There is an interesting post from telecoms Europe which talks of Mobile’s over confidence problem and uses the phrase I am from the Mobile industry (i.e. Operator) and I am here to help ..
This is a play on Ronald Reagan’s words: “The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’”. By the way, Reagan also said “I am not worried about the deficit. It is big enough to take care of itself.” – Something we so regret now .. But let’s leave Reaganomics aside for the moment ..
The article goes on to say ..
But that is the problem. Very little of the innovation is coming from the operators themselves, and that’s why today’s self-confidence seems dangerously misplaced. Carrier leaders need to recognize that the industry culture has evolved to deliver scale and reliability. Even among small and young cellcos, it isn’t geared to innovation.
But the real challenge is to operators that seem not to have realized the world is changing. One cellco executive I chatted to recently was still peddling the line that “only we truly know what the customer wants and how they use their phone.” Evidently, they knew it so well that they didn’t bother supplying an apps store, a touchscreen phone, compelling downloads, or anything other than ringtones and walled-off access to the internet.
This is by now a well known problem .. The more difficult question is: Where can the Operator innovate and how?
For starters, let me say that many senior execs I know within the Operator community are genuinely interested in innovation and we have initiatives like GSMA awards Mobile innovation exchange and GSMA network APIs and others
Let’s break down the concept of innovation a bit further ..
When people talk of innovation, they imply that
a) The innovator invests commercially in the innovation and
b) The innovation benefits the innovator commercially.
However, the Web based innovation which we have seen over the past few years is primarily driven by a model of zero cost(or very low cost). So, with relatively low investments, the monetization is based on acquiring scale i.e. a large volume of content, large volume of users or some other parameter. Once this is achieved, the model then depends on getting small amounts of money from this user base – either through direct payments or through advertisements
This model does not apply directly to Telecoms since the network investment is significant, global interconnect is complex and costly and scale is hard to achieve.
To make matters worse, investments in networks (i.e. innovations) may not directly translate to greater revenues(as innovations should by definition). To add to more woes, the capabilities of the network are increasingly being decoupled from the network itself. By that I mean, value is abstracted at higher levels of the stack. The same function(example Location) can be implemented at higher levels of the stack(ex via cell id databases) on a ‘best case’ basis.
Thus, network capabilities alone do not play out as innovation(by that I mean innovation which benefits the network commercially). For example: Location capability at the network could be seen as an innovation. But increasingly with GPS, Cell id databases and other technologies, monetization of Location is not easy for an Operator.
The important thing to note is: ALL innovation is ULTIMATELY driven by the customer. The two caveats here being: In some cases – the customer may not initially recognise the need. In other cases, venture capital may sustain the innovation until such time that it starts making money(example Twitter). But ultimately, a group of customers need to be found who will pay for the service.
The dotcom era taught us that the model of simply acquiring a user base with no additional innovation does not work. In contrast, the winners of the dotcom era (example Amazon and then Google) have significant technological innovation coupled by a clear value proposition to the customer.
So, the customer drives innovation in ALL models
If we question this, then lets consider how the requirement for a new 747(Jumbo jet) arose. It comes from the airline industry i.e. the even when such a big endeavour is undertaken, it is driven by the customer – in this case the airlines (747: Creating the World’s First Jumbo Jet and Other Adventures from a Life in Aviation (Hardcover)
So, like or not – customers drive innovation – whether it is data traffic or air traffic ..
So, the next questions are:
What are customers willing to pay for? And
What do they understand?
There are two possibilities: Data or services
Data when sold as access is easy to understand and monetise. It is a big success story for Operators(HSDPA). Data when sold as data itself(Differential IP traffic/QOS etc) is a much harder sell -for the simple that it is not easy to guarantee a service(ex mobile user could pay more for guaranteed service/bandwidth – he walks under a freeway – loses connection – sues Operator for lack of service which he paid extra for). Variants of this example are impossible to prove
That leaves us with services
Users understand services. They are used to paying for services on the web(dating = match.com, travel = expedia etc) on a model of basic service is free but extra features are paid for.
When it comes to services, there are three possibilities
a) Deep integration of web based services
b) Third party pays access
c) Providing capabilities to others (Long tail model)
(a) Is the topic of a subsequent blog
(b) Third party pays for access is similar to the ‘free wifi at conferences/hotels’ model. This works quite well as an access level. Note that it is not the same as differential charging for IP traffic since it is not based on discriminating against some users to benefit other users
(c) Raises the question – which capabilities should the Operator provide to third parties? Over time, traditional capabilities are being decoupled from the network and are being provided by the Web on a best effort basis.
The one ‘soft’ capability that a network has is ‘Data’. More specifically data patterns. Services need data and certain datasets are more valuable than others. For instance fans of Nintendo wii gather in Oxford Street in central London at 6pm. This could happen for any number of reasons. Note it is based on anonymised data. So, the valuable insights are based on the Nappies and Beer concept
This means the Operator will sell insights to enable new services. It requires some convergent thinking and some legislative shift in mindset but it is not impossible. It is an idea I explored in my latest book Social media marketing .
I continue to explore these themes .. any comments welcome. A follow on blog will explore the significance of services with new innovation but to re-emphasise – Like or not – customers drive innovation – whether it is data traffic or air traffic ..
Image courtesy: http://www.liv.ac.uk/flightscience/FACILITIES/IMAGES/Jal.747.newcolours.arp.750pix.jpg