In a report titled 'Opening up: How R&D is changing in the telecommunications sector today,' the Economist Intelligence Unit says that over the past five years, 64% of telecom and technology companies have had a new rival enter their market with innovative products and services. A case in point is Apple's entry into the handset sector via the iPhone.
According to data from the SAS-sponsored EIU report, these disruptive innovators will prompt shorter product lifecycles, with telecom firms now planning to churn out more products but with shorter life spans. Half of the telecom and technology firms surveyed say product lifecycles will continue to shorten, with 20% saying product life will go down by at least 30%.
Supporting that point, a third of the respondents say they will come up with between seven and 20 new products in the next two years, up from only a fifth two years ago. Also, around 80% of those polled agree that the complexity, cost and pace of R&D will increase over the next two years, as firms struggle to keep up with the current fast pace of technological change.
Telecom and technology companies, in their quest for more new ideas, are now increasingly adopting the principles of 'open innovation,' which seeks to involve suppliers, corporate partners, the academe and customers in the R&D process.
The EIU report reveals that over the past two years, telecom and technology companies have teamed up with two to five other organizations to help in the development of new products and services. The number of companies that will not resort to partnerships will decline from 10% today to less than 6% two years from now, while the proportion of those partnering with more than five other organizations will jump from 23% to 35% within the same timeframe.
Customers, in particular, will increasingly play a key role in R&D, with 78% of those polled agreeing that their customers have a much greater impact on their innovation process now than in the past.
But this 'open innovation' approach will not be that easy for companies to adopt, as embracing a more open approach brings major organizational challenges. Working more closely with a greater number of third parties brings with it greater logistical and managerial challenges, the EIU report says. It also brings tougher decisions about whether to make, buy or collaborate on new technologies.
Furthermore, the rapidly changing telecoms marketplace is also uprooting and replacing business models. Just 9% of firms polled for this report say they have not changed their business model and don't plan to do so.