The next generation of customers are different to any that technology, media and telecommunications (TMT) firms have known before, for one key reason; these customers have grown up with technology. It comes naturally to them, it is part of their lives, and they are used to a world where their work, relationships and home needs are met through technology. As a result, customer expectations are rising, and are increasingly willing to switch between providers to meet their needs.
TMT organisations are continuously battling to release new and innovative offerings to edge ahead of the competition. In such a fast-paced market, it’s difficult for a consumer to keep up; never mind large corporations who are grappling with time to market processes, innovation strategies and upgrading backend platforms.
This is a challenge, as firms have to implement change faster, take more risks and go through a cultural shift. This becomes all the more relevant when considering that historically, the TMT market has been dominated by larger businesses which find it challenging to be agile in response to a dynamic market.
The difference between surviving and thriving
Uber, Amazon and Airbnb are gleaming examples of innovation unlocking market growth
Firms that innovate regularly, and radically, improve customer loyalty and have been seen to achieve higher growth rates. Uber, Amazon and Airbnb are gleaming examples of this. In an increasingly competitive TMT market, this kind of differentiator could be a significant benefit; it could be the difference between survival and leading the market. Netflix is a great example of innovation that can change the shape of a market; the rise of television streaming, saw Netflix grow its customer base by almost 30% in 2014. This was driven by millennials, who watch a large proportion of the original series on digital platforms.
Customers becoming more open to changing firms means TMT firms have the opportunity to win back customers with one market leading innovation. So how can it be done?
Assessing the innovation strategy
A first step is for firms to assess their Innovation Strategy, and how they currently encourage innovation against three interdependent factors: innovation spending, operating model, and culture.
1. Innovation spending - optimised via a disciplined process
Investment in research, development and innovation can be optimised by focussing on a disciplined process for innovation and product launch. This includes aligning launch and design teams to minimise time to launch and governance of R&D spending to minimise sunk costs for offerings that do not make it to market. The TMT sector could learn a great deal from the Pharmaceutical industry here, who spend an average of 18-33% of revenue on R&D, and it is critical to optimise their innovation and product launch processes.
The strategy should incorporate measurable objectives, and be open to partnering with start-ups or FinTechs, where there are benefits of doing so.
2. Operating model transformation - focused around the customer and innovation
This can be done in multiple ways; both internally and externally. Internally, firms can set up a distinct, centralised innovation team responsible for all innovation (process, product etc.) or can implement a unified approach to innovation spending across the organisation. Firms can also buy their innovation capability externally, through outsourcing or partnerships.
However innovation capability is brought into the organisation, the operating model should be focused around the customer strategy and tailored to the spending strategy and product launch process. Organisations need to ensure there are the right skills within the business and have the capability within to promote innovation – whether this it is built or bought.
3. Cultural change initiative - to shift attitudes toward the right risks
Innovation requires investment and investment is risky. This is a change for some firms, who need to encourage idea generation and innovation throughout the organisation, embracing ‘risk’ and spreading it across a diversified portfolio. This can be done through a firm-wide communication and engagement plan, explaining the innovation strategy to ensure buy-in. This should then be refreshed periodically, to maintain this culture as the firm changes and grows. The structure could be implemented alongside any operating model transformation and process implementation.
Another way to shift attitudes is through change initiatives such as creating a physical space for idea generation and encouraging all staff to submit new ideas. Sky have numerous ‘innovation pods’ to engage staff in designing and testing new products and services. Staff, in turn, become ambassadors of the brand.
Innovating the innovation strategy
As customers demand more and become more flexible to transfer between service providers, this poses both a risk and an opportunity to TMT firms.
Customers are leading the market, causing shifts and making the sector increasingly competitive. This can be tackled through an effective change programme focused on the innovation strategy; transforming investment, operating model, and culture to take risks. If firms do this successfully, they are much more likely to increase market share, increase growth, and ultimately, keep up with the kids.
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