Unless you live on planet Mars there is no escaping the fact that the way people communicate has evolved significantly in the past 7 years. 15 to 25 year olds are spending a majority of their time communicating via social media sites rather than the “traditional” modes of communication such as voice, text and email. In fact some of the younger kids don’t even use voice. Even though data from operators shows that SMS is continuing to grow, its unclear what proportion of these texts are simply to send data to social networking sites rather than peer to peer communication.
These changes in communication habits have serious implications for operators because it could just turn them into bit pipes – carrying bits and bytes for communication applications. Lot’s of people argue that this inevitable. I’m inclined to agree that the risk of operators being relegated to bit pipes is high, but I’m also an optimist and think that operators can have a bigger and better role than just being the pipes. However, achieving this will require a significant effort on behalf of the operators to rise to this challenge.
Developers, developers and developers (and platforms too!)
So I’m guessing many of you will have heard the Steve Ballmer pitch to developers and gushing about how important they all are. Ok he may have been slightly over enthusiastic about the way he expressed it but he had a very good point. Microsoft knows it needs developers to innovate and create new products and services; operators need to come to the same realisation and fast.
There are two things that I think operators need to be mindful off when considering their execution strategies. The first is that historically operators haven’t been very successful in creating products and services beyond their core offerings. History is littered with the failures of operator initiatives to create new products and services, especially in the internet space. These failures have occurred for a host reasons but essentially developing products and services that customers want, particularly in a web centric world, require a completely different execution strategy and mindset to the one operators are used to.
The second key thing is that world is changing in terms of the way people buy and sell both goods and services, or put another way, the value chain is changing. This was really nice summed up by Sam Ramji in his presentation entitled Darwin’s Finches on why APIs are important. Increasingly things are being patched together and sold in different ways and what you are selling may well be a component of someone else’s customer value proposition rather than being the customer value proposition. As an example of what I mean is customers may want to purchase an app that uses SMS capabilities to send the bits and bytes back and forth. The app provider may do a deal with an operator to provide the SMS bearer (i.e wholesale SMS) and its the app provider who delivers the customer value proposition, charges the customer and has the primary relationship with the customer. The SMS capability is in this case just a component in delivering the overall customer value proposition. The permutations of this in a Web mash up world are endless so what operators need to do in this example is ensure that it’s their SMS capability that’s used and not some other operators. This means exposing your SMS capability through an API in a really simple and frictionless way. This is all about remaining relevant in an internet centric world. That’s why developers are so important. Developer are the people who use APIs from different providers to create customer value propositions and they’re the people who will increasingly be selling directly to customers. But attracting developers isn’t easy and requires significant effort. It requires a company to:
- Adopt a new engagement model with developers. It requires nurturing a community that can have a two way dialogue with the operator.
- Offer important and valuable capabilities via the APIs – it has to be compelling.
- Adopt technologies and standards that are used by developers such as RESTful APIs and JSON – simpler more lightweight technologies. Sorry but SOAP isn’t going to cut it:-)
- Have the right business model and revenue sharing agreements in place.
So let’s take this one stage further. Exposing capabilities is great, but if operators really want to be successful they need to embrace platforms from which they expose the capabilities via APIs. One of the best definitions I’ve seen on the web for a platform is:
A “platform” is a system that can be programmed and therefore customized by outside developers — users — and in that way, adapted to countless needs and niches that the platform’s original developers could not have possibly contemplated, much less had time to accommodate. This can be all done without the platform owner having to do anything at all.
(Apologies to whoever came up with this definition but I can’t find the reference to it right now so if you email me I’ll be sure to include your name.) Examples of platforms that we know and love are Facebook, Twitter and Jajah. The important thing is that by using Platforms, APIs and the developer community operators can ensure that the remain relevant in the new communications paradigm and leverage innovation from beyond their own organisations.
A lot of this value creation today emanates directly from software. Telcos have got to learn to master software and not be overly reliant on others to do this for them. Delivering new products and services means they can’t just be picked up off-the-shelf and creating them requires in-house teams working in close collaboration with all parts of the organisation. (Please note that I said a lot of the value comes from software, not all of the value).
It’s not over just yet
Even though operators haven’t been entirely successful creating new products and services to date, that doesn’t mean its over just yet and being the optimist that I am, I think operators can still execute in way that not only uses platforms and exposes capabilities via APIs, but also sees them directly using the same capabilities to create customer value propositions to reduce time to market and cost, as well as bringing new innovations to the market. The execution strategy has to outline how you:
- Attract the right talent and people into the company – lots of the creative people you need don’t naturally gravitate to large corporates. People need to “get” the new world of the internet and embrace it, seeing it as an opportunity. Just because someone works in IT doesn’t mean they “get it” – sorry but all techies aren’t equal.
- Allow people the freedom to create – creativity can’t just be planned or switched on, it has to be nurtured. Freedom to create also means using different approaches and breaking some of the old rules that exist. People have to be allowed to try new things and the organisation has to ensure that constraints are not placed on things because it doesn’t fit for example with the “brand” or it might be risky. People also need to be given time to do things beyond their day job. A big killer for creativity is not having time or feeling pressured.
- Allow people to work outside of the old culture and processes – the culture and processes in most operators is finely honed for their existing business models not the new world that operators need to embrace. Operators need to figure out how they retain the old culture and practises for the core business, but then create a ring fenced capability to help build out the new world that isn’t constrained or compromised by the core business.
- Set aside money – Of course all of this effort requires cash. O and by the way you need to take a punt and stop the urge to carry out long range planning activities for everything.
Easier said that done right? Well unfortunately these are very significant challenge and they’re not easy to overcome. It will require people in the boardroom to champion some of these changes. It’s worth noting that these challenges aren’t unique to the telecommunications industry. Many industries face (and have faced) the same dilemma as the world around them changes and innovators enter their industry to eat their lunch. Tackling these challenges is an imperative or operators could end up watching a car crash….in slow motion.