Understanding the Fundamentals of Telco Innovation (by a practitioner)

Posted by on January 15, 2013 in Blog | Comments Off on Understanding the Fundamentals of Telco Innovation (by a practitioner)

Understanding the Fundamentals of Telco Innovation (by a practitioner)

Telco Innovation is a Values Problem

Telcos are rapidly headed towards their own fiscal cliff because the model they built their industry upon is crumbling. Many of them don’t believe it, but only in the same way the Roman Empire, or any empire, constructed a worldview mostly in terms of past glories. There is also a good dose of denial – “it can’t happen to us.” That is the child-like naivety that we all like to cling to – that bad things only happen to other people. Telco innovation is the only way out, but it remains an elusive and misunderstood concept.

The problem is one of human psychology and no business strategy will fix it. Just like any procrastinator knows, change must come from within before circumstances will improve. A procrastinator is entirely aware of his self-destructive behaviours, but constructs elaborate excuses to blame his plight on external factors – lack of money, lack of this, lack of that.

That’s why a parent who balls at their underachieving child is making a critical error, what logicians call a category mistake. An underachiever is fully aware of parental values like the importance of hard work, the benefits of good grades and so on. They are fully aware of their laziness. Shouting the same old refrains of “encouragement” will make no difference. An underachiever is afraid of taking responsibility, as are the majority of folks in a telco whose job it is to build a new company. The reasons might be different, but the psychology is the same. Telco innovation begins with true self-awareness.

I use the term “Telco Innovation” because, as I will argue, there is a huge misunderstanding that innovation is an elastic set of ingredients that can be copied from company A (say Google) and applied to company B (say Verizon). It’s a bit like drinking Matcha green tea and expecting to become an enlightened Zen master. It doesn’t happen quite like that.

Disconnected Values

As my industry associates at the fantastic VisionMobile point out in their “Toolbox for Re-inventing the Telco,” the very basis of competition for a telco has changed forever. The advice offered is that telcos need to “move their innovation focus from technologies … to ecosystems,” and that operators need to seek ways to “build unique user value atop the platforms.”

Many of the points in VisionMobile’s paper are well argued. I have made similar arguments for some time, including my own attempt to discuss the importance and impact of ecosystems in my most recent book Connected Services – A Guide to the Internet Technologies Shaping the Future of Mobile Services and Operators, which is really a book about telco innovation. I wrote it for those who had already understood that they had to figure out how modern software ecosystems work. The so-called patterns and paradigms are mostly unfamiliar to the majority of folks working for carriers.

But the problem is more widespread than just the telcos. Many of the vendors are equally stuck. To illustrate the problem, I will mention the strategic consulting work I did for the world’s largest supplier of messaging infrastructure. I was asked by the CTO office to facilitate the 5-year strategic planning workshops. I spent most of the time educating the team about ecosystems thinking, platforms and how the mechanics of innovation in a new (unknown, unpredictable) market are totally different to what they were calling innovation. Indeed, their tagline was “Innovation Assured.” As I pointed out, it is anything but. Telco innovation is even less assured.

The lack of assuredness became clearer when I started consulting as “Chief Disruption Officer” for a major UK carrier. It was interesting to see how the messaging team were optimistic that the same messaging supplier I knew well would provide them with new tools for building innovative services. Having just been on the other side of that supplier-customer relationship, I knew the folly of such optimism. The supplier had no innovation to offer.

And the problem was self-perpetuating. The reality was that the supplier was waiting on the customer to fund the innovation by placing an order for a half-baked product idea. There’s nothing wrong with half-baked. That’s what most innovation is initially. Indeed, my new neighbours in Silicon Valley have turned this into a methodology, called the Lean Start-up. More on that later, but let’s finish the current tale of woe first.

I hope that I don’t have to spell out the irony of the above scenario. If the 2-way expectation of innovation support was symbiotic, then it might have worked, but it never works like that with telco-vendor relationships. Suppliers want to be innovative, but not without the guarantee of an order. Telcos want supplier innovation, but not without other guarantees.

I will be blunt about this. When I proposed various “disruptive” technologies, solutions and vendors to my same colleagues in the messaging team, I was ultimately told that the reason they like to use the established vendors had nothing to do with cost, as I often mistakingly assumed, but that “we need someone to blame when it goes wrong.” This returns to the mentality of the underachiever and procrastinator. These guys in their established jobs did not want to take responsibility for innovation. Better to “buy innovation” from a vendor so it’s their fault when it all goes belly up.

As a psychologist would tell us about this situation, there is a disconnect in value systems. What the “innovators” value is their job security and avoiding blame for mistakes. Within an operator’s “99.999% reliability” culture, making mistakes is regarded as a sin. All KPIs and metrics back that up. Ironically, the purgatory for making mistakes is often to be assigned to a so-called “innovation” program, but I won’t bore you with that tangle of thorns. It goes without saying that such job- and face-saving values are incongruent with innovation.

Change The People First

These kinds of issues are at the very heart of the problem and are why any amount of “innovation strategies” liberally applied are going to fail when they don’t take into account value systems and human psychology, as they often don’t . Managers will read endless numbers of innovation books and case studies. They will hold endless numbers of innovation workshops and launch, often to a cry of moans, yet another innovation scheme that internally everyone “knows” is going to fail, and so, unsurprisingly, does.

I talk with some experience. I have spent my entire 23 years on the forefront of innovation. It’s all I do. I have never spent one year working a “regular” job profile, repeating a pattern. I work endlessly with blank sheets of paper to find solutions to unsolved problems. It is exhausting, yet thrilling. I have done this in research labs, engineering labs, start-ups (my own and others), in large companies and small, in “conservative” cultures (e.g. Middle East) and “liberal” cultures (e.g. Silicon Valley). As I write this, I am working on my latest “labs” project, which is setting up an “innovation lab” for art.com as their “Chief Renaissance Officer” (couldn’t resist that title).

Prior to that I did the same for O2 and Telefonica. Prior to that I did the same for Motorola EMEA (their “Mashing Lab”). I have become somewhat a rare commodity and expert in figuring out these problems. Over the years, I have understood that the issues are a combination of psychology and technology, or attitude and execution. Tackling one without the other NEVER WORKS, but is a common mistake.

When I assisted O2, I began with the title of “Open Platforms Evangelist.” Usually an evangelist preaches to external players, but I took it upon myself to preach internally. I knew that mindset change was vital. I lost count of the number of times managers of various grades asked me “So what do we do?” I consistently answered “Change the people.” I meant literally and metaphorically. However, a common response was “OK, but what next?” Which meant that they didn’t want to change, like underachievers and procrastinators avoid changing themselves, some times until it is too late.

If this fundamental aspect of mindset change is missed, no amount of innovation programs, expensive consultants, white-papers and labs projects are going to succeed. Again, I speak from experience. I was granted a 7-figure budget in O2 to run an “open platforms” project, but it failed because it was killed by corporate anti-bodies from a dominant culture with different values.

It is an insidious problem because often those that rally to the innovation cause do so without realizing how deeply their own corporate-cultural biases run.

Whilst the necessity of mindset shift is not particular to a telco environment, the incumbent value system is. Telco value systems are in opposition to those required to orchestrate truly innovative programs and initiatives, especially the kind that underpin so-called ecosystems thinking, software DNA and now, “Big Data” (I will get to that). I think that this topic of “telco mindset shift” is worth studying because the assumption that innovation techniques are universal is wrong and some telcos have been spending hundreds of millions in acquisitions, programs and people, only to fail. It’s also why the glib application of ideas from Silicon Valley, like the Lean Start-up, are often a huge mistake, ending in failures that lead to the wrong conclusions about innovation. I was one of the first to attempt a Lean Start-Up method within a telco behemoth and learned much from the experience(s) (I did it more than once.)

What goes undocumented about many innovation patterns is the unspoken context of values. And this is a very hard problem to crack, mostly because it seems to me that organizations don’t have the tools to become self-aware of their cultural biases. It’s like asking an Englishman what makes him English. It’s not a conscious expression, so it’s hard to pin down.

This cultural confusion is why it’s possible for an organization to “reorganise” itself supposedly around a set of new, more innovative, values, only to find that nothing happens. They spend man-years of effort constructing new mantras, like “Be Bold” and somehow fail to be bold because, in truth, they don’t really want to be, or don’t really believe it.

It’s not that the new values don’t make sense, or are misunderstood. It’s not that people don’t want to change either. Quite the opposite is usually the case. It’s that the REAL values that make the company what it is, are simply misunderstood – they are too implicit, too imbibed, almost to the point of invisibility. They are deeply ingrained habits. They are cultural norms that are so “normal” that adherents don’t even think to question them before layering on new values that are like adding oil to water.

Many corporate managers don’t believe this. They make a fundamental mistake because of their own, usually above average, intelligence. They will say that they KNOW we have to change, or we KNOW we have to take risks, or any other well-reasoned statement, but the problem is they don’t “KNOW” at all. This is because they confuse their intellectual grasp of a problem and solution with real knowledge. In the English language, there is only one word for KNOW. But there are two types of “KNOW” – to know something factually and to know something experientially. Much of the thinking that drives innovation programs in telcos is based on anecdotal knowledge only. It is read in books. It is blindly copied from other companies – “We want to be like Google – let’s have a ‘do your own project’ day.”

This is why I insisted that one senior manager in O2 accompany me to Silicon Valley to participate in the first (and last – shame on them) Twitter developer conference (Chirp), including a 24-hour hack. That’s when we also went to visit the now widely known Twilio in San Francisco, a small bunch of well-funded enthusiasts inventing their own “open telco” world after the frustrations of dealing with the old-school closed one. The *experience* of hanging out with various folks with “software DNA” opened my colleague’s eyes. As I have tried to explain on many occasions, there are “developer cultures” out there that come with their own sets of values. Even many developers don’t understand this.

Ecosystems Can’t be Engineered

Why do I bore you with these details? Because they are fundamental to innovation, which is a human process. That’s why merely thinking of ecosystems as N-sided business models with new rules of engagement will not lead to anything useful. That’s why merely adding an API program to a telco, even if it does align with developer business models, will not succeed. Ecosystems are orchestrated by humans, not business rules and mechanisms documented in lengthy white papers by academics who often don’t understand the real mechanisms underpinning their models because they unwittingly factor out the cognitive elements.

It is still common to hear comments like “Apple don’t have customer workshops” or “Google are an adhocracy” as justifications for aping the same. These are the comments of fools who simply doesn’t understand company culture evolution. Why should they? Most of us go to work to bend metal or build spreadsheets, not figure out the bigger context in which we do those things. The metal-bender doesn’t question his need to achieve high quality. Everyone knows the principles of TQM, Six Sigma and Kaizen. That’s why he’ll go for twenty years doing something that he could’ve done better or differently, because to “disrupt” himself is unthinkable – it’s counter-cultural, it’s counter-intuitive. But intuition is not a sixth sense, it’s guided by a set of cultural norms and deeply embedded assumptions of right and wrong.

Ecosystems can NOT be engineered. They are emergent and they evolve. As those who study real ecosystems (in nature) will tell us, the emergence process is often a mystery. The ecosystem mechanisms are well understood, but the exact sequence and nature of of constructor-mechansisms aren’t. If we consider handset platforms as an example, it is a topic that I know well, including its history. I wrote a book called “Next Generation Wireless Applications” in 2004! When I tell folks who don’t know me about the book, they are often baffled – “Could you build mobile apps back then?”

Yes you could. It was called Java 2 Micro Edition, or Windows CE or Symbian. Later on we had widgets. In fact, there were many ways to build mobile apps, including SMS apps. O2, just after it became O2 (it was previously called Cellnet) had a program to work with developers long before the iPhone existed. I built one of the world’s first SMS apps because Vodafone had a program to offer programmable access to its SMS centers via a cumbersome X.25 radio PAD. My first start-up, possibly the first mobile apps company in Europe, built a wireless connector for Microsoft Exchange using a platform from Unwired Planet accessed via a GPRS modem. We built one of the first Blackberry apps. All these things were possible before REST, AJAX, iPhone, iTunes or app stores. Sun, Vodafone, Nokia, Microsoft, RIM, Unwired Planet and a host of players were busy constructing interactive components of — guess what — an emergent ecosystem. It’s just that it failed.

It’s not like telcos didn’t understand some of the concepts that “apps” folks think they invented, like user experience. Obsession with user experience is, ironically, what made innovation suffer for so long because telcos were unhappy about letting go of control. They wanted to certify apps, handsets, services in order to avoid potentially malign side-effects that would cause a negative user experience.

The ecosystem case if sometimes overstated. It made perfect economic sense for operators to think of making money directly from apps rather than a core-complements model. The reason this now looks outdated is that operators failed in their attempts because they were no good in executing them. The model was right, but the execution was wrong. It is tempting to suggest that the model was wrong because a different one has succeeded in its place. Clearly, to cling to the old model in the face of a new economic reality is foolish.

It is also an oversimplification to think that telcos never “understood” developers. Apple didn’t align their app store model with developer business models. They invented new ones! And it was only possible because they had – quite happenstance to developer interests – already created a marketplace infrastructure ideally suited to distribute apps. In fact, as many developers at the time bemoaned, Apple created a business model that developers hated because it created an expectation for cheap or free apps.

Using today’s criteria for a successful ecosystem (e.g. Android and its constituents), telcos had it all wrong. They were still trying to build an ecosystem, but not an open one. But, let’s face it, this was never going to emerge from telcos, even though some visionaries understood this potential. It was not obvious either that Apple or Google would solve this problem. Apple had a rocky history with developers (via OS X) and Google simply didn’t have one to begin with. Strangely enough, operators were dealing with developers before Google. However, Google’s business from the moment it figured out a business model, was naturally going to be an ecosystem play because of the strong correlation between complementary activity (anything that generates more eyeballs on search-related tasks) and advertising revenue. The correlation was far weaker for telcos because their core product (voice initially, and then data) lacked plausible differentiation (unlike the iPhone) and was driven by a set of economic precedents (level playing-field competition) that had a neutralizing effect on core revenue that far outweighed anything that ecosystem economics could have countered.

Evolution Takes Time

I don’t believe that a telco can merely copy ecosystem economics, not without understanding how such a move fits with their “values DNA” per my previous discussion. For example, customer ownership is deeply ingrained in the telco subconscious. It is a highly valued component of what they do. But let’s say they could overcome some of these inhibitions. The notion of merely “applying” ecosystem economics like a formula is deeply flawed. Ecosystems are emergent and evolutionary. Timing matters, as does time itself. Ecosystem emergence is often a long drawn out process that begins long before its impact is felt.

The innovations involved in iOS and Android ecosystems emerged (and evolved) over a period of many years. Sustained innovation is required, which can only happen with strong cultural values that support it. It is not a paint-by-numbers operation. To achieve innovation, you have to be innovative. That seems obvious, but the question of what it means to be innovative remains largely unexamined, even in the innovation literature. The books usually talk about the tools of innovation, not the values.

This is where telcos consistently fail, even with well intended attempts to reap the benefits of ecosystem economics, some of which I have orchestrated. I have been involved with several sincere attempts to combine ecosystem power with telco power. The problem is the timing. The event horizon for successful “scalable” innovation is always in years, if not decades if we take into account the value systems that precipitate scalable innovation ventures. The event horizon for telco innovation projects is never more than one year. And it’s worse than that. When a telco takes on an innovation project using “cut and paste” innovation tools, it’s usually allowed only one attempt at success, thereby making cultural change through experience (to really “know” something) impossible, which, I argue, is the only way its every going to happen.

Innovation is a Way of Life

I can mention several areas where I think telcos might attempt to benefit from ecosystem economics, but they will do no good without a means to alter values and without the guts to take responsibility for their own failures and successes. Also, I rather suspect that ecosystems thinking might not be the answer.

Either way, while telcos continue to think of innovation as “projects” rather than corporate responsibility to reinvent for a sustained future, senior management can continue to blame anything other than themselves for lack of innovation – they can blame it on the wrong innovation method, project, idea, unfair markets — or Google — forever. The values of innovation must be internalized. Innovation must cease to be an “initiative” or “tool” that can be cookie-cutter applied from elsewhere. Innovation is a way of life and a set of values that take years to evolve. Telcos need new religion.


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