Technologies such as big data and software-defined services are transforming customer expectations and creating new opportunities for Communication Service Providers (CSPs). However, in the fight for customers and revenues enabled by these technologies, CSPs must learn to innovate quickly and harness the potential of technologies such as 5G and IoT.
Innovation was traditionally the responsibility of the R&D department, which would focus on taking new technology and building a service or solution around its capabilities. Each year the budget for the department was allocated, with the business reporting its investment in innovation as a line item on its annual financial reports, says Gabriele Di Piazza, VP Products & Solutions, Telco NFV, VMware.
As the innovation ‘cycle’ becomes established in each company it could risk becoming ‘innovation for innovation’s sake’ rather than tying it to a specific problem. But the overall value of driving an R&D department always remained unquestioned.
However, this model isn’t as profitable as expected. Research of the top 1000 innovation companies from PwC’s Strategy division found no correlation between R&D investment and sustained financial performance. R&D is important but not sufficient.
For those service providers struggling to adapt quickly enough to new realities, the solution is not dialling up the percentage of revenue attributed to their R&D budget each year. They simply cannot afford to in times of falling margins. A fundamental rethink is needed to their approach to innovation both financially and practically.
Innovation today can have multiple drivers. However, the traditional approach to Research & Development-driven innovation is not part of it. There are two overarching reasons for this.
Traditional R&D focused on the development of technology that solved or improved small aspects of an established business or customer challenge. The R&D team could be housed within a standalone building (or ‘Lab’) and the benefits of their technology could be easily predicted and measured.
But as the Internet and the connected world have impacted business strategies and created the need for a wholesale digital transformation, these established methodologies have struggled to adapt in-line with not only the pace of change, but the fundamental shift in customer perception and engagement. In this world, change is constant, and it’s essential that CSPs are able to keep up with the pace.
Businesses must then imperatively turn to customer-centric strategies. With a single focus on the customer as the guiding light, businesses will drive new models of innovation. Any successful innovation strategy today needs to be closely aligned to the business strategy and to delivering value to customers as well as shareholders and board members.
The challenge being faced by CSPs is to define and deliver a digital strategy that moves them beyond the long-established service silos to a company-wide and customer-centric model for innovation. Supported and led at an executive level and towards a clear vision.
A chief digital officer can be instrumental in working with the CTO to drive the digital transformation agenda throughout the business, collaborating to drive not only technological innovation, but more importantly a customer-centric strategy.
Businesses that seek to innovate, need to move away from silos of technology, people, and processes towards dynamic, agile and flexible operations.
CSPs looking to drive successful innovation across their business need to move on from the traditional R&D mindset. The crucial role of R&D will evolve to one that enables community-wide innovation within the CSP. Ultimately this will deliver more customer-centric, real-time innovation.
R&D will create the capability that the CSP will implement. The actual implementation of innovation will then increasingly happen ‘on the fly’ within the operating teams – and possibly by customer self-service – using platforms and tools R&D develop, test and deliver.
The right combination of culture and collaboration is essential for successful innovation within a business. Without understanding why customers are loyal to your business and the value they receive from your services, a business cannot set the right goals for driving new thinking. While the value of research is questionable, all markets are open for innovation, whether they know it or not.
Collaboration is about breaking down boundaries; breaking down the internal silos, bringing new ideas through external partners, technology and services to their customers; and finally, engaging with customers both directly and through analytics. Whatever the drivers and the specific goals, it’s all about nurturing an ongoing change in mindset that sees departments coming together in new ways and working hand in hand for mutual benefit.
Companies need to develop sustainable innovation management processes – these should include what to do to test and prepare products for market, and how to stress-test appropriate business models. Developing such processes isn’t quick or easy but will ultimately turn a company into a serial innovator.
The author of this blog is Gabriele Di Piazza, VP Products & Solutions, Telco NFV, VMware
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