Several factors probably account for the emphasis telecom providers place on product and service innovation. First, most of the industry leaders are making major capital investments in next-generation services over Internet Protocol (IP) networks and want to monetize their investments with new products and services as rapidly as possible. Second, they are typically large, complex enterprises with established cultures and operating principles, and in such environments it is very difficult to make or sustain far-reaching changes. They have already seen – and survived – the dotcom bubble, when numerous small companies launched new business models, only to go bust soon afterwards. Finally, they have moved away from doing fundamental R&D and have therefore relied on the leading equipment and application providers to innovate on their behalf. However, as new entrants from the media, entertainment and Internet industries encroach on their territory and the competition becomes increasingly fierce, the incumbent providers will have to expand their innovation horizons. To a much greater extent, they will have to embrace new ways of doing business and collaborate with external partners – both equipment providers, and innovators in information and entertainment services.
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