What does innovation look like amid the cost-of-living crisis?

In this blog, guest author Teresa Cottam, Chief Analyst at Omnisperience, looks at why CSPs must accelerate co-innovation during the cost-of-living crisis, while pointing out the importance of not overlooking value capture and communication.

Scarcely a day goes by without there being more bad economic news in Europe. Businesses that have not yet fully recovered from the effects of the COVID pandemic are now battling rising costs and weak demand. This couldn’t be worse news for CSPs at a time when they’ve spent billions on network build out and infrastructure refresh.

Collectively, Germany, France, Italy, Spain, The Netherlands, Greece and Austria have already committed EUR300 billion to help both consumers and businesses cope with soaring energy costs. But even this is not enough. Pasta and toilet paper may have been two of the most in-demand commodities during the pandemic, but a lot has changed in 18 months. Germans were left joking “not pasta then” when toilet paper manufacturer Hakle went bust. Despite huge demand during Covid-19, it had fallen victim to soaring energy costs on the one hand, and customers switching to cheaper products on the other. Something the telecoms market needs to pay heed to.

In the UK, for example, 8 million households (1 in 3) are now struggling to pay their telecoms bills at a time when CSPs have little choice but to increase prices due to their own costs rising. The proportion of customers in difficulty means they have to rethink the way they deal with customers - being more flexible on contractual terms and offering the possibility of moving to cheaper tariffs to help customers struggling to pay their bills.

Given the current economic climate, it’s tempting for CSPs to slam the brakes on innovation, cut their costs, and hunker down until the worst of the crisis is over. But this would be a big mistake.

Innovation is more important than ever

While it’s always good to increase efficiency, this in itself will not be enough to help either CSPs or their clients survive the current crisis. Understanding customers better, and meeting their needs more precisely, is vital if CSPs are to prosper and retain their market share in such a challenging market.

Doing so, requires them to go beyond simply designing what they consider to be better offers and products. Instead, they need to accelerate the move towards customer centricity and personalization by co-innovating with their customers.

Muthu De Silva, assistant dean at Birkbeck, University of London, argues just this point, saying that companies must refocus on their clients and their needs. “The secret to success during difficult times is concentration and innovation,” she states.

This is why co-innovation is not a nice-to-have but an essential tool to help CSPs survive and prosper. By putting the customer at the heart of the innovation process, CSPs are not only able to deliver products and offers that solve their customers most pressing problems, but they can also derisk innovation and speed take-up of new complex services.  Perhaps even more importantly, co-innovation will help CSPs overcome current resource constraints and aging business models to find new ways of co-creating value with their customers.

"Co-creation can be a powerful tool for driving innovation, even during tough times,” argues Professor Benjamin Laker from the Henley Business School, University of Reading. “By collaborating with other companies, universities, and government bodies, you can pool resources and overcome the challenges posed by a recession. What’s more, by investing in co-creation today, you can set your business up for success when the economy eventually rebounds tomorrow."

What’s clear is that whether CSPs are figuring out how to support sectors under stress with new innovative tariffs and productivity-boosting products, or helping businesses better address their own customers’ needs, there’s never been a more critical time for them to adopt a co-innovation approach and co-create more value.

Leading CSPs are already co-innovating

Leading CSPs have been embracing the benefits of co-innovation and co-production for some time. Just as the pandemic accelerated digitalisation, the current economic crisis will accelerate the move to co-innovation.

Orange Business Services, for example, has said that it will work closely with both partners and clients “to help them accurately identify their needs and objectives and then support them through every step of their transformation project: from exploration to large-scale rollout.” They point out that co-innovation not only helps their B2B clients meet their own business objectives, but also meet the objectives of end customers, while improving their experience and reducing their environmental impact.

Amongst other initiatives, Orange Business Services is working with Ericsson and ArcelorMittal on 5G Steel, an initiative to use a high-throughput, low latency and secure 5G private network as the foundation for key industrial projects such as remote maintenance and autonomous vehicles. This will see ArcelorMittal’s maintenance teams adopt AR to access documents and expertise, while a fully autonomous train will be developed to transport products across their sites.

Co-innovation is only half the story – value capture and communication must not be overlooked

Whatever the use case or the industry, the outcome is the same. Co-innovation can unleash greater productivity, solve real-world problems faster and bring CSPs, their partners and customers closer together. But co-innovation and co-production are only the start. Ultimately, all the value being co-created by the participants in these new emerging ecosystems has to be captured and communicated accurately and reliably.

It's easy to get carried away with the excitement of co-innovating solutions; but it’s also essential not to overlook the issue of value capture and communication. This requires CSPs to be able to capture, share and communicate co-created value derived from complex multi-party services. Equally important, bills must reflect the customer’s experience of the service rather than the CSP’s and their partners’ product lines. Monetisation and value communication could become the Achilles Heel of co-innovation if more thought is not put into these issues. Get it wrong and you will frustrate clients and see poor take-up of co-innovation. Get it right though and you will open up an entirely new way of working with customers that results in more value co-created for clients, end customers and CSPs themselves.