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Push-Button Innovation In the Weeds   By Michael Schrage    September 2002

The telecom industry doesn’t need more bandwidth. It needs ways to get people to use the bandwidth they have.

Hello? Hello? Can you hear me now? The telecom sector seems badly disconnected. Analysis reports state that over two trillion dollars’ worth of its market value has evaporated in less than 30 months. The high-flying, high-tech visionaries of the high-bandwidth future—Global Crossing, Covad, Williams, XO, Teligent, et al—have vanished into bankruptcy or liquidation. The AT&Ts, WorldComs, Qwests and Sprints, as well as their counterparts overseas, have seen their bold ambitions for growth in billion-dollar gambits such as the third-generation wireless standard turn into mad scrambles for survival. A few dishonest telco execs may even be going to jail.

There are many good reasons for this sorry state beyond corrupt accounting. Here’s one of the best: America’s telecom companies are lousy innovators. They’ve been more comfortable experimenting with their debt financing than experimenting with new service offerings. Even worse, they appear married to hopelessly outdated definitions of innovation. Telecom equipment suppliers do a sensational job of creating new bandwidth and extending physical networks—sensational, but counterproductive, given the current capacity glut. Does new capacity that nobody is willing to use or able to afford truly count as innovative?

Innovation isn’t what companies do; it’s what customers adopt. In fact, the telecom sector remains a fabulous market for innovative uses of bandwidth. But innovation shouldn’t mean getting people to use more bandwidth; it should be about getting people to change their bandwidth behaviors.

Clever features like NTT DoCoMo’s i-mode Internet services and handheld wireless games (see The Wireless Arcade, TR July/August 2002) can be tremendously appealing and even successful. There is also no shortage of marketing campaigns—most notably AT&T’s mlife— that continue to promote telecommunications as a lifestyle revolution. But this revolution has created more casualties than converts. The multibillion-dollar bids to create bandwidth-based lifestyles via the cell phone failed.

Instead, telecom companies should focus on pushing buttons. Push-button innovation doesn’t ask customers to buy new equipment or learn how to program; it treats them as people who might be prepared to tap a few extra keys to get a little extra value for a small additional fee. Telephone companies need only get a certain small percentage of callers to push a few more buttons to generate hundreds of millions of dollars in cash flow.

The idea is to build on existing behaviors rather than attempt to create new ones. For the sake of argument, let’s define the problem as how to get an extra $120 a year from you, the high-margin cellular customer. Here are a few examples of what profitable push-button innovation might look like:

* Transcription/recording: Many professionals would cheerfully pay a premium for a transcript of conversations with clients and customers—local laws permitting, of course. Why not a push-button sequence that triggers a recording of the conversation? The recording would then be run through any of the rapidly improving voice recognition transcription programs on the market, time-stamped and e-mailed to the subscriber. How many conversations do you have in a week that you’d like to have transcribed? How much is that worth to you? * Improved operator services: Every cellular service will give you phone numbers and offer to connect the call. But sometimes you also want to record the number. Reprogram the 411 service so that— for an extra 35 or 40 cents—the operator sends the number directly to your phone, which can store it for future use. Each customer that used this service just two or three times a week could generate $50 a year in new revenue to the phone company. * E-mail records: Yes, you can go online now to survey your call records. But people on business trips might welcome the option to designate which records of which calls they want e-mailed to them at the end of the day for their expense reports. Tap #1 to designate that this is a call for which you want a receipt. * Teletificates: Bookstores, clothing stores and record stores all offer gift certificates. Phone companies should provide a toll-free number that people can call to buy “teletificates” worth a certain number of calling minutes for friends or family members. The teletificate is automatically credited to the account of the recipient, who gets a voice mail or e-mail telling him or her of your generosity.

What do these ideas have in common? They all lend themselves to automation and require only marginal investments in modifying existing networks. More importantly, they are all engineered around convenience and ease of use as opposed to paradigm busting. In fact, it is easy to imagine people paying for these services precisely because of their familiarity rather than their novelty.

The telecommunications business has every incentive to get more innovative. It should be deluging its customers with offers of new products and services. For some reason that’s not happening. The industry needs to start pushing their buttons.