Who's innovating now?

Jonathan Dharmapalan, Ernst & Young
Telecom CEO

For the last ten years in Asia's telecom markets, innovation has been driven largely by the industry's technology companies, rather than its operators.  There are good reasons for this.  To date, operators have had a clear mandate:  to deploy capital to acquire technology, to package this technology into a service, to provide that service under license to the general public, and to charge a fee for this service that provides investors with an appropriate return on capital. Operating in a heavily regulated and fiercely competitive environment, their focus has been on making that process as efficient and effective as possible.
 

In short, their brief has been to operate - not to innovate.

Moreover, the strategies required to succeed in this endeavor focus on process systemization, and financial and operational discipline. Thus, operators tend to attract people with procedural expertise, whose strengths are logical, straight-line thinking and high attention to detail - not innovation and creativity. The human capital operators attract is unlikely to include the sort of people who apply for jobs as Google engineers.

In this environment, almost by definition, within Asia's telecom industry the responsibility for innovation has been transferred to the technology companies. Operators have been so busy paying attention to network deployment and growing a low user base to a respectable penetration, they haven't had time to focus on innovation.

Service, not technology

But now that penetration is maturing quickly, reaching comparable levels to some developed countries, operators must learn to innovate.  The evolution of the telecom market does not have to be driven by technology innovation - service innovation can be an equally powerful driver.  Indeed, one could argue that consumers are better served when service innovation leads the way.  

Mobile money is an excellent example. 

This service innovation has seen operators using mobile to extend mainstream financial services to the many billions of consumers worldwide who are currently excluded from the formal economy.

The equation is simple. Traditional financial services require heavy investment in infrastructure to support users who primarily carry out micro-transactions. Distribution of these same services and transactions over mobile networks and handsets reduces the required investment dramatically, thereby enabling mainstream financial services to be offered cost-effectively to previously unbanked people for the first time. This breakthrough is generating major benefits, not just for the consumers themselves, but for the local businesses and economies in the countries where they live.

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