Traditionally telcos have been innovating in profit centre (P&L) silos within each business unit. There is a focus on the residential P&L; the mobile P&L; and the business P&L.

If the industry continues to innovate in the P&L as opposed to “with the customer” I think we will find ourselves increasingly irrelevant. Providing innovation at the speed of life, in people’s personal lives or professional lives and into the business has had to become much more to the top of the agenda. Infrastructures simply do not move on the same time cycles as customer needs.

At the heart of our industry transformation is the customer. Going forward, we have to move away from treating the customer solely in terms of the products they have or may want.

However, in the current economic climate there is only one trend that matters in every sector:  the strong will get stronger and the weak will become prey. With liquidity low, businesses will have to work together to achieve their goals.

BT embraces this emerging global model through open innovation and we work with a variety of strategic partners – such as HP, Cisco, Oracle and SAP.  Through these partnerships we have extended our global reach, accessed new customers, and broadened our service scope across our client base. BT’s partners have benefited similarly.

The global liquidity crisis has overshadowed the impact Web 2.0 is having catalysing business model change; effectively shifting the balance between supply and demand and creating a legion of “pro-sumers” [producers/consumers].

We know the Web provides an alternative, and often substitutional, channel to market for goods and services. At the same time the Web has grown up with a culture of low, or in most cases, zero cost to users. In order to buck the trend of ‘everything is free on the Web’, service providers must provide something of real value to customers; good examples being Apple’s iPod and iTunes which have created value through innovation, despite a background of growing online music piracy.

In the Web 2.0 world, failure in service innovation is acceptable. New service innovations can be tried and if they don’t capture a market, it is seen as part of the learning experience for the next new idea. The important consideration is that if a service idea is to fail, then it must ‘fail fast’. Once services are established they are constantly updated and improved, often without the rigorous backwards compatibility testing that characterises telecommunications networks. An incremental approach is used where new options and additional functionality builds upon established products.

With services provided on the Web, traditional business models exist side-by-side with newer models where, for example, the service provider executes a broker model – like eBay – bringing together buyer and seller for a small percentage of the sale; or in the use of advertising on many search engine sites – where revenues accumulate from the number of visits to a customer site. Traditional telco models often rely on usage or rental-based revenues that may be inappropriate for some new services.

More recently, the Web has become a forum for user innovation. The advent of the concept of Web 2.0 and new software technologies such as asynchronous Java and XML (AJAX) allow increasing levels of customisation by users of the way in which services are presented, via such integration techniques as ‘mash-ups’.

Initially the feeds to mash-ups tended to be based upon information (such as really simple syndication (RSS) feeds that one sees on many Web pages). However, we are increasingly seeing feeds based on a functional service and many company IT departments are providing Web2.0-like services in order to add value to traditional methods, such as the use of data feeds for corporate dashboards.

These innovations are all helping create a new world – the “perpetual” beta – where companies can launch quickly and learn from users using the service.
Telcos moving into the ICT space need to match the software players in terms of speed to market while making hard decisions about “tried and tested” versus “beta” services.

Transformation from telco to softco
We are witnessing the emergence of the “softco”. There are three key factors that interplay in the transformation of service providers to softcos: web 2.0, software driven platforms and next-generation network technologies.

To unlock those investments being made in broadband, the investments being made in NGN, and the systems-software processes, telcos must fuse service-orientated networks, software-as-a-service, and web 2.0 to deliver new services.
To compete in the web 2.0 world service providers need to be agile. We also need to re-use and we also need to think in software drops not hardware replacements.
If you look at the organisational structures that exist in our industry, there are IT organisations and network organisations. This is a legacy artefact.

Inside BT, we created BT Design and Operate to deliver end-to-end for customers. We did this because telcos are no longer going to be capable of delivering services at increased cycle times and getting them right the first time by having separate silos of networks and systems.

At the same time we have been able to consolidate down to key strategic platforms. Between Q1 2005/6 and Q4 2007/8 BT have closed 1600 systems globally, with a further 4000 in scope for rationalisation.

Service providers must be at the forefront of this change and agile working is fundamental to success. The innovation challenge in India is high because adding eight million mobile subscribers every month places unique pressures on operating and support systems.

‘Agile’ software development is worth exploring. Since BT started measuring Agile software development projects in 2005, we have seen that compared to more ‘traditional’ methodologies, Agile processes delivered more for less, faster and cheaper with up to 25% more functionality. The number of Agile projects is increasing, too. In October 2005, Agile projects represented 14% and by 2008 they represented 70% in BT.

So if you wrap up the people, process and systems innovation of softco with an NGN, you can then expose this all with a set of APIs – featuring common software building blocks and a software development kit (SDK) – to the universe of innovators emerging around the planet including India.

However in the transformation to a softco, you also need to work in collaboration with partners to harness the best innovations from around the world. In this new world, innovation must be driven out of ecosystems as opposed to out of product development organisations.

It’s working for BT, too. Customers are coming to us in numbers to find ways of liberating value from their business by outsourcing their computer and communications estates. They are starting to understand that information technology is one of the keys for success.  Forced by demands for cash, they are coming to understand that all the cash tied up in the servers, networks and software that they own can be released in exchange for functionality that you can turn up or down as your business demands.

However, service providers that have too few of the right ideas will soon find business ebbing away. So too will businesses that are slow to turn their ideas into marketable products and services.

To sum up, globalization and technology have come together to accelerate every step of innovation, stimulating the creation of new ideas and speeding them on their way to market.

The world is full of people who are keen to offer their ideas, and we will all need to become exceptional exploiters of this immense pool of talent if we are to thrive.
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