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Posts Tagged ‘telecom innovation’

What if making a business case is not possible?

Innovation is a high-risk activity. You invest in something with the only certainty that you know (some of) your costs and none of your future revenues. Traditional wisdom tells managers to focus on a business case. If the business case is more positive than the other alternatives and gives a good return-on-investment, then you should invest. However this approach is flawed when dealing with innovative projects. There is not reference to calculate future revenues. Yes you can “guestimate” and make nice assumptions. However no business case would have indicated that you should invest in a 23-year-old that has put photo’s of his fellow students online. Some years later that photo page is worth many billions. For every positive example unfortunately there are a long list of failures.

The solution: focus on incremental innovation. Or not?

Nokia would be the best example of this strategy. You make the best hardware platform, a relatively easy software and make sure people can reliably make calls and send messages. Every investment decision had a positive ROI and positive margins. Unfortunately Nokia’s stock is close to becoming junk.

Can you make a business case for highly innovative projects?

Yes you can make a business case. Especially costs can be estimated and some high-level revenue estimates can be made. As long as this business case is used to validate if the project is economically viable, then there is no problem. The major problem is when this business case is compared with incremental innovation projects or investments in the core business. The outcome will be always negative. Disruptive innovations tend to go for lower margin business with inferior offerings that often cannibalize the core business. Over time the disruptive innovation will move up the value ladder and will be able to substitute the core business. Unfortunately the Innovator Dilemma in which you attack your core business and substitute it with an inferior margin business is difficult to accept by conventional managers. There are some companies that have excelled at this. The best example is Amazon that is seeing its core business of book sales being threatened by electronic books. The answer has been to provide e-book readers and tablets below the hardware costs with the idea to dominate the electronic book market by offering a total solution to easily buy books.

Ostrich techniques

The technique used by most companies when faced with disruptive innovation attacks is to consider them inferior and to ignore them. Unfortunately over time these solutions will substitute the existing offerings. This process is currently happening: e.g. SMS versus Whatsapp, LBS versus Mobile Phone location, calls versus Skype or Voxtrot, etc.

Unlike incremental innovation, being first in the market for disruptive innovation is key because the winner takes most of market. Number two can still take some market share but number three is no longer profitable. Examples: Google Search/Adwords/Youtube, Facebook, Linkedin, Twitter, etc.

The worst strategy for operators is the ostrich technique because implementing LTE will offer disruptive innovators all the tools they need to offer voice services over the top.

Discovery-driven planning versus business cases

In 1995 Harvard Business Review came up with discovery-driven planning. The idea has been successfully implemented by venture capitalists. You do not give money to a new venture to develop a new product, launch it and expand globally. You give money to develop a prototype in a few months. If this goal is met, you give money to validate the prototype with early adopters, etc.

Operators should start using discovery-driven planning to introduce disruptive innovations. Employees, partners, customers, etc. can “complain” about inefficiencies in the current offerings. The most urgent “inefficiencies” are selected, for instance via voting. Afterwards small innovation groups, made up out of experts in different domains, are formed to find solutions on paper for these “inefficiencies”. These paper-based solutions are presented to selected early adopters. Via continuous feedback the solution can be designed, the future price can be determined, the costs can be estimated and a high-level business case can be made. Early adopters are asked to find beta users. If a certain number of beta users express interest in the solution then the team will receive funding for a prototype.

Beta users are able to see the prototype come to live and to give continuous feedback. The prototype should evolve from paper to a real service in as few months as possible, 2-6. Afterwards the beta users get a limited amount of time to start subscribing to the real service and to extend the number of beta users. If a certain limit is reached within a certain time frame, then the beta product will get a next investment round. This investment round will bring the product from closed beta to a public launch. The last stage is expansion. If the public launch is successful then the last round of funding is provided that allows the service to expand, e.g. within all markets of the operator.

Any idea/service that does not make a stage gets killed. The complete disruptive innovation program should get a budget and should be initially independent from the core business. Direct support from the CEO and other senior executives is a must. Business cases are used to set prices, etc. but not to compare disruptive innovations with core business investments.

 

It will only get worse…

February 27, 2012 Leave a comment

In a recent article on Gigaom, the author is saying that it’s the end of the line for telco. Several arguments are brought to the table to explain that the industry as we know it today has seen its best days. Similar to postal services and railways.

What if the article is true?

What if the complex telecom standards no longer live up to the dotcom flexibility? What if communication is so much more than calls and SMS? How can an industry that seems so alive on the Mobile World Congress be like a dinosaur just before the ice age?

Assuming the industry will only get worse. What are your options?

1) Denial – deny the end of the world is near and focus on daily business. Once the recession is over things will pick up again. Tomorrow an operator will find the solution…

2) Survival – accept the industry is going to get worse so try to focus on those things that still continue: 4G networks for sure but what else:

3) Surrender – move to the winners (Apple, Google, Amazon, etc.). However, what if they are not hiring?

4) Move on – change industry. Where? Hiring freezes are general in most industries. Where do they need SS7 specialists?

Since the list ran out of options, there is only one more thing you can do: revolution.

The current model has failed. Let’s try to focus on the next model.

What if calls and SMS are free? What if monthly mobile subscription charges are €10 max? Where will the money come from in this case?

I have some ideas. They might be good or bad. However for sure there are millions of people that will have ideas. The challenge will be how to test millions of ideas without spending billions on useless ideas.

This challenge sounds very much like the same challenge venture capitalists and business angels have. So why not use their techniques to solve the same problem?

Instead of investing in yet another useless large scale OSS or BSS transformation project, why not set-up a telecom venture capitalist business with this money? There are several companies that use a similar set-up to do product innovation. They allow the crowd to suggest ideas, rank them, complement them, etc. They set-up a team of internals and externals to build prototypes for the best ideas. They allow the crowd and social tools to make publicity and a darwin-like experience to get to a certain level of profits or get killed. External companies could even be willing to participate in some of the ventures.

The best way to motivate is to create a challenge. Every approved idea will get €250K for 6 months. Who can successfully launch a telecom product or service that makes €1M profit within 6 months after idea approval? The team that does, gets €1M investment and stock options. Next challenge €10M in 6 months.

To cater for these telco startups, operators would need to set up separate legal structures, innovation platforms and expert guidance teams. Startups should be owned partially by the operator but also by their founders. Innovation platforms should avoid re-inventing the wheel continuously. Expert guidance teams should help startups with technical, business, legal, marketing, etc. support.

The idea should not be to invent the next SMS but to invent a whole portfolio of profitable new services because the industry should no longer be built around two or three killer apps…

From Pain Points to Demand Creation

February 7, 2012 Leave a comment

When you ask a company about innovation, they talk about how their product manager asks customers what they want and how their R&D delivers new features or new products. Lots of companies are following the pain points to solution approach and engage in evolutionary innovation.  Although evolutionary innovation is the best way to grow revenue from an existing customer base in the short run, there are several disadvantages that most underestimate.

Evolution means assuming the status quo will never change

Evolving products based on customer feedback assumes that the current solution is the best possible solution for the customer and only some features are missing. Showing status-quo-breaking innovations, a.k.a. disruptive innovation, to customers will often yield a negative response.

Whoever went to the postal service to try to sell email servers as the next generation letter [letter 2.0], will have had a very negative reply. The postal service would not understand why they would want to offer free-of-charge instant delivery to their customers because it canabilizes their existing business. Instead if you would offer a sorting machine that can sort double the amount of letters in half the time for half the cost, you are a lot closer to a sale.

Whoever read “the innovator’s dilemma“, will understand that disruptive innovation is often rejected by the current customers because it either canabilizes their business or is not resolving their specific pain points.

World-leading companies focus at most 90% on evolution and at least 10% on disruptive innovation. Some like Amazon and Apple seem to invert the equation.

Companies that do not focus on disruptive innovation will sooner then later run into problems. Disruptive innovations are becoming more common place and occur more frequently. Whole industries are being transformed as we speak. Existing players can disappear in a few years:

Media:

  • Books versus Kindle and eBooks
  • CD, DVD and Blu-ray versus P2P, mp3 and DIVX

IT:

  • Harddisks versus memory cards
  • Data center per company versus Cloud IaaS
  • PC with Windows versus Tablet with Android

Telecom:

  • Physical PBX versus Cloud-based PBX
  • Roaming versus VoIP
  • Nokia feature phone versus iPhone and Android
  • Circuit networks with pay per minute versus flat fee data traffic
  • Physical routers, firewalls, loadbalancers versus virtual networks and Openflow
  • High priced spectrum licensed versus white spaces

Towards a world of demand creation

Companies that want to innovate disruptively should focus on demand creation. Demand creation is about understanding customers hassles. Customers hassles are different from their pain points in the sense that customers do not always understand their own hassles, and even less tell you.

People never told Nokia that their phones were such a hassle to navigate the internet and to install applications on. Customers will not tell you that you need to build a touchscreen phone and app store to solve the hassles.

Disruptive innovators find those activities that customers waste a lot of time with, think are ackward, cost a lot but deliver few value, etc. by questioning, observating, networking and experimenting.

Disruptive innovators at the same time focus on developing technology capabilities in innovations that have a potential to change industries, e.g. VoIP, cloud computing, big data, collective intelligence, etc.

Disruptive innovators work together with early adopters to map out their hassles into hassle maps. To understand if solutions for these hassles are like painkillers [big market] or just vitamines [no or small market]. They propose the simplest solutions possible. Those that do not require a user manual.  First on paper and only when everything is validated [technical solution, business model, distribution, purchasing stakeholders, marketing] do they build a real prototype. Ideally customers can personalize the new solution towards their individual needs. Listening to customers is key. Being able to add features frequently and validating in a statistical manner which one contribute to the bottom line, allows innovators to rapidly go from an early beta to a ground-breaking product.

Disruptive innovations do not need to cost millions to launch. Good books on the matter are: Nail it then scale it, Demand: creating what people love before they know they want it, the lean startup, etc.

Telecom predictions for 2012

December 22, 2011 Leave a comment
Let me try to make predictions for 2012. Some will be negative, others will be positive for the industry.

Positive predictions:

  1. European television will become Cloud-based. Netflix, Apple, Google, etc. will launch all-you-can-eat video on-demand in Europe and change the current industry.
  2. M2M will become successful in the consumer & SME space but with moderate successes in the Corporate space. Some disruptive players will become market leaders. Due to lack of standards corporate adoption will have to wait till 2013.
  3. Telecom cloud solution providers will change the European telecom landscape. Twilio is a potential game changer.
Negative predictions:
  1. One or more major telecom operators will fail. With the crisis continuing some major telecom operator will get into trouble due to the high costs of LTE licenses and the abrupt drop in ARPU.
  2. Consolidation in the telecom provider domain. Either ALU or NSN will be losing its independence or Chinese players will merge.
  3. Nokia and RIM will lose their independence. Microsoft will absorb Nokia.

Let’s hope my negative predictions are wrong and a lot more positive things happen.

What is the cloud and how to generate Cloud revenues?

November 29, 2011 Leave a comment

An introduction  for telecom professionals on Cloud Computing and how to use the Cloud to generate new revenues…

Europeans have lost their telecom edge…

November 7, 2011 Leave a comment

Not so many years ago, Europe was the leader in telecom. Nokia was the dominant phone maker. Symbian the dominant operating system. GSM/GPRS/3G driven from within Europe. Ericsson the dominant network solution provider.

Fast forward 2011/2012

Only Ericsson is still leading the network solution market. Their mobile arm is being absorbed by Sony however. Symbian is dead. Nokia is in coma, let’s hope its doctor from the Microsoft hospital is able to revive them. LTE is being deployed widely, except for Europe.

The  new rulers are Apple, Google and Huawei. Countries like South-Korea and Japan have gigabit fiber to the home. Something no European country can match.

What should Europe do?

First of all there is a legal problem in Europe that blocks a lot of innovations from reaching Europeans. Europe does not exist in telecom world. Instead there is a collection of small and medium countries that each have their own incumbant operator and legal framework.

The first thing should be to move the telecom legal framework to European level and stimulate the creation of one open market. It can not be that in Germany or France it is not possible to get a virtual phone number [DID] without having an address of residence. Services like Twilio have a hard time to deploy in Europe because of this.

The European Union should drastically reduce its help to farmers, especially industrial farming, and instead use the funds to build gigabit fiber-to-the-home. The UK model whereby the fixed infrastructure is separated from the go-to-market entities should be a good model to follow. If we want to have more Internet companies in Europe, we should start by having fast Internet in all mid to large cities. As well as LTE access for all Europeans in 2013.

European Silicon Valleys

The next step is to create European Silicon Valleys in which startups and universities get easy access to venture capital. Without European innovation, it is hard to see how the European telecom industry will blossom again. Large telecom operators have shown few success-stories when it comes to telecom innovation. They are better at buying successful startups, then starting new innovations themselves. But before you can buy, you must have them first.

The Alternative

What is the alternative of not doing anything?

European employment will suffer. Telecom hardware and software development will be moved permanently to China and India. With only some small design shops in Europe at best.

Operators will become bitpipes which means that only a fraction of the current employees are needed.

American dotcoms and large corporations will attract all investments.

If there ever was a time to feel European, now is the time…

Five new businesses for Telefonica Digital

September 21, 2011 3 comments

Telefonica recently restructured its business units and now has a separate business unit called Telefonica Digital that is ran from the UK and has several offices around the world: Sillicon Valley, Madrid, etc.

Telefonica Digital is a clear sign that the traditional telecommunication business is no longer going to be the growth engine for Telefonica. So what should Telefonica Digital focus on. Here are five ideas. Some are already partially in progress but ease-of-use, consistency and completeness often can be improved.

1) Become the European Netflix

Google and others are likely to enter into the European market for all-you-can-eat video-on-demand, a.k.a. pay a monthly fee and see all movies, music, series, documentaries, etc. you want. Netflix is the American success story however there is still a window of opportunity to become the European one. Having great content is key in this market. However the most important competitor is not a company but a protocol: P2P. Some European countries have high piracy rates. People are getting accustomed to downloading movies and music for free. The longer Hollywood holds on to high prices in the digital age, the more chances there are that people will not want to pay any more for content. Even when all-you-can-eat service becomes available. Sometimes it is better to have every family pay €15/month then to have almost nobody pay €20/DVD.

2) Long-Tail Partner Eco-System

Open system for partners, big and small, to easily integrate into Telefonica’s back-office systems. Partners should be able to:

  • charge customers and handle recurring subscriptions
  • have single sign-on solutions and access to user profiles
  • update Telefonica’s inventory and CRM systems without magic
  • provision Telefonica’s base services (e.g. numbering plans, VLANs, etc.) in one-two-three
  • long-tail monitoring and alarming
  • long-tail settlement engine
  • long-tail support systems
  • Escrow and standardized contracts
  • Standard revenue sharing arrangements in which partners get the lion share.

Having a long list of long-tail partners will boost innovation at a relatively small cost. A regular operator takes 12-24 months from idea to production launch. In the digital era, new services should be launched daily. Without partners this is impossible. Telefonica should focus on lowering the entry level so two people in their garage can benefit as well.

3) Telco & Mobile PaaS

Offer easy to use telecom APIs to key assets like billing, network quality of service, user profiles, micropayment subscriptions, etc. Allow developers to integrate these telecom APIs into SaaS and mobile apps/SaaS. Have tools to easily create mobile SaaS and native apps. A cloud-based environment to host SaaS. Have a marketplace where customers can easily buy and provision the combined solutions. Solutions to support customers that need help for solutions they have purchased.

4) M2M PaaS

Similar to Telco PaaS but for machine-to-machine and the Internet of Things. Specific hardware plug-and-play functionality, backoffice plugins for monitoring/alarming/management interfaces, etc.

5) The Paypal of Mobile Payment

Operators have a limited time left before alternative systems will disrupt the micro-payment “oligopoly”. NFC solutions, micro-payment subscriptions, mobile payment, etc. are still not standard. Mostly not because of technical limitations but because the whole eco-system wants to see a high margin business. High-volume low-margin would however change the potential of short-term success. What if a micro-subscription (€0,10/month) would leave a merchant with €0,09 instead of €0,05 or less? The window of opportunity is closing fast however…

Mobicents is moving telecom development towards the cloud

September 4, 2011 Leave a comment

Although the video seems to be ahead of the software, the vision of mobicents for the cloud is disruptive. The economics of setting up a global communication infrastructure in the cloud and integrate it with Web 2.0, Smartphones, Internet of Things, etc. will drastically change when first-class open source solutions will be available:

Changing from Telco Grade to Web 2.0 Grade by fighting telecom myths

Most telecom operators are still thinking that software should be upgraded at most twice a year. Oracle RAC is the only valid database solution. RFQ’s bring innovation. If you pay higher software licenses, the software will have more features and as such will be better.

All of these myths will have to be changed in the coming 12 months if operators want to be stay on top of the game.

Upgrade twice a year

For telecom network equipment, two upgrades a year are fine. However for everything related to services that are offered to consumers or businesses, that means that operators are 180 times less competitive then their direct competition. The large dotcoms like Facebook and Google make software upgrades on a daily basis. 50% of all the files that contain Google software code change every month. Even if “a revolution” would happen and software upgrades would come every month, it would still mean a 30 times lag.

Operators need to start using cloud computing, even if they are private clouds, to deploy their back-office systems. The business needs software solutions to move at market speed. That means that if a new social networking site is hot, then it should be integrated into telecom solution offerings in days. Not in months or a year.

There are many techniques to make deployments more predictable, more frequent and more reliable. Offering extra features or integrations quickly can be done via plugins. You can have a group of early adopters, give feedback. If they don’t survive this feedback, kill them. If they do, scale up quickly.

Oracle RAC

Nothing bad about the quality of Oracle RAC but it is a very expensive solution that needs a lot of man-power to keep on running smoothly. Operators often pay a premium for services that could run equally well on cheaper or Open Source alternatives. Also NOSQL should be embraced.

If the cost of deploying a new service is millions, then only a couple of them will be deployed. By lowering hardware and software costs, innovative projects are more likely to see daylight.

RFQ’s and Innovation

It takes 3 months from idea to finalizing an RFQ document. 1,5 month to get a reply. 1,5 month to do procurement. Half a year in total. Not counting the deployment time which is likely to be another 6 months. The result is that the operator takes 12 months for any “new” system.

Now the question is if that system is really new. Because if an operator was able to define in detail what they want and how they want it, then the technology was probably quite mature to begin with. So operators spend fortunes installing yesterday’s technology 12 months late. Can anybody explain what innovation this is going to bring?

First of all operators should not organize multi-million RFQs for business or end-user solutions. These are likely to come late to market and can only be focused on mass markets.

Instead operators should focus on letting the customer decide what they want by offering a large open eco-system of partners the possibility to offer a very large list of competing services to their customers. The operator should offer open APIs to key assets (charging, numbering plans, call control, network QoS, etc.). As well as offer revenue share and extra services like common marketplaces and support 2.0 (social CRM, helpdesk as a service, etc.). This is called Telecom Platform-as-a-Service or Telco PaaS.

High licenses, more features, better

More features does not mean better. Most people want simplicity, not a long list of features. Easy of use comes at a premium price. Look at Apple’s stock price if you don’t believe it.

It is better to have basic systems that are extremely easy to use with open APIs and plug-ins. A feature by feature comparison will make you choose the most expensive one. However it is hard to put as a feature that the system needs to be easy to use.

In telecom, there is a natural tendency to make things hard. In Web 2.0 the tendency is the opposite. You can see the difference between Nokia and Apple. The Nokia phone would win every feature on feature comparison but the iPhone is winning the market battle…

Instead of organizing an RFP, let end-users and employees play around with early betas or proof-of-concepts. No training, no documentation. Let’s see which solution makes them more productive, the feature rich or the more straight forward. Just ask open APIs and a plugin-mechanism and you will be set…

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