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Monday, October 27, 2014

Telecoms service innovation & differentiation - The car model-year approach

Over the next few weeks, I'm speaking at various conferences and events that cover telecom service innovation, including TADSummit and The Great Telco Debate. There will be considerable discussion on whether (and how) telecom operators can compete in the services domain, both amongst themselves and with Internet peers.

One of the things which baffles me about the telecom industry is the constant focus on standardised applications and services. There is no other industry in the world which has hundreds of companies manufacturing identical, commodity products which have zero shipping costs. Where the cost and time of developing, or deploying, those products is measured in years - and where the process involves immense bureaucracy and compromise.

For most telcos, differentiation manifests in network (eg coverage, speed), or billing/charging of standardised components, particularly access to the Internet. Fixed and cable operators often have a greater range of unique options, because they are able to negotiate content deals, and exploit set-top boxes as a delivery mechanism and anchor-point for innovation. 

Mobile operators, however, still mostly compete on minutes/messages/data allowances, perhaps with some bundled-in content, and partner WiFi access. Some plans might "innovate" with pricing for Internet access, using zero-rating. 

But few operators have interesting and unique "own brand" services in their bundles. Telefonica has TUGo, its WiFi-access OTT VoIP app. Orange has its Deezer music service and Libon messaging app. Verizon has cloud storage and exclusive sports content.

While these types of things are important, they are generally the product of huge development efforts - large teams of people, big budgets, and development cycles measured in years.

What is missing is any way of creating smaller, unique "surprise and delight" services for bundles, which could capture customers' imagination, and gain extra market share or customer loyalty. 

I don't see operators thinking along the lines of "What could we do with 5 people, 3 months and less than $1m budget?" or even "What could we do with 100 teams of 5 people, 3 months each and $100m budget?".

My view is that the telecoms industry needs to start acting more like the car industry. 

It's not a direct analogy, but consider that most cars have a "model year" approach. The 2015 version of the Ford Whatever is very similar to the 2014 one. But it's got new headlights, an extra airbag, redesigned mirrors, coloured stitching on the seats and 10 other tweaks. It's essentially the same price, but it's had various changes made. This differentiates it from older models (encouraging upgrades) and from its rivals. Hopefully, it will gain the manufacturer a few % points of extra market share, and a few % points of extra margin.

In that scenario, the product manager has to work out how to add in the maximum number of new features that make a difference to customers, for the minimum extra design and tooling cost. They probably have a long-list of possible options, which gets whittled down to those which offer the best "bang for the buck". Some will be big changes - a new engine, perhaps - while others will be minor cosmetic evolutions. There's also a longer 5-6 year cycle of doing complete re-designs. The next "G", to use a telecom analogy.

A similar approach should occur in telecoms. By all means work on big strategic service innovations like cloud storage offers. But telcos should also be looking at creating and deploying new and cool extra services rapidly with small teams, or with partners. They need good ways of "on-boarding" such services - and perhaps deploying them to existing customers in a similar fashion to a handset/browser OS update.

This should happen at the level of customer segments, in a similar fashion to the car industry. Telcos could have plans or sub-brands for specific groups: music-lovers, teenagers, sports fans, home-workers, seniors and so on. Or the segments could align with regions - a Londoner plan, perhaps - or techno-psychological, like an Early Adopter Plan.

Within each plan would be standardised elements like phone calls and SMS, plus an appropriately-dimensioned mobile data offering. Then would be bundled content or partner apps. But then there could be unique, cheaply-developed and unique services, that could evolve and be added-to over time.

So for example, the Music-Lovers' plan might include Spotify in year one, but then add in a karaoke app, plus a free introductory online music or DJing lesson & discounted extra tuition. Perhaps  there could be a competition among subscribers, so once a month one lucky winner got an hour-long videoconference with a pop star. 

The alert among my readers will have noted that all these involve two-way realtime communications of some sort - precisely the sorts of apps that WebRTC can help bring to reality in weeks, given a suitable team. But that's just one of the rapid service-development tools available - internal and external APIs from the telco platform or external providers, web and app development frameworks, cloud-based hosting and so forth will all help. 

The key thing here is the management and process. There needs to be acceptance that the 5-person team works on the basis of optimising the time/price/performance variables independently. They're not forced to use internal APIs, infrastructure and service elements, but can if they choose. There's no forced mandate to use QoS or interoperate with IMS or the phone system. They can use the telco infrastructure, or they can host on Amazon if it makes more sense and saves money and time. They are free to use open-source or rebrand 3rd-party white-label products, take a DevOps approach and launch fast with minimal corporate scrutiny. They can add in OTT-style messaging or voice/video. They can use carrier billing, credit card or even Bitcoin - whatever makes most sense. The management can force the internal legal team to have 24-hour turnarounds. There needs to be an acceptance of glitches, and a good way to update / bug-fix if necessary.

It becomes the brand manager or product manager's job to do the overall bundle "design", in a similar fashion to the 2015 model-year car. It has to be cohesive as a proposition, but it also has to launch on time and to cost. Things which are too complex, costly or delayed may get canned - but because there are a dozen other new things, that's no huge loss.

Here's a random selection of potential differentiating service offers which telcos could/should offer in some of their bundles. The challenge should be "How can we get one or more of these in the bundle in 3-6 months, from a standing start?"

  • Mobile Karaoke app (between subscribers, or mobile-to-desktop)
  • Realtime sentiment analysis of calls - is the person speaking really angry, or just pretending?
  • Crowdsourced WiFi help function - "who knows how to log onto the Internet at Starbucks on Baker Street?"
  • Swipe-to-screen, pushing a web-page or image from a phone to the user's TV
  • A fan app, allowing people liking the same band or movie to send messages to each other, or set up a call
  • A concierge app for hoteliers to suggest visitors download, including zero-rated or sponsored roaming calls to the hotel guest-services desk
None of the above are "scientific". They're all just things I've thought up in a few minutes in a cafe. But telcos ought to be able to come up with 100 of these, which map to their market and customer base (using, ahem, external consultants if needed), and filter them quickly down to 10 or 20 of the most attractive, relevant, and easy-to-implement.

It is this type of grass-roots service innovation process that will make a difference - not years-long industry industry initiatives to get to a clunky lowest-common denominator that nobody will use. But it will require a software mindset, a good platform for on-boarding (and updating/removing) new services, and a lot of "air cover" to make sure new offers don't get mired in corporate wrangling. If the internal API team's proposition is that good, the new app development team will choose it. If not, they'll look elsewhere - and should not face problems for doing so. Speed and pragatism - a startup mentality - need to overrule the conservative approach to standards and network controls.

The 2015 and 2016 service plans should be subtly different from the 2014 one, in lots of small ways, which enhance the overall telecom model-year design beyond the sum or the parts.


Anonymous said...

Very nice article. Something i largely agree to and have been voicing as well.

Always wondering why operator world is few years behind the market in terms of innovation. I would have understood if there were 2~3 big operators only. But Planet earth has quite a lot of them.

Unlike past, i think service innovation will come out of developing world ( can already see WhatsApp and facebook packages being sold in INDIA and Africa).

Developed world (ATT types) will mostly focus on large network grade services ( eMBMS ?) for monetization only.

Anonymous said...

To Add

Unless Network operators embrace technology, engineers and Product people, its hard to see any in house innovation happening.

They will always depend on the technology eco-system to feed them innovation