Operators must take more risks to get back amongst innovative elite

Network operators love to tell the world how innovative they are being, but as a new report has shown, it is not a view shared by senior executives from other industries.

The Boston Consulting Group’s annual Most Innovative Companies report was released this week and it did not make good reading for operators.

Initially, there seemed to be good news on the way as the press release was headlined “Tech and Telecom Firms Regain Lost Ground”.

But a check of the Top 50 confirmed that SoftBank was the only operator on the list, coming in at number 30.

Unsurprisingly, Apple and Google topped the rankings, followed by Samsung, Microsoft and IBM.

A look back through the BCG archives shows that European operators have been conspicuous by their absence from the list since it started in 2005.

Vodafone has made four appearances, the last in 2010, while Telefónica made its only appearance in 2009. And that’s it.

Ultimately, executives at some of the world’s most well-known companies conjure up images of device manufacturers when they think about innovation in the telecoms industry.

Hadi Zablit, a BCG partner and co-author of the report, confirms that operators are not recognised as having sustainable innovative practices by the wider world.

Why? “There are multiple reasons,” he tells European Communications. “Innovation comes from devices and lots of companies are coming from the outside, so many telcos more concerned with defending their core businesses.

“In addition, the customer focus of telcos is being weakened by Apple and Samsung who, increasingly, are taking control of the customer relationship.”

CCS Insight analyst Kester Mann adds: “Operators are lagging as they have been under pressure from falling revenues and increasing regulation. They are aware they need to [be more innovative]. The list is a reality check for Europe where the innovation culture is not so strong when compared to Asia and the US.”

But Zablit says it should not all be doom and gloom. He thinks innovation comes in waves and some industries go up while others go down.

He says telecoms is going through a similar process to the pharmaceutical industry, which has seen innovation to some degree outsourced to biotech companies.

It could be argued operators are already doing this via the many start-up incubators that have been set up, such as Telefónica’s Wayra.

But it’s not easy. In July, Orange announced that its start-up accelerator will work more closely with that of Deutsche Telekom in a bid to boost scale.

Zablit believes operators can return to the Top 50 list but they need to focus on being digital in the broadest sense.

He says: “They need to take more risks and step outside the traditional value chain. The pace of change is accelerating. To prepare for this you need to accelerate adoption of new tech or enter new domains.”

The report suggests that telcos are not as far behind as they might fear and that, if they think big, they still have a chance.

Just 13 percent of respondents across all industries have a significant ambition to deliver radical innovation. Of those, more than 40 percent indicated that their companies’ innovation capabilities are average at best.

Examples of operators trying to regain ground are numberous. Earlier this month, Orange presented over 30 solutions, roughly 20 of which were brand new, at its annual Hello show – a showcase for new innovation at the France-based company.

Mann, who attended the show, says: “It was a really good event but we’d seen a lot of the new products elsewhere. There was nothing genuinely new, nothing moved the [innovation] needle.”

Clearly, operators have a lot of work still to do.​

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