Make the callChoosing effective innovation in the telecommunications sector

A Southeast Asia perspective

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ContentsIntroduction .............................................................................................................................. 2

Part I: The new telecommunications landscape ...................................................................... 3

Part II: Surviving and thriving in this new environment ........................................................ 5

Path III: Choosing a path of good innovation ........................................................................ 9

Conclusion ................................................................................................................................. 18

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Introduction Telecommunications service providers have enjoyed astounding growth rates of mobile devices and subscribers over the past few years. Fuelled by the rise of the middle class in Asia Pacific, mobile devices and subscribers have been growing strongly. In ASEAN, the compound annual growth rate (CAGR) of subscribers has been 23.7 percent from 2007 to 2011i, to reach 621 million mobile subscribers.

Further, mobile data users in the region rose from 177 million in 2007 to 450 million in 2011 and are expected to rise by another 200 million by 2016.ii Mobile handset sales per annum have increased by 45 percent from 88 million in 2007 to 128 million in 2012.iii

However, despite this unprecedented period of expansion, the future market value of telecommunications operators is under threat. Two main factors are challenging the sustainability of current business models: crumbling consumer loyalty and the fragmentation of the value chain due to competition from new Internet players.

To survive—indeed, to thrive—telecommunications operators must choose a path of innovation. Further, they must put in place strategies to assist their innovative efforts to have a good chance of meeting their stated requirements.

These strategies encompass the technical, organizational and cultural. This paper sets out ways in which companies can implement innovative measures to position themselves for growth, and to emerge among the winners in the rapidly evolving telecommunications arena.

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Part IThe new telecommunications landscapeThe global telecommunications sector will be increasingly shaped by three major trends:

• ubiquitous Internet connections

• little consumer loyalty towards brand, platform, provider, device, and content

• a shift away from core telecommunications products.

Ubiquitous Internet connectionsImagine a world where telecommunications providers can engage with consumers across all aspects of their daily lives. From connected homes to smart cities, mobile payments substituting cash, and even medical services available at the touch of a button, the Internet is revolutionizing the scope, reach, and opportunities of operators.

This future may be closer than many people might think. The worldwide market size of Internet connectable devices like SMART TVs, Blu-ray players, gaming consoles, media players and tablets is expected to reach 670 million units by 2016iv. The worldwide smartphone market alone is expected to grow by 19% CAGR from 2011 reaching 1.16 billion users by 2016v. A future where most electronic devices are expected to be connected to each other via the Internet, forever changing the way people interact with their environment, is just around the corner.

Across the Association of Southeast Asian Nations (ASEAN), these changes are being enabled by increasingly progressive infrastructure, facilitated by strong government support. Within ASEAN, overall Information and Communication Technology (ICT) investment was estimated to be US$95 billion in 2011vi, representing 11 percent CAGR over the previous five years.

In addition, telecommunications operators in markets such as the Philippines, Indonesia, and Singapore have invested heavily in the modernization and improvement of infrastructure to increase data bandwidth and allow for high-speed connectivity. They’re responding to a young, tech-savvy population, which is spending its rising disposable income on Internet-enabled devices.

Indeed, consumers’ insatiable appetite for technological change is rapidly changing the way they interact and connect with each other. For example, Filipinos are shifting their interactions online, with 93 percent of the online population on Facebook.vii A future where daily life increasingly takes place within digital ecosystems may not be too far away.

Declining consumer loyaltyWith so many services and devices vying for consumers’ attention, people are showing little loyalty to brands, platforms, providers, devices, or types of content. In addition, the little difference between the various modes of Internet access, such as fixed, wireless, and 3G or 4G is decreasing. Consumers expect seamless connectivity to the Internet anytime, anywhere. This is particularly so for ASEAN consumers, who have been among the quickest adopters of the latest mobile technologies.

To keep customers in this environment, providers must serve their immediate needs with a service and experience that reflects their brand promise. In effect, this requires a deliberate change in focus from the acquisition to the retention of customers.

A shift away from core telecommunications productsTraditional voice and revenue streams have come under pressure with the slowing growth of new connections, the squeezing of margins, and shifting usage patterns. Mobile data service is the key driver of growth, but it is the non-telecommunications players—so– called over-the-top (OTT) providers–who are transforming the landscape and capturing much of these new value-added services (VAS) revenues.

These players are targeting parts of the traditional mobile network-operator value chain with innovative IP-based products and services, supported by disruptive business models such as freemium (where most of the content is available free supported by advertising, with paid access to premium content services) and ‘rentable’ downloads.

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In an overall sense, traditional telecommunications revenue streams are being challenged by the following products and services:

• VoIP-based applications or potentially even software-based SIMs, which threaten traditional voice products

• proprietary and third-party instant-messaging clients, which threaten SMS

• public cloud services and proprietary-device cloud services, which threaten enterprise services

• third-party stores and user-generated content, which threaten walled-garden content.

As a result, many telecommunications operators are progressively losing value compared to their newer, more nimble Internet counterparts.

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Part IISurviving and thriving in this new environmentIf operators remain on their current trajectory, cutting costs and making limited bets on innovation, they risk becoming marginalized as commodity providers. This could mean being classified as a “dumb pipe”, carrying traffic for other players rather than delivering additional value to customers.viii

The growth curve of traditional wireline and wireless companies has already reached maturity. To succeed, operators must make the leap to a newer, more sustainable growth curve by:

• increasing revenues through new business models

• enabling new value for digital consumers through digital ecosystems

• delivering superior customer experiences.

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Increasing revenues through new business modelsWe see opportunities for ASEAN operators to gain first-mover advantage in the OTT services market. This is particularly the case given that the disruptive competition from other competitors is still relatively light within the region.

With a shift towards IP-based products and services well underway, ASEAN operators need to find new ways to make money from services and data. Indeed, for first movers to succeed in this context, they must lead with converged, innovative, and differentiated digital services and use hyperlocal applications. These should draw on the GPS and wireless data functionality of mobile devices to deliver information, discounts, and other offers to consumers.ix

Further, telecommunication operators need to be able to design, develop, and commercialize new business models to benefit from the growth of data usage. This can be through offerings directed to customers based on advertising and freemium, or by providing intelligence, tools, and capabilities to business-to-business third parties based on pay-per-use models. As network distributors, operators can turn their bandwidth into revenue streams—particularly through the rich data they hold about customer usage and behavior.

Enabling new value for digital consumers through digital ecosystemsTelecommunications providers need to create an ecosystem of digital services and platforms that will help them to become a smart pipe. They need to position themselves at the center of digital ecosystems, and function as a platform or service provider to facilitate customers’ interactions with their environments and other people.

For example, operators can provide revenue enhancing networking services by utilizing their expertise in transmitting large amounts of data over networks. Deutsche Telekom has recognized this and created its Intelligent Networks business, which focuses on providing networking services in the energy, automotive, health, and media industries.x

Further, together with its external allies, Deutsche Telekom is looking to build an integrated home energy-management platform for customers to manage their energy use and automate their homes.xi Other operators such as Spain’s Telefonica have pooled their resources and harnessed their knowledge in integrating ICT technologies along with technology allies utilising web-based data to create a telemedicine service.xii

Developing such an ecosystem will create easily accessible services that cater to the unmet needs of the user and provide information that is personalized and contextualized to exactly what a user wants at a particular point in time. This facilitates additional revenue generation opportunities for telecommunications providers by rolling out additional products and services and thereby increasing data consumption and customer loyalty.

Delivering superior customer experiencesBy effectively recognizing customers’ needs and delivering a superior experience every time they interact with their customers, operators may achieve higher retention levels. Customer experience innovations are critical in the ASEAN context, as pre-paid subscribers—who have low switching costs and high rates of churn—dominate most markets.

Some operators that have understood the importance of innovation around customer experience have improved their customers’ network experience and concentrated resources on upgrades that have the biggest impact by creating an application that allows customers to mark spots in real time where they are experiencing poor network quality.

One such operator analysed the information, and correlated the data against network issues, to identify root causes and proactively engage customers to manage their expectations on resolutions and updates. This information directed the operator’s investment plans to upgrade specific areas and enabled it to use customer feedback to improve the overall customer experience and increase customer satisfaction.

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Figure 1: Top reasons for innovation failure

Among top 3 most frequent reasons

Failed to meet customer needs 63%

54%The product or service is late to market

52%The product or service is priced incorrectly

50%Customers find no new or unique value proposition

44%We encountered supply chain issues

43%We forecasted incorrectly

41%We encountered regulatory or quality issues

41%Our product or service cost was too high

Source: Accenture Innovation Survey 2009 - Survey of 639 company executives across industries

When potentially good innovations go bad In order to succeed in this new environment, telecommunication providers have no choice but to become more innovative. However, embedding innovation within an organization’s culture is not an easy task. There are numerous pitfalls that need to be avoided.

In previous Accenture innovation surveys, more than 80 percent of corporate executives said they

were unhappy with their company’s innovation results. The top reasons for innovation failure included:

• a lack of customer relevance

• slow speed to market

• incorrect pricing of new products and service

• no new or unique value propositions in the offerings.

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In our global experience, we have found that the innovation efforts of companies—not just telecommunications—fail due to the following reasons.

Too little voice of customerCompanies tend to focus on competitor actions, rather than embedding voice of customer into creating new products. There are often inadequate processes and technologies to collect and create a feedback loop with customers, in addition to a lack of skills to develop valuable insights. Further, the scope of innovation can be limited and not meet the full spectrum of customers’ needs, as departments within the company often operate in silos, without a full view of customers.

Focus on incremental innovationsInnovation efforts within companies are often characterized by a fear of failure and a lack of management commitment to the innovation agenda. This results in research and development budgets being reduced at the first sign of failure. The combination of these two factors leads to incremental innovations with limited impact on customers, rather than potentially more lucrative breakthrough innovations. Financially, companies simply do not generate significant growth premiums with incremental innovations.

Underdeveloped capabilitiesThe focus of recruitment, training, and incentives is often not aligned to innovation. Companies place emphasis on functional capabilities, and innovation skills are not prioritized. This can lead to unproductive behavior and underdeveloped capabilities that hinder true breakthrough innovations.

Inefficient innovation and operational processesCompanies regularly open themselves to significant wastes of time, money and effort due to inefficient processes and planning, and poor governance. They launch a new generation of offerings into the market without a robust planning process, which places demands on the company’s value chain, from the sourcing team and operational support groups (including finance and human resources) through to manufacturing, sales, distribution, service, and reverse logistics.

Further, structures, roles, and responsibilities among teams are often not clearly defined and there is no decision-making mechanism to direct cross-functional collaboration. This can slow the innovation process, lead to duplicative efforts, and result in poor utilization of available resources.

Companies that struggle with these inefficiencies face increased costs and longer times to take products to market. Their product portfolios are often overloaded with unnecessary projects, making it difficult to clear space for new—and potentially more valuable—launches.

Poor failure managementWe’ve also found that companies do not assess the real cost of introducing products or services into the market. Nor do they evaluate the quickest and most efficient path for removing products or services from the market if necessary. Organizations have not developed the ability to identify failures early on and quickly deal with such events.

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Path IIIChoosing a path of good innovation

The challenges presented by innovation are not unique to telecommunications operators. Many companies and organizations face the difficult prospect of finding new, value-added ways to deliver enhanced products, services, and experiences for customers. Indeed, such solutions involve a mix of technical solutions, organizational changes and cultural factors.

Figure 2: Creating an innovation driven telecommunications organization

Organization & Culture

Innovation Process

Enabling Technology PlatformLeveraging External Partners

InnovationDriven

Organization

We have identified four components that underpin the pathway to good innovation:

1. Enabling technological infrastructure: for telecommunications operators, technological infrastructure is the backbone for the development and deployment of innovative services.

2. Organization and culture: the organizational structure must support and encourage innovation.

3. Process management: organizations require internal processes that monitor and measure the risks and benefits of any potential innovation.

4. External alliance and collaboration: tapping the potential of external resources can bring in knowledge not found within the organization, and can reduce project risk.

This can be seen in Figure 2 below.

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Component 1: Managing technology to facilitate innovationFor telecommunications operators to drive innovation, technology needs to play a crucial role. As can be seen in Figure 3, technology has a major impact on new offerings and developments in network and service delivery.

Figure 3: Using technology to enable innovation

Network Intelligence

Network Infrastructure & Planning

Integrated Service Delivery Platform

Technology as the innovation

Enabler

Network infrastructure and planningTo support their innovation efforts, telecommunications operators need to set a strategic direction that fully exploits the trends of network convergence. This will involve convergent service offerings, new network infrastructure, and developing synergies in operations.

In this environment, innovations are all IP-based and telecommunication operators will need to move away from the traditional independent voice and data networks, with two different services layers, to an open convergent multimedia service layer for voice, data, and video with integrated operations support systems (OSS).

Further, operators need to explore the possibilities presented by long-term evolution (LTE) networks. LTE will radically change how consumers use their mobile devices, by enabling new capabilities well beyond traditional voice and data services.

Telecommunication operators in ASEAN have already recognized this, investing heavily in building LTE network infrastructure and capabilities. In Japan, DoCoMo launched its 4G network in December 2010 and passed the 5 million 4G customer milestone in August 2012.xiii In the Philippines, Smart Communications will launch its own LTE service for mobile broadband in August 2012.xiv And Globe Telecom—also based in the Philippines—will be rolling out its LTE services to mobile users by September 2012, as part of its US$700 million network-modernization program.xv

It is easy to see the appeal of the next generation in broadband networks. Research conducted by the United Kingdom’s communications regulator, Ofcom, shows that 4G networks will deliver more than 200 percent of the capacity of 3G technologies, while using the same amount of spectrum.xvi This has the potential to improve consumers’ experiences in accessing content and applications.

In addition, the all-IP architecture, combined with the efficient use of spectrum and bandwidth flexibility, is making it easier for telecommunications operators to manage and improve the profitability of their networks. This has helped operators to innovate via new business models, such as wholesale businesses to drive cost and operations synergies. Building infrastructure to cater to the increasing bandwidth needs of consumers will lead to massive Capital Expenditure (CAPEX) costs. Sharing infrastructure (Active, Passive, Spectrum, Base Stations or the network itself) will reduce the total ownership cost. Telecommunications operators can also resell the excess capacity to other operators as an additional revenue stream.

Further, through the use of 4G, telecommunications operators now have the opportunity to team with wireless providers, national retailers, PC manufacturers, Internet giants, and more beyond just other telecommunications operators. Some operators have started testing these new ways of working together to reduce ownership costs of their network assets and boost efficiencies through network and transmission sharing.

Vodafone UK and Telefonica, for example, announced plans to combine their wireless grid and build a joint mobile network using LTE technology.xvii

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Integrated service delivery platformsThe presence of the latest network technology and network intelligence acts as the backbone for innovation. But to enhance the potential of this infrastructure, telecommunications operators need to more effectively deliver new services to customers.

To do this, operators need to adopt a common service delivery framework for integrated platforms. In turn, this must be supported by a single service delivery platform that acts as a network gateway to integrate with different network technologies.

It is also critical to integrate and create the necessary data architecture to underpin business support systems (BSS), operations support systems (OSS) and with external parties. In addition, telecommunication operators need to continually improve service delivery by using structured innovation and development processes for products and services.

By having all these arrangements in place, telecommunication operators can:

• gain strategic advantage over competitors and lead innovation in the market

• industrialize the service creation life cycle by process standardization and using agile development methodologies

• reduce time to market for new services

• establish third-party collaboration capabilities to bring innovative digital services to market.

Network intelligenceTraditional network operators have rarely used their network data for the purpose of analytics. They could develop an improved service offering by using network analytics to proactively respond to service quality issues and improve customers’ experiences.

A customer’s network-usage data patterns can be used to develop new and innovative services, offerings, and maybe even new incremental revenue streams. Improved customer profiling can also be used in marketing efforts to develop customer offers that are better aligned to their needs. For example, a truly innovative concierge service can be provided to users by combining the knowledge of where a customer is (through location tracking of the device), what is available in the area (using directory services and previous online shopping/surfing data) and reviews/ratings of stores/products in the area (using social media integration and other product review/rating services). In addition, by being able to examine and use usage patterns in data across multiple devices, operators will have the insights and knowledge necessary for future customer innovations.

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Figure 4: Developing an innovative culture within companies

People

Idea sharing

Innovation Culture

Reward system

Promotion

Innovationgovernance

CEO hands on involvement(Set a clear innovation vision for the company)

• Hire I-oriented people with drive• Encourage job rotations• Develop I-oriented capabilities

• “Open door” approach to Senior executives• Sharing mechanisms (Web 2.0, blogs, forums,...)• Multidisciplinary I-teams • Learning by doing (brainstorming sessions...)

• Clear role definitions• Coordination mechanisms• Cross functional board committee for decision making• Centralized funding management

• Alignment of objectives between areas• I-encouraging retribution system - no fear failure• I-Results driven incentive structure

• Authority/empowerment for I-oriented individuals (project managers,...)• Foster autonomy• Positive reinforcement of idea generation (i.e free time dedication to idea generation “no fear of failure”,...)

Highly innovation oriented culture

Component 2: Embedding innovation within the organizational structure and its cultureNot all companies are naturally good at, or focused on, innovation. In some cases, it takes deliberate efforts by management to foster a culture of

innovation that works towards the development of new products and services, with the freedom to explore fresh ideas, and is unconstrained by a fear of failure.

We have identified six steps in embedding an innovation mindset within a company. (Figure 4)

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STEP ONECEO hands-on involvement

As with all major business endeavours, a company’s leadership must set the right tone for innovation. They must establish innovation priorities, and spell out what the company wants to achieve through innovation. Management must also help to monitor that staff involved in innovation have full access to necessary resources, including personnel, budgets, and senior executive time.

STEP TWOIdea sharing

Building an innovation culture is about more than just presenting employees with an ‘innovation’ and asking them merely to implement it. It’s also about more than claiming innovation as the exclusive remit of research and development employees or other specialists. Instead, all employees should be actively involved in the vibrancy of discovery and dialog.

To do this, companies can use facilitators such as knowledge sharing systems, open-door policies, and governance mechanisms to foster inter-departmental collaboration. However, one potential pitfall of this approach is that by engaging more people in the creation of ideas, companies can receive a flood of proposals–and of mixed quality. It’s essential to have processes in place to receive and evaluate employee ideas.

STEP THREEPeople

The creation of a recruitment and talent-development program that emphasizes innovation skill sets is crucial to enabling the innovation process. For instance, an entrepreneurial mindset and an ability to challenge the status quo should be included as part of the recruitment criteria. Further, a company can build innovative skills within its culture through a centralized academy that provides training content aligned to innovation competencies.

STEP FOURReward system

Innovation must be underpinned by well-defined processes, as well as performance targets and indicators. Too many organizations see such process guidance as a potential stifling of creativity. On the contrary, such rigor helps to ensure that the alignment between innovation and organizational strategy is constantly monitored and improved.

Like any other area of a company, innovation must demonstrate its contribution to the company. Without a clear demonstration of value creation, innovation efforts will fail because they will be unable to command the support and commitment that more mainstream business disciplines take for granted.

The value creation of innovation must be assessed by defining various review stages and milestones. With such disciplined management, it is also easier to define a clear incentive system to reward the innovators. It also makes it possible to include innovation goals within the performance objectives of employees, incentivizing them to innovate in order to advance their career.

STEP FIVEPromotion

Autonomy and empowerment in job roles is important to promote innovation within the organization. Employees who have strict job specifications and roles and are encumbered by bureaucracy, find it difficult to develop their innovations and ideas. To further promote and institutionalize innovation, some companies build an “innovation centre” that showcases the assets, capabilities, and innovations that have been developed internally. This helps to both inspire and empower employees to join in the innovation agenda.

STEP SIXInnovation governance

To facilitate an efficient decision-making process and that promising innovations are quickly taken to market, companies need a clear coordination mechanism in the innovation process.

While every employee should be responsible for idea generation and development, a dedicated innovation team needs to coordinate the process, manage budgets and resource allocation, plan the deployment of projects, and track the value created by innovations.

Some companies empower an innovation officer at the executive level to champion the innovation agenda and bring ideas to market.

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Figure 5: Managing innovation in companies

1. Innovation Target & Planning 2. Idea Creation 3. Explore 4. Develop 5. Pilot 6. Deploy

Go to Explore Go to Develop Go to Pilot Go to DeployG2 G3 G4 G5

GOAL • Determine organization’s innovation strategy

• Define business objectives of the innovation agenda

• Generate wide range of innovative ideas based on the innovation strategy

• Develop selected ideas into defined concepts - with high level value proposition, target clients, and projected financials

• Design, build and test

• Initiate IP protection

• Develop E2E business case

• Conduct pilot and verify if the asset operates as expected

• Commercial launch

• Quickly scale to achieve revenue objectives and maintain competitive edge

PLAYERS • C-level Engagement

• Innovation Leaders

• External experts

• External & Internal Experts/Partners

• Employees

• Innovation Management Team

• External & Internal Experts/Partners

• Innovation Management Team

• Innovation Labs

• Ideapreneur to champion the idea for the rest of the lifecycle

• External & Internal Experts/Partners

• Innovation Management Team

• Innovation Labs

• Ideapreneur to champion the idea for the rest of the lifecycle

• Project Team

• External & Internal Experts/Partners

• Innovation Management Team

• Innovation Labs

• Ideapreneur to champion the idea for the rest of the lifecycle

• Project Team

• Pilot Users

• External & Internal Experts/Partners

• Innovation Management Team

• Innovation Labs

• Ideapreneur to champion the idea for the rest of the lifecycle

• Project Team

• Pilot Users

• Employees within the corporate function

KEY ACTIVITIES • Identify and prioritize market spaces

• Gain insight from external experts

• Evaluate customer needs and market trends

• Define focus areas for the organization

• Ideation workshops with participation from all players

• Initial assessment of achievability of the idea

• Idea prioritization

• Test value proposition

• Assess proof of principle

• Build high level models to determine concept’s financial viability and profitability

• Define high-level go-to-market strategy and project plan

• Develop prototype

• Establish initial operating model

• Estimate market take up and build detailed business case

• Estimate and validate revenue and cost projections

• Identify pilot clients

• File patents

• Establish expected value creation

• Demand curve refined based on learnings from Pilot

• Develops commercial ready offering

• Operating model tested and refined

• Complete pro-forma financial plan for new offering/business

• Incorporate pilot observations into financial model

• Complete launch plan

• Transition to the existing business structure

• Key functions like sales, marketing, product development, HR and finance are in place to support scale up of the business

• Continuously improve business and operating model

• Assimilate idea fully into the business

STAGE GATE • Assess execution viability of idea and whether it is desirable

• Business case reviewed by innovation management team

• Determine whether the offering is ready for pilot

• Assess whether financial return is sustainable

• Determine whether asset/offering is ready to go-live and still provides competitive advantage

• Assess whether it can be considered a steady state business

• Has branding been completed?

• Monitor and assess value delivered by the idea

• Decommission the idea if value delivered does not align with the organization goals/objectives

Component 3: Managing the innovation process and pipelineThe success of innovations is highly related to the effectiveness of the innovation process itself. Organizations typically have multiple innovation projects running concurrently and, with varying timelines from project to project, it can become very difficult to effectively manage all the loose threads. Some companies might even lose track of the number of projects being pursued. This could result in unnecessary delays, budget overruns, and resource constraints impeding an organization’s ability to innovate.

It’s critical to have a systematic, stage-by-stage process to manage innovation. A data-driven, outcome-based approach should be taken to move each idea from one stage to the next. We recommend companies use an innovation team to manage the entire process, and to decide which project to proceed with, and which ones to shelve or drop completely.

As part of the first stage, the organization needs to decide on its innovation target and the business objectives underlying the innovation agenda. The company needs to work out the mix of incremental, platform, and breakthrough innovations required for achieving business objectives, as well as the key dimensions of innovation required to meet specifications around the prioritization of go-to-market strategies, customer experience, supply chain excellence, and more.

The innovation target in essence sets the guidelines for the next stage: idea creation. The ideas generated by staff and others must clearly align with the innovation objective and timelines. Further, the ideas must be clearly logged and tracked. This is very important in ensuring the current ideas can be used in the future.

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1. Innovation Target & Planning 2. Idea Creation 3. Explore 4. Develop 5. Pilot 6. Deploy

Go to Explore Go to Develop Go to Pilot Go to DeployG2 G3 G4 G5

GOAL • Determine organization’s innovation strategy

• Define business objectives of the innovation agenda

• Generate wide range of innovative ideas based on the innovation strategy

• Develop selected ideas into defined concepts - with high level value proposition, target clients, and projected financials

• Design, build and test

• Initiate IP protection

• Develop E2E business case

• Conduct pilot and verify if the asset operates as expected

• Commercial launch

• Quickly scale to achieve revenue objectives and maintain competitive edge

PLAYERS • C-level Engagement

• Innovation Leaders

• External experts

• External & Internal Experts/Partners

• Employees

• Innovation Management Team

• External & Internal Experts/Partners

• Innovation Management Team

• Innovation Labs

• Ideapreneur to champion the idea for the rest of the lifecycle

• External & Internal Experts/Partners

• Innovation Management Team

• Innovation Labs

• Ideapreneur to champion the idea for the rest of the lifecycle

• Project Team

• External & Internal Experts/Partners

• Innovation Management Team

• Innovation Labs

• Ideapreneur to champion the idea for the rest of the lifecycle

• Project Team

• Pilot Users

• External & Internal Experts/Partners

• Innovation Management Team

• Innovation Labs

• Ideapreneur to champion the idea for the rest of the lifecycle

• Project Team

• Pilot Users

• Employees within the corporate function

KEY ACTIVITIES • Identify and prioritize market spaces

• Gain insight from external experts

• Evaluate customer needs and market trends

• Define focus areas for the organization

• Ideation workshops with participation from all players

• Initial assessment of achievability of the idea

• Idea prioritization

• Test value proposition

• Assess proof of principle

• Build high level models to determine concept’s financial viability and profitability

• Define high-level go-to-market strategy and project plan

• Develop prototype

• Establish initial operating model

• Estimate market take up and build detailed business case

• Estimate and validate revenue and cost projections

• Identify pilot clients

• File patents

• Establish expected value creation

• Demand curve refined based on learnings from Pilot

• Develops commercial ready offering

• Operating model tested and refined

• Complete pro-forma financial plan for new offering/business

• Incorporate pilot observations into financial model

• Complete launch plan

• Transition to the existing business structure

• Key functions like sales, marketing, product development, HR and finance are in place to support scale up of the business

• Continuously improve business and operating model

• Assimilate idea fully into the business

STAGE GATE • Assess execution viability of idea and whether it is desirable

• Business case reviewed by innovation management team

• Determine whether the offering is ready for pilot

• Assess whether financial return is sustainable

• Determine whether asset/offering is ready to go-live and still provides competitive advantage

• Assess whether it can be considered a steady state business

• Has branding been completed?

• Monitor and assess value delivered by the idea

• Decommission the idea if value delivered does not align with the organization goals/objectives

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Under open innovation strategies, companies can take advantage of the skills and resources of an unlimited pool of potential allies, ranging from the general public to specific research organizations. Depending on the relationship between the innovation allies and the company’s innovation agenda, one of the following open innovation strategies can be employed.

For example, Verizon is working with Vodafone, Softbank Mobile Corp. and China Mobile as a member of what’s called the Joint Innovation Lab to create a single global platform for developersxviii. The stated requirement is to encourage the creation of a wide range of innovative and useful mobile applications. This kind of collaboration clearly creates a deeper pool of new ideas. But it also increases the potential customer base. The four companies of the Joint Innovation Lab together serve a billion subscribers.

Open Innovation doesn’t have to be with other companies only. Customers can be involved too. Companies could consider engaging selected customers during the product development process by having them interact with their researchers or by leveraging social media to create open forums where customers provide feedback on products and services as input to the design process.

A further form of innovation relates to acquisition-based innovation. The company’s acquisition can involve some form of payment for the exclusive use of an innovation, or even the purchase of an organization conducting research and development. This offers companies flexibility around which projects to invest in and at what stage in order to manage risk. However, this might also involve huge sums of capital (depending on the nature of the investment) and adherence to a lot of regulations.

Figure 6: Open innovation strategies

Topi

cs

Partners

Non

defin

ed

Partner-orientedOpen Innovation

Fully Open Innovation

Pred

efin

ied

Classical inter-firmcooperation

Topic-oriented Open Innovation

Preselected Anyone

The following stages are then typical for most projects:

• an exploration stage to assess the feasibility and the potential benefits of the idea

• prototype development

• a development stage to build the details of implementation and necessary products/services

• a piloting stage to test the project and conduct trials with select customers

• a final deployment stage to eventually go to market.

Once a project has been deployed, there should be measurement mechanism put in place to assess the performance of the project and evaluate the value provided to the organization.

Component 4: External alliances and collaborationsIn seeking out innovations, the most typical method is to look within. Under so-called organic innovation, innovation is driven primarily from the internal resources of the organization.

The key element of this approach is that the new ideas are developed in alignment with a company’s objectives and stated requirements. However, locating the necessary resources, skillsets and knowledge within a company may present a significant challenge.

To embed themselves in the digital ecosystem and increase revenues from services and data, companies sometimes need knowledge, capabilities, and resources that they do not currently possess. And rather than over-extending themselves and trying to develop such capabilities in-house, telecommunications operators need to move towards external alliances and collaboration strategies such as open innovation.

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ConclusionOver the next five years, the global telecommunications industry will undergo radical and unprecedented change. The ability for telecommunications operators in the Asia-Pacific region to succeed and thrive in this new environment will depend on their ability to embed innovation at the core of their operations.

In order to implement effective innovation, operators must focus not only on digital services, new business models, and customer experience, but on their entire culture and approach to innovation. Companies need to take a holistic approach to innovation and develop operations that actively foster innovations, effectively manage the innovation process, and provide the necessary technological backbone to support innovative solutions.

In return, consumers will embrace more innovative products and consume new services, driving data usage and average revenue per user. This can drive customer loyalty in a very challenging environment, and lift the engagement and satisfaction levels of today’s digital consumers.

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About the authors Luc GrimondLuc Grimond is a Senior Manager with Accenture’s Communication Strategy Practice based in Singapore. Luc’s working experience spans across Europe and APAC, where he helps communications and high-tech companies adapt to the changing realities of a convergent and digital world, to transform their operations and help them exploit new opportunities. Luc relocated to Singapore in 2010 where he has pioneered Accenture’s thinking in the area of innovation and digital monetization.

Monte HongMontgomery Hong leads the Accenture Communications industry practice within the Accenture Communications, Media & Technology (CMT) operating group. In this role, Monte oversees the development of Accenture’s strategies and capabilities for serving the wireline, wireless and cable segments, including most of the world’s largest service providers. Additionally, Monte serves as the CMT Asia Pacific Communications Industry lead, driving the industry agenda across a dynamic and hyper growth market.

Additional ContributorsSrihari ChakrarajanSrihari Chakrarajan is a Senior Consultant with Accenture’s ASEAN Strategy practice, based in Singapore. Srihari has over 7 years of experience and focuses on corporate and operational strategy for Communications and Media clients. He has worked with clients in Asia, Australia and India helping them develop market entry, product launch and pricing strategies, assess new business models and execute business and IT transformation programmes.

Contact detailsLuc GrimondCommunications, Media and Technology Strategy

Accenture Management Consulting

Singapore: +65 98512149

luc.grimond@accenture.com

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with approximately 259,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.

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