Redalyc.Open Services Innovation: the Case of BT in the UK
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Journal of Technology Management & Innovation E-ISSN: 0718-2724 [email protected] Universidad Alberto Hurtado Chile Yamasaki Sato, Carlos Eduardo Open Services Innovation: The Case of BT in the UK Journal of Technology Management & Innovation, vol. 9, núm. 2, 2014, pp. 145-156 Universidad Alberto Hurtado Santiago, Chile Available in: http://www.redalyc.org/articulo.oa?id=84731254011 How to cite Complete issue Scientific Information System More information about this article Network of Scientific Journals from Latin America, the Caribbean, Spain and Portugal Journal's homepage in redalyc.org Non-profit academic project, developed under the open access initiative Received August 13, 2012 / Accepted June 20, 2014 J. Technol. Manag. Innov. 2014, Volume 9, Issue 2 Open Services Innovation: The Case of BT in the UK Carlos Eduardo Yamasaki Sato Abstract Open innovation was conceptualised by Chesbrough (2003, p. 34) using cases from the ICT (Information and Communications Technologies) sector, more specifically equipment and component suppliers such as Lucent, IBM and Intel. Subsequently, the vast majority of the case studies in open innovation emphasised innovation processes in goods-based firms, not in service firms. Open systems innovation was well known in the telecommunications industry well before Chesbrough’s conceptualisation of open innovation. However, subsequent research has not paid much attention on its adoption by incumbent telecommunications operators. This paper investigates how open innovation was adopted by the incumbent telecommunications operator BT in the UK, using the case study as the research method. BT used open innovation as a management injunction to systematise innovation under a common framework to leverage and integrate technology and knowledge in order to address customer needs, and to change the way of thinking about innovation within BT. Keywords: open innovation; service innovation; research & development (R&D); information and communications technologies (ICT); next generation network (NGN); public switched telephone network (PSTN); internet protocol (IP); voice over internet protocol (VoIP). University of Sussex, School of Business, Management and Economics, Science Policy Research Unit (SPRU), The Freeman Centre, Jubilee Building, Falmer, Brighton, East Sussex BN1 9SL, United Kingdom Phone: +44 (0)1273 873564; e-mail: [email protected] ISSN: 0718-2724. (http://www.jotmi.org) Journal of Technology Management & Innovation © Universidad Alberto Hurtado, Facultad de Economía y Negocios. 145 J. Technol. Manag. Innov. 2014, Volume 9, Issue 2 Introduction to others. In addition, open means that the incumbent tel- ecom operators are more inclined to collaborate externally The literature on open innovation started privileging the not only in R&D (Research & Development), but also in the supplier side (usually producers of manufactured goods) of implementation of different business models for commer- the innovation process, where companies such as IBM, Intel cialisation. This happens because at the infrastructure level, and Lucent (as in Chesbrough (2003)) were used to illus- the incumbent telecom operators have divested the equip- trate their ‘open’ practices to create and capture value. Since ment suppliers which were part of the vertical integration then the concept of open innovation as a business prac- of more monopolistic times (Fransman, 1994). At the ser- tice has received much attention, and it has been diffused vices level, the uncertainty about the future services and to other sectors besides ICT (see, for example, Gassman applications which will render revenues leads BT to look et al. (2010) and Huizingh (2011)). Case studies were done actively for external innovators and technologies which can in firms such as P&G (Dodgson, Gann, & Salter, 2006), Ital- be somehow combined with BT resources in the develop- Cementi (Chiaroni, Chiesa, & Frattini, 2011) and the Dutch ment of new services. Thus, incumbent telecom operators materials company DSM (Kirschbaum, 2005). are reorganising their infrastructure and processes in order to increase the ‘interaction surface’ with third party firms. More recently, open services innovation has been advo- cated as an important business practice in order to avoid The term innovation was originally devised to distinguish the commoditization trap (Chesbrough, 2011). The argu- the process of invention from commercialisation (Freeman ment is to rethink the business as a service business and to & Soete, 1997). Invention and commercialisation can occur figure out business models that can take better advantage in the various stages of the innovation process, taking the of the commercialization of tangible goods. The examples linear model as a reference: closer to the original invention (for large firms) range from product-based firms (Xerox (i.e. closer to science and R&D), during intermediate stages and GE) to service-based firms (KLM and Merrill Lynch) of developing products and services, and finally closer to (Chesbrough, 2011). the final customer (i.e. the final commercialisation). This is a modified view of the original linear model, where com- The success of the acceptance and diffusion of the con- mercialisation is only a downstream activity. In this modified cept of open innovation does not seem to be because it view, commercialisation can occur in intermediate stages was a new phenomenon in the market, but a phenomenon of the model. Recent developments facilitate a more open in the ICT sector that had been occurring for some time, strategy, where further mechanisms of external collabora- but captured and conceptualised in a way that it could be tion and access to external resources facilitate invention and meaningfully communicated and translated to other con- commercialisation in the various stages of the innovation text and sectors than ICT. However, within the ICT sector, process. Thus, open innovation emphasises a more collabo- few studies have addressed the world of service providers rative approach with external parties in the various stages of such as the incumbent telecommunications operators such the innovation process. as BT, which is plagued by strong competition, and desper- ate to create new paths for growth. The focus of attention This paper is concerned with how BT is reshaping its service has been usually within the ICT equipment and compo- innovation processes. The focus is the nature and conse- nent suppliers as in Chesbrough (2003), mentioned earlier, quences of open innovation practices as they are applied in and Ferrary (2011), who discusses open innovation in the a service company within the ICT sector (original sector ex- context of the telecommunications equipment industry, us- plored by Chesbrough (2003), but here from a service firm ing comparative case studies of Lucent Technologies and perspective), changing the way BT innovates in the develop- Cisco Systems. ment of new services. The research question that guides this paper is: Is open innovation relevant to incumbent telecom- As competition from different parts of the industry emerges, munication operators (as large service firms)? If so, how is threatening the traditional sources of revenues of incum- open innovation implemented? bent telecom operators, and with the landscape becoming clearer about the convergence of markets, the traditional The aim is to show how the concept of open innovation is ways of introducing new products and services are no long- implemented as part of the overall strategy being under- er adequate to keep pace with the speed of change in the taken by BT. Open invention is primarily done through part- market. A platform strategy demands that the organisation nerships with academics from universities, and sometimes adopts more open practices. By definition a platform strat- through direct interaction with customers at the level of egy involves the ability of others to ‘build’ on the platform the application of the technology. Open commercialisation which means that the information necessary for interoper- happens through the business of integrated solutions in in- ability and the capacity to interoperate needs to be provided teraction with larger customers, and through initiatives like ISSN: 0718-2724. (http://www.jotmi.org) Journal of Technology Management & Innovation © Universidad Alberto Hurtado, Facultad de Economía y Negocios. 146 J. Technol. Manag. Innov. 2014, Volume 9, Issue 2 Web21C that try to address smaller customers and the cusses such initiatives and the innovation model pursued mass market. Web21C was part of the BT21CN initiative, by BT, and elaborates on the implications for incumbent where BT made available API (Application Programme In- telecom operators in general. Section 6 draws conclusions terface) for third party developers to access BT’s network from this paper. and to develop applications. It is the idea of opening the plat- form for external firms and developers. In 2008, BT acquired Open Innovation and Services Ribbit, which overtook the Web21C initiative (Meyer, 2008). Although the focus is on BT, it is very likely that many of Open innovation has received much attention as it is an the ideas discussed here may be usable for other incumbent expression which captures several practices aimed at im- telecom operators. The analysis of open innovation at BT in- proving innovation performance through outside-in and dicates that it is used as a framework to build a coherent in- inside-out transactions (Huizingh, 2011). Although