NFV Management & Orchestration NEWS

The R&D Conundrum: A New Approach to Innovation For CSPs

By Special Guest
Gabriele Di Piazza, Vice President of Solutions, Telco Group, VMware
November 17, 2017
photo courtesy of BigStock

Innovation was traditionally the responsibility of the R&D department, who would focus on taking new technology and building a service or solution around its capabilities. Each year the budget for the department was allocated, with the business reporting its investment in innovation as a line item on their annual financial reports. As the innovation ‘cycle’ became established in a given company it could become a challenge to ensure that this was still in line with a current understanding of end-users needs – it would in fact risk becoming ‘innovation for innovation’s sake’ rather than tying it to a specific problem. But there was no question about the overall value of driving an R&D department, which was taken as a given.

Here’s the rub – and I’d be very surprised if you don’t find it as eye-opening as I did. Research on the top 1000 innovation companies from PwC’s Strategy division found no correlation between R&D investment and sustained financial performance.

R&D is important but not sufficient. For those service providers struggling to adapt quick enough to new realities the solution is not necessarily a case of dialling up the percentage of revenue attributed to their R&D budget each year. Nor can they afford to in times of falling margins as there’s less money to allocate. They need an alternative approach both practically and financially: they need to fundamentally rethink their approach to innovation.

In today’s software-driven, customer focused world, innovation can have multiple drivers. These include business culture and organization, customer feedback, the need to take costs out of infrastructure and to lower opex generally, and the imperative to deliver agile services and high value customer experiences.

Replacing the R&D model

I’d like to suggest that the traditional approach to Research & Development-driven innovation is inherently broken. There are two overarching reasons for this.

Keeping up with the accelerated pace of change

Traditional R&D focused on the development of technology that solved or improved small aspects of an established business or customer challenge – so the benefits could be easily predicted and so measured. The R&D team could be housed within a standalone building (or ‘Lab’) and be charged to simply solve a problem or create a new piece of technology.

But as the impact of the internet and the connected world has taken hold with the need for a wholesale digital transformation influencing many business strategies, these established methodologies have struggled to adapt in-line with not only the pace of change, but also fundamental shift in how the business needs to perceive and engage with their customers.  In such a world, change is constant, and it’s essential that Telcos are able to keep pace.

As myself and my VMware colleagues have previously written, it’s imperative for businesses to build a customer-centric strategy. With that single-minded focus on the customer as the guiding light, businesses will drive new models of innovation.

For any innovation strategy to succeed today it needs to be closely aligned to the strategy of the business and to deliver customer value, as well value to the shareholders and board members.

The tenacity of silos

It’s a fact that many CSPs are still struggling to define and deliver their digital strategy. The reason this can be so painful to do in practice is the enduring strength of many long-established silos.

Many digital transformation initiatives are still set and measured as standalone projects with no clear vision from senior leadership. According to a 2016 survey, 89% of respondents agreed that a Chief Digital Officer was important to lead and drive their digital transformation, but only 28% said they had one in place.

A CDO can be instrumental in working with the CTO to drive the digital transformation agenda throughout the business, collaborating to drive not only technological innovation, but more importantly working to align the business to a customer-centric strategy.

To move forward, businesses need to break the hold silos have on them, to move away from silos of technology, people, and processes towards dynamic, agile and flexible operations.

For those still needing convincing, I’d like to cite the example of ATM and suggest that its development was perhaps indicative of “old thinking”. ATM was touted as a high speed, efficient solution for connectivity but was rapidly overtaken in most applications. Mobile network RAN backhaul - along with most MNO infrastructure - has moved to a packet switch ‘ethernet’ transport. This was one R&D step forward that should instead have been a leap somewhere else.

Defining a new approach to innovation

CSPs should be looking to drive innovation across their business – my contention is to do this successfully they need to move on from the traditional R&D mindset. R&D will of course always have a role, but this will change to one that enables innovation that will be implemented by a wider community within the CSP; to ultimately deliver more customer-centric, real-time innovation. R&D will create the capability, and then the broader organization will implement. In this way, the actual implementation of innovation will increasingly be done ‘on the fly’ within the operating teams - and possibly by customer self-service - using the platform and tools R&D develop, test and deliver.

For a business to be able to innovate successfully, on a platform delivered through R&D, they need to develop the right combination of culture and collaboration. Without understanding why customers are loyal to your business and the value they receive from your services, a business cannot set the right goals for driving new thinking. At the same time it’s always worth bearing in mind Henry Ford’s famous saying: “If I had asked people what they wanted, they would have said faster horses.” My point here is not that the value of research is questionable, but that all markets are open for innovation, whether they know it or not.

Collaboration is about breaking down boundaries; breaking down the internal silos, engaging with external partners to bring the right new ideas, technology and services to their customers, and finally, engaging with the customers themselves both directly and through the use of analytics. Whatever the drivers and the specific goals, it’s all about nurturing an ongoing change in mindset that sees departments coming together in new ways and working hand in hand for mutual benefit.

Companies need to develop sustainable innovation management processes –these should include such considerations as what to do to test and prepare products for market, and how to stress-test appropriate business models. Developing such processes isn’t necessarily quick or easy, but will go some way towards making a company a serial innovator.

A call to arms

The average revenue per user in the telecom industry is falling year-on-year. In 2006 it was $32 per user in Western Europe; in 2016 it was just $15 (-6% compounded). One step in any strategy to reverse the downward trend is for CTOs and CEOs to start thinking about the inter-dependency between the business strategy and the need for a refresh in their approach to innovation.

Despite the pressure these are hugely exciting times for CSPs, one main reason for this being the adoption of 5G which will bridge physical, virtual and social worlds and herald game-changing new technologies – including Virtual Reality applications. 5G will allow CSPs to monetize the network in radical new ways. For example, 5G’s ability to allocate slices of the network spectrum for specific services will offer innovation for service providers to tailor and attract lucrative customer market segments. Network slices will be used to deliver industry-specific services where each slice delivers a set of specific service characteristics tuned to the vertical market’s needs – examples include low latency, high bandwidth, mass connectivity or enhanced security. 

Service providers don’t want to miss out on these opportunities by being late adopters and slow innovators – now is the time to take action and avoid being sidelined.

Leadership teams within Telcos need to rethink in order to survive disruption. I’d welcome the opportunity to share more of my experience of innovating in the Cloud sector with you – get in touch.

Gabriele Di Piazza-Vice President of Solutions, Telco Group, VMware

Edited by Mandi Nowitz

Related Articles

The R&D Conundrum: A New Approach to Innovation For CSPs

By: Special Guest    11/17/2017

CSPs are painfully aware they're not innovating fast enough to respond to changing customer expectations, or to the new opportunities being created by…

Read More

Amdocs Simplifies Core Network Testing Processes

By: Frank Griffin    6/7/2016

If there is one constant in IT, it is change. And this change in many instances brings with it new solutions that require optimization of existing or …

Read More

Nomadix Launches Alloc8 - X Series for Real-Time Network Monitoring

By: Rory Lidstone    3/17/2016

Public access gateways specialist Nomadix has announced an entire new series of enterprise-grade layer 7 platforms. The Alloc8 - X Series is launching…

Read More

Red Hat, Amdocs to Assist Telecoms with Migration to Cloud

By: Casey Houser    2/26/2016

Red Hat, developer of its well-known Linux distribution for enterprises, has announced its partnership with Amdocs, which creates software for telecom…

Read More

Ericsson Puts Together NFV & SDN

By: Paula Bernier    2/25/2016

Network functions virtualization and software-defined networking are two of the most prominent themes in networking today. They're often mentioned in …

Read More