Telecom at a Crossroad, The Role of Innovation Catherine Bentley, Senior Consultant, Innovation 360 November 2014

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1 If you had to choose between your mobile phone and your automobile, which would you keep? A video of interviews asking people from around the world this question launched the Innovation 360 seminar,. Resoundingly, the responses to the question were a mobile phone. The value we place on communication with people and the world today links the importance of the telecom industry to everyday life. With mobile technology increasingly deepening its reach and breadth of services, this video of interviews expresses how the experience and utilization of mobile technology is more paramount than even transportation by our own cars. Therefore as the market and technology changes, innovation in telecommunications is not a choice, but an imperative. By helping users connect and understand the world, mobile applications for example are shifting the industry. The industry is witnessing a shift in the value chain of terminal- network- service to terminal- application as the use of mobile broadband penetrates global markets. As consumer behaviors and preferences change, so must the telecom organization. However the larger, less agile corporations find change difficult. They become reactive instead of proactive, lacking foresight to anticipate the next steps. Larger telecoms and service providers are realizing that within the organization, they must cultivate and nurture their own innovation in order to capitalize on the resources of their workforce, as well as their users, to drive the competitiveness of the firm. How to increase competitive advantage? Competitive advantage today is defined by the innovation strategy at play. Competitive advantage tomorrow will be contingent on a firm s innovative capacity and ability to be agile constantly challenging business- as- usual by hosting an organizational culture that relentlessly pursues new value focused on customer experience. Kamal Hassan, CEO The ease of adapting an innovation environment depends upon the size of the organization. Larger organizations tend to be more focused on revenue and sustainability. Smaller firms have tremendous opportunities to outpace the industry in using their resources to bring new innovations to market (leading to disrupting the industry in many cases). Telecom firms have found their ability to challenge business- as- usual and embrace user experiences are pre- requisites of an innovative organizational culture that leads to competitive advantage. What types of innovation are most disruptive? Organizations focused on finding innovation in costs saving measures come to realize this limits innovation capacity, as a floor always exists. While easy for executives to implement, these bottom- line activities are only incremental. Top line innovations on the other hand drive productivity where new value is added. To create new value means finding new markets, or playing in the white space. White space lies in customer experiences and through a process of willingness to explore new business model innovations. White space is found at the intersection between customer unmet needs, technology discontinuities, and market opportunities. 1

2 Those organizations in telecom focusing on customer experience will realize the heart of innovation is within the technology and the network. What is innovation? Innovation is the process of challenging business as usual by combining (new and old), (science and art), (stakeholder interests and third- degree customer experience). It rests in commercializing ideas that create value for the customer. Innovation is not only found in new products and services but also in re- engineering older products and services, building upon and improving what exists to meet new or enhanced customer expectations. As a science and art, innovation calls on all participants to draw not only on the analytical, logical right brain to find solutions, but also on the creative left brain to bring about an idea that has the potential to be a breakthrough or disruptive innovation. While first and second- degree customers are those relationships that are both direct and indirect, third- degree customers are those existing users of a service plus those who you never thought about and/or who are future potential customers. Innovation responds to first, second and third- degree customer interests and needs. How to enable innovation? The number one asset and challenge within any organization is its people. In the Cultivate phase of Innovation 360 s 5- Step Innovation Framework, we help organizations ignite the required environment for encouraging creative approaches to the business model, to operational processes, to management and to new products and services. The 5- Step Innovation Framework begins with cultivating creative thought in the workforce. This is driven by leadership but must be inclusive in its design and execution (everyone must be part of innovation). The Cultivate phase challenges organizations to address the following: The role of the human resource department is increasingly important as it instills the context under which people are hired and managed. Traditional models of human resource management stifle innovation. Job descriptions and KPIs integrated with pay- for- performance does not allow for creativity. On the contrary, it is a disincentive to participate in the innovative thought process, which naturally through its iterative practice, distracts employees from achieving such measurements usually tied to financial reward. Disruptive innovation is most often found in startups that are free to lose, free to be creative with their products/services and their business model. Innovative corporations combine a startup mentality and assumption of risk within the larger organizational structure. Encouraging employees to find this perspective generates new ideas and opportunities for innovation at all levels of the organization. How to recognize innovation opportunities? The second phase of Innovation 360 s 5- Step Innovation Framework is Anticipate, where we evaluate trends and scenarios that help organizations craft a strategy that targets the potential of new markets and potential users needs in the future. It s not about solving today s 2

3 challenges. As Kamal Hassan notes, it is about what are we going to do when new markets open? Innovation 360 leads clients through a process of identifying a number of different types of trends: Trends that are the core of the business. Trends adjacent to the business. Trends that might actually cause complete disruption to the business and the industry. Driving trends or those concepts, challenges, behaviors, and technologies that are likely to call for new set of metrics to solve, or are likely to affect the demand in the near or far future. Solution trends or those new and emerging trends that are being developed to tackle the challenges presented by the drivers. Where is innovation found? Innovation is the tension between Exploitation (the method of leveraging assets and core competencies) and Exploration (the actionable measures that unveil new possibilities). The Generate phase of Innovation 360 s 5- Step Innovation Framework helps an organization generate ideas around the innovation strategy that was developed during the Anticipate phase. Generate is the actual implementation of the strategy. It is living in the tension between Exploitation and Exploration. Idea generation or ideation begins with understanding the trends and scenarios that influence the innovation strategy, creating a governance system to submit, evaluate and select ideas for acceleration, and establishing a formalized implementation/commercialization process. Ideas are driven towards an organization s innovation formula by focusing on specific types of innovation that will yield expected strategy results. For example, telecom growth opportunities (as identified by various telecom players and supported by attendees of the Innovation 360 industry seminar) include: Servicing low ARPU (Average Revenue Per User) consumers through new low- cost products and service. Mobile broadband services, and/or adoption of LTE services (such as video, VoIP, other service lines) through smartphones, dongles, etc. Emerging market SMS enabled applications for public service information and advisory services, notably in agriculture and health. Money transfer, mobile payments. Network outsourcing. Addressing new infrastructure competition. Green environmental impact reductions yielding new business models. 2G & 3G upgrading the network infrastructure. 3

4 Leveraging an organization s human resources to explore such ideas for new customer experiences requires employees to be free to investigate opportunities. For example, Google is always on the cusp of disruptive innovation as a result of targeted employee productivity: 70% of an employee s time is dedicated to core business activities; 20% is allocated to considering adjacent opportunities; 10% is committed to new business from the third- degree customers. Innovation initiatives must look at their human resource and finance divisions to realize internal innovation shifts. Human resource divisions need to be a part of the innovation governance program that rewards for creativity, not performance, and which doesn t punish for failure. Additionally, innovation should be led from a fund, not a budget with contingencies. Balance Score Cards and Key Performance Indicators (KPIs) focused on stability, risk mitigation, and immediate core activity including cost reductions, produce little creative thought and can hinder innovation. Success is not characterized by structure and stability. Rather, success today is a factor of innovation that inherently is chaos in process. Thus, organizations must create a system of innovation that is institutionalized in order for it to survive in perpetuity. So, how does ideation happen among the workforce to bring about innovation? The answer lies in providing tools and resources for teaching creativity, understanding the challenges and direction of the company, possessing a desire to improve the flow or productivity of the business at large, and focusing on employees specific roles in driving creative thought. When the workforce is given time to explore new ideas in a constructive manner, new ideas flourish. For example, attendees of the telecom seminar identified the following are areas where new ideas in telecom can expand: Network functions virtualization (NFV), an architecture using virtualized technology, opposed to physical hardware, to create blocks of network node functions that can be linked to form new communication services. Vertical telecom services, a new business model innovation where for example a telecom service provider creates solutions specific for the user or for an industry instead of current horizontal services that deliver all services to everyone. SIM card as an operator asset, a way of monetizing the ecosystem by selling data. Content innovations that are resource rich and drive the most traffic in the industry could lead to new costing structures and network designs yielding efficiency improvements for content providers and new revenue streams for operators and service providers. Innovation 360 utilizes engaging seminars, workshops and trainings to nurture the innovation culture. Our tools are fun, interactive and team oriented to guide all levels of the workforce through idea generation around a strategy, a job to be done, or particular challenges. We encourage our clients to consider our IdeaFusion product that integrates consulting services and workshops with an online idea management tool to help build an innovation culture and system that produces results. 4

5 Once found, how do innovative ideas become realized? In the Innovate and Accelerate phases of the Innovation Step Innovation Framework, ideas become innovation. In these phases, the business case is determined and a minimum viable product (MVP) to implement or commercialize is built around selected ideas. This process requires an infrastructure that enables creation of the business case (revenue costs and structure) and design of the MVP. Next, in the prototype phase, a live prototype is constructed and ready for customer validation. The result leads to implementation or commercialization of the innovation project. All of this is accomplished through the Corporate Innovation Accelerator or Innovation Center products offered by Innovation 360. Our infrastructure model for bringing ideas to life can be integrated into any size organization. From defining innovation program management to building the systems and environment ripe for innovation activities, the accelerator and innovation incubator effectively help firms to develop strategically balanced ideas into profitable innovation. Conclusion Innovation 360 believes disruption is waiting to happen in telecom. Today tremendous opportunities exist for innovation to create a new space in communication technology. We look forward to helping telecom operators, service providers and other equipment and software companies discover the ingenuity available in their own organizations, as well as in their customer base, to confront tomorrow before it becomes today. About Innovation 360 Innovation 360 is a global innovation management consultancy that works with public and private organizations to define their future challenges and overcome them through innovation. The firm s expertise includes innovation strategy, execution, innovation support vehicles or enablers and leadership development. Further, they advise and train on business model design and idea- to- market execution for both corporations and SMEs. They offer innovation products, trainings and workshops, and advisory services. Headquarters are in Dubai, UAE. Contact Catherine Bentley at for more information. 5

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