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A University of Sussex DPhil thesis Available online via Sussex Research Online: http://eprints.sussex.ac.uk/ This thesis is protected by copyright which belongs to the author. This thesis cannot be reproduced or quoted extensively from without first obtaining permission in writing from the Author The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the Author When referring to this work, full bibliographic details including the author, title, awarding institution and date of the thesis must be given Please visit Sussex Research Online for more information and further details BUILDING THE NETWORK AS A PLATFORM FOR INTEGRATED SOLUTIONS AND SERVICE INNOVATION IN THE TRANSITION TO THE NEXT GENERATION OF TELECOMMUNICATIONS: THE CASE OF BT Carlos Eduardo Yamasaki Sato A Thesis Submitted in Partial Fulfilment of Requirements for Degree of Doctor of Philosophy SPRU: Science and Technology Policy Research University of Sussex September 2009 I hereby declare that this thesis has not been, and will not be, submitted in whole or in part to another University for the award of any other degree. Acknowledgements The doctorate journey is a long and personal project. In that respect, this project had many stakeholders. Several people supported this initiative and made the journey possible. I thank my wife, Neide, who has been with me along this journey: my gratitude for her support, sponsorship and companionship. I thank my parents, Hiyoshi and Tiyoko, and my older sister, Márcia, for their support not only in this, but in many other undertakings in my life. I also thank my parents-in-law, Kaoro and Kazuko, for their kindness and generosity. I am grateful to Prof. Dario Eduardo Amaral Dergint and Prof. Kazuo Hatakeyama, from UTFPR for their guidance and friendship, which inspired me to do this doctorate. I would also like to express my special gratitude to the following people and institutions who have, in conjunction with the family and friends listed above, provided me with invaluable support during the doctorate journey: • Ed Steinmueller, my supervisor for most of the doctorate. He provided me with the inspiration (and perspiration) to persist with this journey and to attempt to learn what a critical scholar is. I may not have learned this yet, but it is not his fault. • Andy Davies, who set me off on this journey as my first supervisor in SPRU. • Martin Meyer, who supported me at many important moments. • Friends and colleagues who were part of the ‘therapy’ group, which helped me to cope with the burdens of the journey and also to enjoy the experience. • The support staff from SPRU, especially Janet French and Carmen Long. • The academic staff from SPRU. I learned everything that I expected and more from them as a student and as a lecturer. • Programme Al βan, the European Union Programme of High Level Scholarships for Latin America, scholarship no. E04D046140BR: without this scholarship, my doctorate would not have been possible. The end of the doctorate marks the start of a new phase. The repercussions are yet to be seen and experienced, but the lenses to see the world seem to be more focused. Success and failure are like two sides of the same coin, where success can turn into future failure and failure can lead to future success. UNIVERSITY OF SUSSEX Carlos Eduardo Yamasaki Sato Doctor of Philosophy BUILDING THE NETWORK AS A PLATFORM FOR INTEGRATED SOLUTIONS AND SERVICE INNOVATION IN THE TRANSITION TO THE NEXT GENERATION OF TELECOMMUNICATIONS: THE CASE OF BT SUMMARY This thesis investigates the development of capabilities by incumbent telecommunications operators in the context of the transition to the Next Generation Network (NGN). In particular, it examines the case of BT in the UK, as a large-scale first mover in this transition. The research is based on recent developments in the telecommunications industry, and the empirical evidence was obtained through documentary analysis and a large number of interviews. Using the resource-based view (RBV) as a foundation, the wider theoretical contribution of this thesis lies in the proposition that integrated solutions are constructed through the combination of platform strategy, project business and service innovation. A unique contribution is to consider the customer/user perspective, as the traditional literature on integrated solutions relies heavily on the supplier perspective. Another specific contribution is in the integration of two aspects of the platform strategy that are usually treated separately in the literature: (i) the reusability of components and sub- systems; and (ii) the openness of the platform to external actors in order to drive innovation in the industry. The empirical evidence points to the development of the following approaches by BT: (i) the deployment of the network as a platform, integrating both aspects mentioned above; (ii) the adoption of a customer-centric approach which resulted in the establishment of a new business unit, BT Global Services (BTGS), that required the development of stronger capabilities in integrated solutions, especially in professional services (i.e. consultancy, project management and systems integration); (iii) the use of the term ‘open innovation’ as a management injunction within BT in order to coordinate several initiatives which bring together internal and external collaborators and resources to innovate in services. The above approaches, however, have not changed BT’s core capability in the provision of network/infrastructure services. The challenge is to connect BT’s platform to their customers’ networks and to shape long-term relationships to enhance the profitability of the integrated solutions. Finally, the findings suggest that the platform and customer- centric strategies may not be enough (or even be the right ones) for the survival and growth in the long-term future of BT in the telecommunications industry. This is evidenced by the recent failure (as of 2008) of BTGS to provide professional services profitably. 1 TABLE OF CONTENTS TABLE OF CONTENTS .................................................................................................. 1 LIST OF ABBREVIATIONS ........................................................................................... 5 LIST OF FIGURES .......................................................................................................... 7 LIST OF TABLES ............................................................................................................ 9 1. Introduction .............................................................................................................. 10 1.1 Background ...................................................................................................... 10 1.2 Research Questions .......................................................................................... 19 1.3 Boundaries of the Thesis .................................................................................. 21 1.4 Areas of Investigation ...................................................................................... 22 1.4.1 The Network as a Platform ........................................................................... 23 1.4.2 The Capabilities for the Transition to NGN ................................................. 24 1.4.3 Service-Dominant Logic and Open Innovation to Co-Create Value ............ 28 1.5 Organisation of the Thesis ................................................................................ 29 2. Theoretical Framework ............................................................................................ 34 2.1 Introduction ...................................................................................................... 34 2.2 From Resources to Project Capabilities ........................................................... 37 2.3 Project Business: Project Management and Project Marketing ....................... 44 2.4 Service-Dominant Logic (SDL) and Goods-Dominant Logic (GDL) ............. 49 2.4.1 Value Co-Creation and Service Innovation .................................................. 58 2.5 Platform Strategy .............................................................................................. 64 2.6 Integrated Solutions .......................................................................................... 72 2.7 Conclusions ...................................................................................................... 78 3. Research Methodology ............................................................................................ 81 3.1 Introduction ...................................................................................................... 81 3.2 The Research Process (Design and Strategy) ................................................... 82 3.2.1 Research Design ........................................................................................... 82 2 3.2.2 Observational Strategy .................................................................................. 85 3.2.3 Operationalising the Research Strategy ........................................................ 89 3.3 Data Collection, Analysis and Case Study Writing ......................................... 92 3.4 Drawbacks of Interview Data and Case Study Method.................................... 96 3.5 Conclusions ...................................................................................................... 96 4. The