GUEST POST from Nicolas Bry — originally published on Innovation Excellence.

How should Telcos innovate?

Ovum completed a throrough analysis about Telco’s innovation challenge: ‘Understanding How Telcos innovate’. The entire report by Emeka Obioudu is worth reading as it includes case studies on AT&T, Telefonica, Telenor, Orange, D&T, Singtel, Telstra, and Vodafone.

A few insights capture quite well the huge innovation challenges Telcos are facing, and the resilience they should develop:

• Innovation benefits should be encompassed in a broader scope: innovation is not limited to new product development but covers building efficient infrastructure, reducing costs, and improving processes. Ovum suggests the notion of ‘net innovation’ as a result of ‘net new revenues’, ‘net cost savings’, and ‘net non monetary benefits’, it draws attention on the fact that ‘saved revenues’ should be appraised similarly to ‘new revenues’ and ‘cannibalized revenues’;
• Telcos should stress their network as an innovation platform: ‘designing new product as an embellishment of their core product, Telcos can build a veritable shield for it’; by ‘extolling the role of the network as a differentiator’, not imitating, but ‘using the network to drive their innovation activities, making it adaptable and malleable for multi-purpose use’, they will keep their capital intensive asset as a considerable barrier to entry, and shape the network as a ‘killer structure‘;

• Telcos must ‘compete less and collaborate more‘: digital hub or units, VC units are a way to ‘create channels for the Telcos to engage and assimilate ideas and knowledge from external parties’, and to ‘prevent internal inertia’; Telcos must ’employ people that have an intimate understanding of external innovation trends’; nevertheless, these units ‘raise the question as to when the new products or services should be handed back to the product teams for development’;
• Innovation requires ‘agile and lean operations’: Telcos should empower community of developers to create Smart services by layering ‘risk-accepting’ accesses to their infrastructure through bold APIs, and cloud services, and setting-up an exchange ecosystem where partners can simply ‘plug and play’; similar innovation flexibility can be achieved internally with ‘modular design’: ‘AT&T has thus separated the building blocks of its innovation structure’;

• Innovation can not happen without resolute supports: a clear and explicit vision of the ‘what and how’ of innovation, CEO commitment in ‘communicating innovation objectives to the entire company and getting people to work together towards the same goals’, C-level sponsoring personified in a Chief Product and Innovation Officer, promotion of a “bounded risk” approach to innovation enabling to learn from failures, are essential to unleash an ‘innovation hungry’ culture;
• In a higher perspective, Ovum believe Telcos must recast themselves as “Enablers of the Digital World”, partnering and acquiring the capabilities that they need to enable the digital world.

What is a win-win API business model?

Does future of Telcos rely on proactive offerings composed of cloud services, infrastructure and APIs supporting the development of Smart services on their networks? Michael Vakulenko from Vision Mobile is on the same page in their ‘Telco Innovation Toolbox’:

• Presenting a vision of ‘Modular Telco’, comprised of three business layers: connectivity, services, and distribution;
• Exposing ecosystem as new distribution channel,  and how ‘APIs are the key technology enablers of this new distribution channel’;
• Unravelling  the mysteries to successful API business model: ‘considering developers as value-added resellers, Telcos should design API propositions for win-win outcomes, not expecting a source of direct revenues and up-front payment, but allowing free, small-scale usage of the API’;
• Finally, raising the real cost of doing nothing.

How should Telcos mould their ‘killer structure’ in the shape of attractive APIs and enablers? How to capture inspiration to design a cutting-edge exchange ecosystem with apps developers?

Read our next episode on : Enablers of the Digital World (2/2)

image credits: publicinterestfoundation.com, www.telco2.net, VisionMobile.com, ashklytoosi.edublogs.org

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