Hello? Hello? Can you hear me now? The telecom sector seems badly disconnected. Analysis reports state that over two trillion dollars’ worth of its market value has evaporated in less than 30 months. The high-flying, high-tech visionaries of the high-bandwidth future-Global Crossing, Covad, Williams, XO, Teligent, et al-have vanished into bankruptcy or liquidation. The AT&Ts, WorldComs, Qwests and Sprints, as well as their counterparts overseas, have seen their bold ambitions for growth in billion-dollar gambits such as the third-generation wireless standard turn into mad scrambles for survival. A few dishonest telco execs may even be going to jail.
There are many good reasons for this sorry state beyond corrupt accounting. Here’s one of the best: America’s telecom companies are lousy innovators. They’ve been more comfortable experimenting with their debt financing than experimenting with new service offerings. Even worse, they appear married to hopelessly outdated definitions of innovation. Telecom equipment suppliers do a sensational job of creating new bandwidth and extending physical networks-sensational, but counterproductive, given the current capacity glut. Does new capacity that nobody is willing to use or able to afford truly count as innovative?
Innovation isn’t what companies do; it’s what customers adopt. In fact, the telecom sector remains a fabulous market for innovative uses of bandwidth. But innovation shouldn’t mean getting people to use more bandwidth; it should be about getting people to change their bandwidth behaviors.
Clever features like NTT DoCoMo’s i-mode Internet services and handheld wireless games (see The Wireless Arcade, TR July/August 2002) can be tremendously appealing and even successful. There is also no shortage of marketing campaigns-most notably AT&T’s mlife-that continue to promote telecommunications as a lifestyle revolution. But this revolution has created more casualties than converts. The multibillion-dollar bids to create bandwidth-based lifestyles via the cell phone failed.
Instead, telecom companies should focus on pushing buttons. Push-button innovation doesn’t ask customers to buy new equipment or learn how to program; it treats them as people who might be prepared to tap a few extra keys to get a little extra value for a small additional fee. Telephone companies need only get a certain small percentage of callers to push a few more buttons to generate hundreds of millions of dollars in cash flow.
The idea is to build on existing behaviors rather than attempt to create new ones. For the sake of argument, let’s define the problem as how to get an extra $120 a year from you, the high-margin cellular customer. Here are a few examples of what profitable push-button innovation might look like:
What do these ideas have in common? They all lend themselves to automation and require only marginal investments in modifying existing networks. More importantly, they are all engineered around convenience and ease of use as opposed to paradigm busting. In fact, it is easy to imagine people paying for these services precisely because of their familiarity rather than their novelty.
The telecommunications business has every incentive to get more innovative. It should be deluging its customers with offers of new products and services. For some reason that’s not happening. The industry needs to start pushing their buttons.