Innovation is critical to telco survival, Ovum (News - Alert) analysts say. But after looking at 3,500 new service launches since 2009, Ovum finds that “many operators miss the big picture, exaggerate the threat from over-the-top (OTT) players, and misunderstand the broader benefits of innovation,” says Emeka Obiodu, Ovum principal analyst.

Ovum concludes that telcos “must compete less and collaborate more.” Presumably that advice pertains to carrier relationships with third party partners.

When comparing telcos’ efforts with Apple (News - Alert) and Google’s approach to the app ecosystem, it is obvious why telcos never managed to gain a foothold in the market, argues Obiodu.

Ovum implies that telcos were too selective when choosing partners and overburdened their prospective allies with unrealistic revenue expectations. 


Image via Shutterstock

Ovum also emphasizes the importance of prioritizing innovations that exploit the centrality of operators’ networks. Whatever service provider executives might have thought in the past, the advice to look for new services that build on the network and its users seems a generally accepted point of view at the moment.

“No matter how much telcos try to diversify, their primary role will always be as carriers of voice, messaging and data traffic,” says Obiodu. Doubtless most service provider executives in the telco world would agree. It perhaps is not so clear that cable TV operators or satellite providers necessarily agree so much.

Other studies suggest telcos already have gotten that message. The approach currently pursued by the majority of respondents (64 percent) to an Accenture survey can be defined as renovation, or a more limited, incremental approach based on line extensions.

In other words, innovation efforts tend to build off of perceived core advantages, a logical enough approach.  

Telco executives also seem to recognize that their approaches to new product development and innovation are less than highly effective.

Only 34 percent believe their company has a well-defined innovation strategy, 46 percent say they have become more risk averse in considering new ideas and 45 percent see their company pursuing a portfolio of smaller, safer opportunities rather than seeking the next breakthrough.

Ovum also believes telcos should use the notion of “net innovation benefit.” Using that approach, “net new revenues,” “net cost savings” and “net non-monetary benefits” would be used to measure the success of innovation activities.

“By using such a comprehensive approach to evaluating new ideas, telcos will be able to avoid the short-sightedness and misunderstandings that have underpinned some of their previous innovation activities,” concludes Obiodu.

The point, one might argue, is that Internet access providers (telcos, especially) have a specific role in the Internet ecosystem. Some ISPs will attempt to change their roles. One thinks of Comcast (News - Alert), which increasingly is a content provider.

But, for the most part, ecosystem providers do best when they build on the logical roles they already play, rather than trying to beat strong suppliers in other parts of the ecosystem.