The case for defining a new approach to innovation for communication service providers
As is the case in most technology businesses, communication service providers (CSPs) have traditionally relied on research and development (R&D) models to drive innovation. Such models often focus on developing technology to solve or improve small aspects of an established business or customer challenge. Housed within a standalone building (or ‘Lab’), R&D must solve a problem or create a new piece of technology, the benefits of which can be easily predicted, to a cost which can easily be quantified to demonstrate return on investment.
Here’s the problem. Research on the top 1000 innovation companies from PwC’s strategy division found that this approach has created an organisational disconnect; there is no correlation between R&D investment and sustained financial performance. While R&D is important, it is clearly insufficient on its own.
For those service providers struggling to adapt quickly enough to new realities, the solution is not necessarily a case of dialling up the percentage of revenue attributed to their R&D budget each year. Nor can they afford to, during times of falling margins, when there is less money to allocate. They need an alternative approach both practically and financially: they need to fundamentally rethink their approach to innovation.
Above all, CSPs should be looking to drive innovation across their entire business. But to do this successfully they need to move on from the traditional R&D mindset. R&D will of course always have a role, but its focus should shift to enabling innovation that will be implemented by a wider community within the CSP; to ultimately deliver more customer-centric, real-time innovation. In other words, R&D should create the capability, and then allow the broader organisation to implement it. In this way, the actual implementation of innovation will increasingly be done ‘on the fly’ within operating teams – and possibly by customer self-service – using the platform and tools R&D develop, test and deliver.
For a business to innovate successfully on a platform delivered through R&D, it must also develop the right combination of culture and collaboration. 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. At the same time, it’s always worth bearing in mind Henry Ford’s famous saying: “If I had asked people what they wanted, they would have said faster horses.” My point here is not that the value of research is questionable, but that all markets are open for innovation, whether they know it or not.
Collaboration is about breaking down boundaries; breaking down the internal silos, engaging with external partners to bring the right new ideas, technology and services to their customers, and finally, engaging with customers directly and through the use of 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 process considerations such as how to test and prepare products for market, and how to stress-test appropriate business models. Developing such processes isn’t necessarily quick or easy, but will go some way towards making a company a serial innovator.
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