In my post defining the Social Telco I made brief reference to the help telcos need with innovation, but I think it’s worth a post in its own right. This is a topic I addressed in an Ovum comment a while back too – that comment was picked up in a couple of places which are available outside Ovum’s gated community here and here. The focus of that piece was an Innovation Day AT&T held, which was designed to showcase some of the things coming out of the AT&T Labs. My main point was that telcos were lousy at innovation and that substantial R&D investments were probably no longer a worthwhile exercise with few exceptions. That’s essentially the point I’d like to expand on here.
Telcos do a terrible job at innovation
Telcos are abysmal at creating new services that customers actually want. Part of the problem is that they have historically been very engineering-led, rather than marketing-led, organizations. Engineers ordered parts for the network, which offered certain features. The only decision to be made was which of these features to switch on. Telcos have been very bad at really understanding customers’ needs and creating services to meet those needs. In the old voice world, that wasn’t a big deal, since there were few competitors and they were largely relying on the same infrastructure from the same suppliers. But VoIP changed all that, and provided a view of things to come: when truly innovative players enter markets where telcos dominate, they create real disruption.
There are significant barriers to change
All the major shifts in communication in the last 20 years have come through players other than telcos – the world wide web and email were created by DARPA, IM was pioneered by Internet players such as AOL, Microsoft and Yahoo!, social networks created the next big wave of communication and so on. Telcos are nowhere to be found in that list. The major barriers are:
telcos are still engineering driven in many ways and buy their apps from traditional players
they have large installed bases and have defending those bases as a major strategic priority – anything that threatens to cannibalize them is therefore suspect
the development process for new services has been so long and expensive that they can afford to place only very few big bets, making them risk averse and preventing them from straying far from their traditional services
all their business models are based on funding new investments through new revenue streams, and mitigate the opportunity for adding new functionality that isn’t paid for directly. They are also not expert in advertising-funded business models.
All of this means that telcos are still bad at innovation and unlikely to get any better. The shift to software-based rather than hardware-based services, including the implementation of IMS, should assist a little in making services quicker and cheaper to roll out, and therefore allow for more experimentation and risk-taking. But a large part of the barrier is still cultural – telcos’ size, scale and history all prevent them from being as innovative or as fast-moving as web players.
The solution: outsource innovation
The logical solution is therefore to outsource R&D to some extent to third parties. That means Web 2.0 players but it also means the armies of developers – both professional and amateur – who love nothing better than to leverage APIs and/or SDKs from existing players to create new and interesting mashups and combinations of functionality to create new services. This means telcos have to make those interfaces available too, in a way that’s attractive for developers. The iPhone is the best possible example of the ideal way to motivate developers: make the end result exciting. The iPhone has tiny market share compared with most of the other mobile operating systems out there, but it captures massive developer mind share because the possibilities are so vast and because of the cool factor. Telcos need to find ways to expose their network functionality which will mimic the success of the iPhone SDK among the developer community.
All carriers need to adopt this model – some with more control than others
Telcos and their equipment suppliers are currently responsible for 90%+ of the innovation which happens in telco services, and that’s simply not going to provide the kind of innovation that’s needed today. However, with an army of developers using APIs and SDKs to create new services, telcos can tap into a much larger base of innovation, and can either allow a thousand flowers to bloom by simply taking a hands-off approach or taking a more hands-on approach and actively selecting and qualifying the most promising applications for a more carrier-endorsed release to customers. The latter approach allows more control and therefore quality assurance, but it also means the telco is once again second-guessing customers’ preferences rather than simply allowing the market to work. Each carrier will have to make its own decisions about that tradeoff. But all carriers should be adopting an open approach to innovation and leveraging all the talent available in creating the next generation of services.
I came across a blog post the other day that highlighted an interesting activity Verizon is toying with at the moment in the social telco space. It’s somewhat tangential to the core of what being a social telco is about, but it’s an interesting model nonetheless and certainly something worthwhile for other telcos to think about. I hope Verizon will be reasonably open about sharing the results of the experiment and what they learn from it.
I have since found the source press release on Verizon.com and there’s some more detail there. Essentially, Verizon has set up online fora for its customers to go and seek out answers to questions or solutions to problems, and many of the responses will come from other customers rather than Verizon employees. The Verizon Community Forums, as they’re known, cover all of the major consumer services Verizon offers, including mobile services, and the front end is split into various product and service categories so you can quickly browse to the one you need help with.
The press release reads, in part:
The Verizon Community Forums have become the company’s hottest online venue for consumers to submit questions, share advice, and get answers about Verizon’s robust portfolio of broadband, entertainment and communication services.
On the forums, customers can interact with each other, ask questions, problem solve, and learn more about the company’s products and services. Answers posted on the forums most often come from the community’s highly active members, referred to as “super users,” an important subset of customers critical to the success of any online community.
According to Mark Studness, director of e-commerce at Verizon, the Community Forums have been well-received since rolling out last July, generating more than 10 million page views.
“The Community Forums have spurred interaction among customers because people today expect to be able to find answers to their technical questions online,” said Studness. “The feedback we’ve already received shows that our customers value the personalized peer-to-peer advice and feedback they receive from fellow users.”
The fora aren’t actually all that different from those you find on various other customer support sites, with a good sprinkling of official Verizon personnel keeping an eye on things and picking up on issues that can’t easily be resolved (a set of customers was seeing commercials interrupting and playing over regular programming, for example – something no fellow user can resolve). But ordinary users are providing lots of the answers, including on fairly technical topics.
One of the most interesting aspects – and something which takes this beyond the standard fora and into true web 2.0 territory – is a tool which allows active helpers to accrue “Kudos” by providing helpful answers to others. Part of the site is a “most kudoed users” page which lists the user Justin profiled in the Verizon press release in the number one slot. Kudos (treated on the fora as the plural form of something called a Kudo – a sort of virtual currency) are awarded by members to those who provide particularly insightful answers or solutions. The Kudos have no value beyond the warm and fuzzy feeling and / or sense of satisfaction or pride they engender, but they seem to provide motivation enough, again in true Web 2.0 fashion.
None of this is earth-shattering, and AT&T is doing some similar things with its business customer support, but it is a good example of the kind of thing that’s possible and an encouraging sign that telcos are thinking a bit more imaginatively about some of these issues.
Great piece on the Implemented blog this week about Web 3.0. Essentially, the piece tracks down lots of different definition of Web 3.0 that are floating around the web and sorts them into four main categories:
Semantic Web
APIs and Web Services
Mobile Web
Implicit Web.
The Semantic Web category seems to be the one getting the most buzz, and the one most people seem to think of when they talk about Web 3.0. But it is important to note that there are at least as many definitions of Web 3.0 as there are of Web 2.0 (in part because no-one really coined the phrase in the way Tim O’Reilly did with Web 2.0). It was always an obvious step to start talking about Web 3.0 as soon as the Web 2.0 term got any traction, but inevitably it just became a buzzword to talk about all the next developments on the web.
I think the Semantic Web – the idea that computers will be able to go a step further in making connections between people and things on the web than they can at present based on various tags and other metadata – is the most compelling of these various ideas and so is deservedly at the top of the list, in that it involves the biggest change from the way the web works today and so provides the biggest step forward in terms of what people can do with the web.
The Web Services and Mobile Webs described in the post at Implemented feel like enablers or corollaries of the semantic web, and are in fact very much part of Web 2.0 as well. And the Implicit Web described at the end of the post is either an extension of the Semantic Web or the flip side of it – it’s still about computers deriving connections that are not explicit, but this time based on user behavior rather than tagging in web pages. As such it’s also an important part of Web 3.0 but probably secondary to the Semantic Web.
The post ends by discussing a few other views, including one that’s time-based. This is interesting but it really doesn’t make any sense because the various generations (to borrow an analogy from the mobile world) of the web co-exist at any particular period in time. Right now we arguably have Web 1.0 and Web 3.0 sites living alongside Web 2.0 sites and that’s likely to continue for a long time. The lines are very blurry indeed in the meantime. The term Web 3.0 is in some ways therefore even less useful than the term Web 2.0. But what we’re really talking about is how to make the web better, and what the components need to be, and that is a helpful discussion when it’s revealed by sweeping away the jargon.
I attended a couple of hours of the Money:Tech conference organised by O’Reilly Media in New York today. Tim O’Reilly himself – originator of the phrase Web 2.0 – was the keynote speaker, and was followed by a chat with Jim Cramer, host of Mad Money, founder of TheStreet.com, etc. etc. The conference was about Web 2.0 and financial services, and O’Reilly started out by talking about Web 2.0 and what it means to him. Ovum certainly has a definition of it, which revolves around four parts – social, business, content and technology models which define Web 2.0 services and sites. However, O’Reilly has a simpler definition, which stays away from specific technologies and services, and is simply this:
Web 2.0 is really about harnessing collective intelligence. It’s about creating a network-effects driven data lock-in with accelerating results to the winners. [I'm paraphrasing based on my notes but that was the gist]
In this way, O’Reilly says, it’s similar to Sun CEO Scott McNealy’s “red-shift” concept – that is, as you start to successfully differentiate yourself in something, your lead over the competition begins to grow ever more quickly. It’s all about creating business models which thrive off network effects – examples, according to O’Reilly, include Google (where the network effects come from the number of links people make), eBay (where the critical mass of buyers and sellers is the biggest barrier to competitive entry), Amazon (where he suggests the reviews are the key network effect) and so on. The value lies in accumulating data which leverages network effects in such a way that it is very hard for competitors to emulate what you have done.
Another major theme at the conference was open source software, and a debate during a panel session focused on whether open source adds or destroys value from a market. There were arguments on both sides, but it’s pretty clear to me that it destroys value for existing players, since it replaces proprietary products priced at a premium with free open source products. At the same time, it creates new opportunities for players which didn’t have the in-house resources to develop their own software, and it reduces the cost of doing business for everyone, which increases liquidity and therefore provides broader benefits.
So, how does all this apply to the OpenSocial program, the Social Graph API and efforts to create data portability? Do these effectively do to value in the Web 2.0 world what open source is doing in the software world? Does Facebook’s value proposition go away? Part of the answer may lie in something else O’Reilly talked about, which is Clayton Christensen’s “law of conservation of attractive profits,” which states:
When attractive profits disappear at one stage in the value chain because a product becomes commoditized, the opportunity to earn attractive profits with proprietary products usually emerges at an adjacent stage.
This would suggest that when open source enters a market, the value flees to the adjacent markets. And when data portability enters the Web 2.0 market, value will flee away from the Facebooks and MySpaces and to – where?
I would argue, as I’ve suggested in other entries, it flows to those best able to make use of the new technology – data portability – to create new services which thrive off it. I think this is the logical conclusion, and it’s another reason why Facebook, MySpace and others need to create value in something other than the information they hold about their users, because that will soon become commoditised and easily duplicated. They need to leverage that data in ways others can’t because of special sauce they themselves have concocted. It’s not clear to me that they have figured this out yet, hence (perhaps) their resistance to full data portability. But they’d better figure it out quick or that value really will go to someone else (and who would bet against Google here?).
I sign up for a lot of private betas when they are first announced and usually just forget about them until one day an email arrives saying the time has finally come for me to join the small in-crowd that gets to play with the latest online toy. That happened a couple of days ago with TypeRoom.
The premise of TypeRoom is that you can edit any website through a browser-based, WYSIWYG, HTML-free interface. To be able to play with any site, you don’t need to have any relationship to it whatsover. However, I’ve just tried editing the CNN and Patriots websites to say something amusing about the Giants’ win but the CNN website never actually came up for editing and on the Patriots site it was clear that you couldn’t put new text boxes in, only edit existing ones. So there are some limitations. But in my circumstances – where I have created several websites using Dreamweaver but not have a work laptop I can’t install my own software on – it’s perfect for the odd tweak here and there. You can set up FTP options or you can use the site to send an email with the HTML file attached to your webmaster (pity those poor webmasters who are now going to get emails from every Tom, Dick and Harry who figures out how to use the site with “helpful” suggestions for improvements).
At this point, it’s a great beta, but it will probably need quite a few improvements to really be useful to anything but the most basic users.
"A Social Telco is an operator which seeks and achieves deep integration between its own core assets and functionality and that of social networks and the broader sphere of web 2.0 services and applications in order to develop new channels for its services and harness greater innovation in the creation of new services."
This post provides a brief introduction to the topic. This blog as a whole provides more detail! The term is my own invention but I hope it may prove useful in describing one of the ways telcos need to evolve to stay relevant to their customers.
