CSPs want to co-create to add value. But can they charge for it?

In this blog, guest author Teresa Cottam, Chief Analyst at Omnisperience, looks at the potential for co-creation of value – the result of collaborative innovation where ideas are shared and improved together with partners and customers - as well as the importance of having the right infrastructure to successfully monetise the opportunities presented.

In the past, innovation in the telecoms market came from two main sources – internal CSP R&D teams and external telecoms vendors. But successful CSPs are now expanding innovation both within and outside their organisational boundaries and co-creating new value with an ever-wider range of entities including intrapreneurs*, their wider workforce, partners, customers, government organisations, universities, and even former competitors.

Historic co-innovation was limited in scope and not for the mass market

In many ways co-innovation and co-creation of value** are not new. CSPs have always operated within an ecosystem, where they have bought and sold tech companies, and re-sold third-party offerings. They have also co-innovated with partners and customers. However, these efforts focused mainly on their largest enterprise customers and partners. AT&T, for example, set-up its 5G Innovation Program with companies such as Cisco, Ericsson, Microsoft, Nokia, Samsung and WarnerMedia to co-innovate new 5G customer experiences.

Co-innovation with large enterprises was historically achieved using highly manual processes to produce custom products and took years to deliver. Partners were also limited in the way they shared the resulting value - tending to simply share IP rather than having more granular and dynamic ways of calculating and capturing value.

Co-innovating in the B2C and SME market wasn’t even on the cards. In these sectors, CSPs sought to create mass-market offers through internal innovation or simply resold third-party products. They controlled the relationship with the customer – largely because the focus was on cost reduction, which required standardisation – and while they could personalise the offer, they could only support configuration (rather than customisation or co-innovation) of the product.

Co-creation platforms will unlock the creative potential of SMEs

In the new wave of co-innovation, CSPs are engaging with a far wider variety of organisations of all sizes. And, if they can get their approach right, the SME market holds enormous potential for them. These customers have the most incentive to co-innovate and are usually far more creative than their larger peers.

There are a number of reasons why this is the case. Smaller organisations are flatter and therefore faster at executing on ideas, and they’re often more entrepreneurial and more willing to take risks. Co-creation platforms boost this creativity even further by giving smaller organisations access to technology that was previously only available to their larger rivals - enabling them to adapt offerings to their own needs and giving them a competitive edge.

Future co-creation ecosystems will therefore feature a mix of both large and small companies – with smaller companies providing innovative tech and specialised know-how, and larger companies delivering foundational elements of technology, underpinning services, and providing the ability to scale and reach customers.

Proximus is co-creating with both large and small partners

Belgian CSP Proximus has fully embraced the concept of co-creation – taking third-party tech and working with partners to localise it to the needs of the Belgian market, while at the same time offering up its connectivity and technical capabilities for partners to co-innovate new offerings. Co-creation has accelerated the velocity of its innovation, as well as the variety and volume of the innovation it is able to deliver.

An example of how Proximus is embracing co-creation is its investment in aug.e, an application platform for smart buildings. Proximus is combining its own ICT experience with its partners  expertise in buildings (Besix) and energy management (i.Leco). This initiative has already resulted in co-innovated solutions, as well as an access platform that enables smart building applications to be available for customers to co-create with.

How CSPs can add value to emerging ecosystems

CSPs such as Proximus add value to emerging ecosystems in a number of ways. The first, and most obvious, is their ability to offer key telecoms products such as connectivity, quality of service and service-level agreements, as required by ecosystem partners. They also have large customer bases to sell to, and the ability to support customers using their substantial investments in contact centres, self-service and even chatbots.

Revenue management capabilities such as billing, charging, payment, and collections are valuable capabilities that CSPs can deploy to support emerging ecosystems. While co-creation will undoubtedly drive new opportunities, it isn’t enough to just create a new ecosystem or add new value – it’s also vital that ecosystem partners can sustainably measure and monetise the value being created.

Revenue is essentially a measure of value creation and in a traditional business model CSPs set prices (which determine their revenues) according to their own costs, combined with customers’ willingness to pay, and adjusted for competitor offers. How much value was being created for customers was not always taken into account. This leads to two main problems. Firstly, prices may be set too high, such that customers don’t feel they match the value being derived, leading to costly product failure. Conversely, there might be a loss of value to CSPs where customers perceive a solution as highly valuable and would be prepared to pay more for it.

In contrast, co-creation of value means the solving of real-world problems for customers, aligning perceived value and charges more precisely, and ensuring faster take-up and a greater likelihood of product success.

Emerging co-creation ecosystems see CSPs become business partners with other firms and the blurring of lines between partnership and customer, as CSPs help co-innovate, co-create, deploy, and support new service offerings. This introduces increased complexity into pricing and charging, with multiple suppliers for a single product instance and far greater volume of co-creation relationships to manage.

What this means for billing

CSPs have the opportunity to assume a new role in co-creation ecosystems, as trusted commercialisation brokers that ensure all players are paid for the value they create – underpinning value creation with key service offerings such as billing, payment and partner management.

Assuming the role of a billing and payment broker within co-creation ecosystems will require CSPs to have flexible and agile monetisation solutions that can handle a wider range of pricing models and charging paradigms, more frequent change, as well as revenue-sharing between partners according to agreed parameters. Partner management will likewise become essential, including the ability to identify the most valuable and least valuable partners.

In future, the nature of CSPs’ commercial relationships will change from relatively simple uni-directional billing and payment flows into true multi-directional billing and payment at scale, supporting complex co-creation ecosystems that are focused on delivering valuable outcomes to customers rather than simple products.

Critical to success will be the ability to ensure all participants in emerging value chains are paid the right amount and on time. This complexity will need to be supported by billing systems; but bills will need to be simple, easy-to-use and accurate. Real-time balances will become increasingly important, so that CSPs and their partners can discover at any time what they owe, as well as how much they’re owed, with clear, real-time reporting essential to attracting and retaining the most valuable partners.

Importantly, customers will expect a consolidated bill for complex co-created services – not bills for each component of a service. From the customer’s point of view they are using a single solution and they will expect a single bill for it. This seemingly simple expectation is actually a huge challenge for CSPs who frequently struggle to produce consolidated bills. But it’s also a huge opportunity.

Ultimately, if CSPs get it right, co-innovation ecosystems will transform B2B billing from an overhead cost to a valued component of complex service provisioning and perhaps even a revenue-generator in its own right.

* Intrapreneurs are employees that act like internal entrepreneurs within an already established (large) company. Steve Jobs is an example of someone who utilized intrapreneurship successfully, while Google also enabled employees to engage in personal projects within company time. How intrapreneurs are rewarded varies between employers but can include pay-for-performance, company shares, a share of cost-savings, or promotion.
** Co-creation is the process of customer engagement in value creation (Co‐creating unique value with customers, Prahalad and Ramaswamy, 2004), as customers are changed from inactive to active consumers (Evolving to a New Dominant Logic for Marketing, Vargo and Lusch, 2004).