businesses have come under increasing pressure from OTT players as well as wider market forces to innovate and grow. Open Innovation is the antithesis of telcos’ traditional, vertically-integrated approach of translating their own R&D efforts into internally-developed products and services, typically tightly linked to their existing customer bases and offerings. Operators are hoping some of the Valley’s magic dust of disruptive thinking and speed of execution will rub off on them.

However, insiders sometimes quip that the Boeing 747s flying out of San Francisco International Airport have “amnesic” properties. The executive groups that typically descend upon the Valley, hoping to learn from its incumbents both large and small, take copious notes and leave fired up about re-energising innovation in their home base. But once back within the corporate environment, the seeds of innovation struggle to germinate and the majority of initiatives fail to generate any substantial return on objectives. There appears to be a degree of cognitive dissonance between the expectation of such engagements, and their impact.

Other approaches to the Valley, from CVCs (Corporate Venture Capital investments in start-ups) to environmental scanning and venture-building, are better established, with hundreds of corporate outposts currently in place. Four major routes to outside-in innovation, with illustrative examples are shown below.

Four major routes to outside-in innovation

Open Innovation

Unfortunately, truly transformational success stories are few and far between (gains tend to be small or incremental in nature) and there is a long tail of failures and missed opportunities.

For STL Partners, this raises a series of questions:

  • What are telcos hoping to learn from Silicon Valley and how are they going about it?
  • What are the challenges they face in implementing and operationalising what they learn?
  • What can they do differently to overcome some of the common pitfalls of Open Innovation to drive more significant successes?

In addition to its own primary and secondary research, STL Partners explored the challenges and opportunities in depth with Jean-Marc Frangos – Executive Fellow at INSEAD, Executive in Residence at the Plug and Play Tech Center, and Advisor to the Telecom Council of Silicon Valley and former Senior VP of BT’s Innovation function. Located in the Bay Area, Jean-Marc benefits from a 360° view of the disruptive technologies, revenue opportunities and shifts in the in the Valley landscape, and advises European and Asian players on how to integrate such innovations into the incumbent telecoms environment.

What are telcos hoping to do in Silicon Valley?

There are currently somewhere between 300 and 500 corporate outposts in Silicon Valley, as varied in their industries, size and depth of operations as they are in their motives, which are not exclusively tech-focused. The majority have a relatively small footprint, such as those acting as an innovation “antenna” or corporate venture capital (CVC) office, although some have established a more structured presence, for example an innovation lab or R&D centre.

Despite the diversity of these outposts, their common goal is to sense and respond to technology shifts, whether they be disruptive opportunities or disruptive threats. Many of these corporations may be struggling to keep pace with innovation in their own industry and are looking to infuse their organisation with a more entrepreneurial mindset and attract creative talent to gain competitive advantage. In the case of telcos, most are already facing disruption while the remainder can see it looming on the horizon.

The key drivers for innovation outposts include:

  • Keeping a finger on the pulse of trends originating in the Valley;
  • Scouting emerging technologies with a view to investment, incubation, acquisition or some form of collaborative partnership and identifying new channels to market, new business models or new people/processes;
  • Acquiring expertise or best practices from outside the organisation that can be internalised (e.g. to evolve the corporate culture) with a view to accelerating the innovation cycle from start-up through Minimum Viable Product (MVP) to initial production.

Table of contents

  • Executive summary
  • Introduction
  • What are telcos hoping to do in Silicon Valley?
    • The dominant innovation outpost models in Silicon Valley
    • What to learn in Silicon Valley: Four levels of learning
    • Increasing acceptance of evolving business models
  • What should telcos do differently?
    • Purpose: Match effort to expectation
    • Whom to learn innovation lessons from in Silicon Valley
    • People: Who goes to the Valley, and who stays home
    • Practices: Dos and don’ts
  • Telco dynamics and challenges
    • Ambidextrous transformation is a hard art to master
    • Two-speed IT puts the brakes on digital culture
    • Capital-intensive infrastructure companies have a bigger turning circle
    • Design thinking must infuse the transmission belt
    • Telcos may struggle to win the battle for tech talent
  • Conclusion
  • Index

Related research

 

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How to identify and meet new customer needs

Customer-led innovation at Telia and Elisa

In order to secure competitive advantage and long-term growth, telcos need to identify and meet new customer needs. The importance of this is confirmed by the STL Partner’s Telco investment priorities survey published in January 2021. Understanding customer needs and innovation, both essential for addressing new needs and driving growth, featured in the top ten priorities.

Telco top investment  priorities

top-telco-investment-priorities-stl

Source:  STL Partners, Telecoms priorities: Ready for the crunch?

This report seeks to identify best practice for telcos. Through in-depth interviews with senior managers in Elisa and Telia, and an expert in disruptive innovation, we identify the critical success factors and lessons learned in these organisations.

Telia created Division X in 2017, a separate business unit focused on commercialising and growing revenue from emerging businesses and technologies such as IoT (including 5G), data insights, and digital B2C services. Its focus is on customer needs and speed of execution, to spearhead and accelerate innovation, which it deems necessary in Telia’s drive to “reinvent better connected living”.

International Digital Services is Elisa’s third main business division, alongside Consumer and Corporate, which serve the domestic market. As International Digital Services has matured, it has focussed specifically on addressing new needs and developing new services, in both industrial and corporate domains.

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The report is based on interviews with:

  • Liisa Puurunen, Vice President, Brand, CX and start-ups, International Digital Services, Elisa — Liisa has a background in leading new businesses and start-ups in Elisa in the Consumer division and International Digital Services. Liisa’s role is to understand where there are new needs to be met, and to get best practise in place across the whole customer journey, within both industrial and corporate domains.
  • Annukka Matilainen, Development Director for Omnichannel and Smart Automation, Elisa —Annukka led the Consumer team’s response to COVID-19
  • Stephanie Huf, Head of Marketing, Division X, Telia — Stephanie’s role is to support the business lines in Division X to in engaging with customers to identify their needs. For example, her team identifies what customers want, defines the value propositions and works with product and business teams to test these in line with customer insight. (Since participating in this research Stephanie Huf has moved to a new role.)
  • Anette Bohman, Strategy Director, Division X, Telia  — Anette supports and guides Division X in defining Telia’s future.
  • John McDonald, FIRSTEP — John is a strategist in disruptive innovation in the health industry in Canada. He helps leaders create alignment around how the forces of disruption are unfolding and where to place the bets. FIRSTEP works with health organisations searching for fresh insights that spark new opportunities for growth.

Create a separate team to maximise new business opportunities

A separate team has many benefits

New business requires a separate, dedicated team. Its needs are different from day-to-day business and it needs its own focus.

One of the biggest learnings for Elisa in addressing new opportunities, is that there needs to be a ‘sandbox team’ with its own resources and budgets, rules, methods and mindset. It must have access to senior managers for decision making and funding, and strong leadership.

The sandbox team needs to be remote from the demands of day-to-day operations and implementation. If finding new needs is only part of someone’s job it is difficult to manage, as short-term demands will inevitably take precedence. Delivery and experimentation are different functions and they should be separate.

Liisa Puurunen’s team is a start-up in its own right. It is leaner than the usual Elisa approach and people are only brought into the team when there is a test to be done, keeping it flexible.

Rationale for a separate team

separate-team-rationale
Source: STL Partners

Contents

  • Executive Summary
    • Create a dedicated and separate team
    • Take a customer centric approach at all stages of innovation
    • Types of innovation will meet different new needs
  • Introduction
  • Create a separate team to maximise new business opportunities
    • A separate team has many benefits
    • Telia Smart Family: The case for a separate innovations team
    • Evaluate success in relevant ways that may be non-traditional
  • Take a customer centric approach to all stages of innovation
    • Ensure a customer centric culture
    • Start with a customer problem
  • Meeting needs and scaling bets
    • Co-create with customers, but choose them carefully
    • Elisa’s empowered teams enable a successful response to COVID-19
  • Types of innovation to meet different new needs
    • New needs in the core versus new businesses
    • Dedicate some resource to extreme innovation
    • Telia Data Insights: New Business innovation in response to COVID-19
    • The case for disruptive innovation
  • Plan exit strategies
    • Perseverance and pivoting can bring success
    • Be prepared to kill your darlings

Related research

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Reliance Jio: Learning from India’s problem solver

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Introduction

This year marks the 25th anniversary of mobile networks in India. The huge potential of the market has attracted many players (even as recently as 2016, there were 12 mobile operators in India). But most have had their fingers burned by the complexities of this market, as well as intense competition, particularly following the entry of Reliance Jio in September 2016.

In the past four years, Reliance Jio has gone from strength to strength, becoming the leading telco in terms of mobile subscriber numbers in December 2019, dramatically expanding internet access and driving adoption of digital services across the country. It is not an exaggeration to say that Jio played a major role in the digital transformation of India to date.

Evidence of Jio’s impact on the Indian market

Source: STL Partners

Jio leads Indian telecoms

By delivering broad societal progress and value, Jio has been able to overcome many of the regulatory and political challenges that have hindered other new entrants to the Indian telecoms market. Jio is in good standing as regards its future ambitions in the digital environment, helping it to attract over USD20 billion in investment between April and July 2020 from Facebook, Google and other international investors.

In India, Reliance Jio has trialled elements of a Coordination Age approach, setting out to solve various socio-economic problems by matching supply and demand, while moving up the value chain to unlock further sources of revenue growth.

At the time of Jio’s entry, India was still predominantly a 3G market, with voice calls being the main application. Although there were a multitude of plans on offer and the retail price per minute was among the lowest in the world, mobile communications remained out of reach for many (not helped by high license and spectrum fees that translated into upward pressure on pricing).

Reliance Industries recognised an opportunity to use the advent of 4G technology to build a data-first telecoms player that could support its wider aspirations to develop a globally competitive technology business in India. Accordingly, it obtained a nationwide license to operate a 4G network and encouraged take-up with a promotion that offered customers free voice calls forever.

The existing operators rushed to defend their market positions by dropping their prices resulting in a price war that destroyed value in the market and has led to consolidation and insolvencies such that, aside from Jio, only two privately-owned operators remain – with the real possibility that the market will shrink further and become a duopoly.

STL Partners covered the success of Jio’s disruptive market entry strategy in Telco-Driven Disruption: Will AT&T, Axiata, Reliance Jio and Turkcell succeed? report in 2017. This report considers Jio’s strategy in the context of the Coordination Age. It looks at what this has meant for the market and highlights the implications for operators in other developing markets.

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Table of Contents

  • Executive Summary
  • Introduction
  • Interventionist government shapes market
    • Mobile market overview
    • The shifting sands of policy
  • Jio overtakes the incumbents
  • The rise of Reliance Jio
    • Leveraging the strength of a conglomerate
    • Restructuring and renewal
  • Major emphasis on partnerships
    • Start-ups
    • Global technology partners
  • Competitor positions
    • Bharti Airtel faring better than Vodafone Idea
    • Competitors’ relationship with the government
  • Conclusions
    • Lessons for telcos in developing markets
  • Index

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