DT's Answer to Telco Innovation

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By Dimitris Mavrakis | 3Q 2017 | IN-4689

Telcos have been through several development phases of innovation, ranging from internal innovation departments, spinning off their innovation teams to Digital Business Units (DBUs) or even relying on management consultants and third parties to create innovation. Several DBUs have been recently decommissioned as they often were not part of the core operator organization; group executives did not have the necessary visibility to understand DBU outputs and in many cases, innovation outputs were expected to provide short-term benefits rather than long-term, incremental improvements.

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Digital business units, internal innovation and partnerships

NEWS


Telcos have been through several development phases of innovation, ranging from internal innovation departments, spinning off their innovation teams to Digital Business Units (DBUs) or even relying on management consultants and third parties to create innovation. Several DBUs have been recently decommissioned as they often were not part of the core operator organization; group executives did not have the necessary visibility to understand DBU outputs and in many cases, innovation outputs were expected to provide short-term benefits rather than long-term, incremental improvements.

For example, Telefonica Digital was founded in 2011 and was home to the Bluevia developer platform and several Big Data projects that allowed the telco to share aggregated analytics from its subscriber base to third parties. This would clearly be perceived as service innovation in the conservative access-driven telco business environment. Telefonica Digital was decommissioned during a restructuring process during 2014 and several other DBUs in other telcos suffered the same fate.

The question is: how should telcos innovate? It is relatively easy to outsource network innovation to a large infrastructure vendor or to create Joint Innovation Labs where the telco commands and the vendor executes. But how should a telco innovate to create new services and what should the governance model?

DT in-sources innovation

IMPACT


An example of a strong innovation strategy is DT, who has implemented an innovation plan that starts from its board: Claudia Nemat oversees Technology and Innovation and the telco has put in place a separate department that now handles innovation. This has several benefits compared to a Digital Business Unit:

  • Internal innovation is accountable and the executive committee (and board in the case of DT) is fully aware of innovation team activities. The same cannot be said for DBUs which may not be transparent to the core telco organization and in many cases, may be considered a cost driver.
  • Innovation addresses challenges faced by the broader organization, rather than try to implement business ideas that are completely new to the rest of the company.

Although it may sound counter-intuitive, DBUs have been conservative in partnering with external contributors (startups or universities) to advance their value proposition, since they have been detached from the main telco organization and not willing to implement potentially risky partnerships. On the other hand, a strong governance model and an internal innovation team with board-member buy-in allows considerable more flexibility to bring in third parties. 

Innovation starts with a strong governance model and a realistic game plan

COMMENTARY


DT’s choice to assign innovation to the highest level of company management is indicative of the company’s long-term commitment to its new department. Moreover, DT has chosen to innovate in “4+1” areas, with the first 4 areas addressing immediate challenges faced by the telco while latter 1 addressing a longer-term challenge. These areas include network innovation, increasing customer satisfaction, IoT and several forward-looking areas for 5G use cases.

Telco innovation must also be a collaborative process, especially for a multi-national telco. In this case, stakeholders from both the innovation team and the local operating company must drive a specific innovation initiative, rather than HQ pushing innovation to all markets without taking individual market peculiarities into account. Innovation usually follows an iterative process, which must reach a critical mass to have considerable effects to the telco top line. After this is achieved, internal innovation may be perceived as a positive catalyst across the company, which will organically create new opportunities and provide a platform for latent talent, while enabling a transition from waterfall development to an agile, iterative process.

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