Ovum warns telcos to compete less and collaborate more as innovation efforts get put under the spotlight

Melbourne, 9 July 2013 – Innovation is critical to telco survival, finds Ovum. Yet many operators miss the big picture, exaggerate the threat from over-the-top (OTT) players, and misunderstand the broader benefits of innovation.

New research* from the global analyst firm examined more than 3,500 new service launches since 2009, finding that telcos must compete less and collaborate more. When comparing telcos’ efforts with Apple and Google’s approach to the app ecosystem, it is obvious why they never managed to gain a foothold in the market. Ovum implies that telcos were too selective when choosing partners and overburdened their prospective allies with unrealistic revenue expectations. Instead, the report recommends that telcos use partnerships to scout for new ideas, assimilate them, and capture value. In addition, the research indicates the importance of prioritising innovations (whether products and services, business models, or tariff strategies) that exploit the centrality of operators’ networks.

“No matter how much telcos try to diversify, their primary role will always be as carriers of voice, messaging, and data traffic. However, an efficient network that has been updated with new innovations can be combined with innovative business models to continuously deliver value to telcos and their shareholders,” says Emeka Obiodu, principal analyst in Ovum’s Industry, Communications, & Broadband practice. “As Google (with advertising on search), Apple (with devices), and Microsoft (with software) have shown, a well-crafted strategy can use additional, preferably low-cost, new products and services to supplement and shield core products.”

Elsewhere, the research highlights the significance of a comprehensive approach to evaluating the benefits of innovation. Ovum believes that telcos should use the notion of “net innovation benefit” – which is made up of “net new revenues”, “net cost savings”, and “net non-monetary benefits” – to measure the success of their innovation activities. The advantage of this metric is that it unifies the traditional metrics used for new products, processes, and marketing initiatives.

“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.