One of my
favourite speakers at ETel (the conference which lead to the birth
of eComm) was Norman
Lewis. Norman is the Chief Strategy
Officer for the Wireless Grids Corporation,
USA.
Prior to joining WGC, he was the Director of Technology Research for the mobile
operator Orange, UK. Prior to this Lewis was the Director of
Technology Research for the Home Division of France Telecom and of
Freeserve.com.
There is so
much what I'd call synchronicity between Norman and me at points that one may expect
most of the questions had been pre-arranged along with scripted answers. They
were not! The only thing I can say is that Norman was chosen for the eComm advisory
board because I felt he was in tune with the conference aims. Norman and I
spoke for quite sometime, so I will need to split it into a further two or even
three parts.
Norman has also kindly agreed to help the
conference out by co-chairing it!
Part 1 of the interview can
be downloaded
here in 64kbps-cbr mp3 format (it's 12 meg in size and 25 minutes in
length). If you think you can hear better voice quality with a higher bit rate,
a 96kbps-cbr version is here
in mp3 format (it's 18 meg in size) or if you want to waste bandwidth a
128kbps-cbr version is here
in mp3 format (it's 24 meg in size). Personally I notice a slight
difference but due to the noise on the call, it is negligible.
The usual caveats apply, below is not intended to be an
accurate transcript but rather a pretty good idea of what is covered in the
audio file (so listen in).
I started by asking about his job as director of research at the mobile operator Orange to which he
replied:
...the job
was to look three to five years out to look at disruptive technologies and in
my case particularly to look at how those disruptive technologies would
interact with user behaviours, in other words what technologies would be taken
up, how they would be taken up. And would this be the basis for new opportunities
or threats to the existing business.
I asked why he was attending the conference, to which he replied:
because I
think eComm is s a very necessary development especially after the cancellation
of ETel from O'Reilly. And indeed the problem I always thought with ETel was
that it really had the wrong name. Because we are not talking about telephony
any longer, that is way behind. We are really talking about the future of
communications and communications here means telephony, voice, content,
entertainment, all other digital technologies, digital media, all together and
how these are going to be knitted together, to what we would call the end users
experience of how all this stuff will enter into their [consumer] lives. And
from that point of view I am very pleased to be part of this because I really
do think this is the direction we need to move the industry in, I don't see
much of this happening within the industry. I see a lot of talk about
convergence and all those kinds of things, they've been talking about that for
a long time, I see very little of that actually happening. And so I think it is a great initiative , that we are going to create a
forum where we can bring together, many kinds of people who are looking , who
are looking at his space, who are innovating in this space, who have a real
desire to work in this space and allow them to meet each other, network
exchange ideas, clash of opinions, whatever, and indeed hopefully , it will
give rise to new ways of thinking , perhaps getting together, starting some
projects together, and hopefully establishing this forum as an ongoing interchange
that will be repeated every year that will get bigger and better, and attract
the kind of attention that I think it should be doing. And act as a pole of
innovation attraction for the industry itself.
Because I do believe we can influence them [telcos]. But it is very
important that we get together with like minded people and establish that forum
in the first place. So I am going to be there and hopefully helping to do that
My next
question to get thing going was "how do you see the telecoms innovation model
that we have today, can you comment on that"?
actually I
could comment very briefly because I do
not see much of an innovation model, in the telco space to be honest, to be
absolutely frank. In fact if you look at what is happening in the last ten
years or so, all the innovation that has occurred in this space has came
outside of the telcos. It has particularly came around the Internet., and in
many instances this has forced, this has forced the telcos to change what they
are doing, rather than the impulse for that change coming from within. I felt
particularly strongly, where I was [director of research], where there was a
real, where beyond simply the access product was, the real inability to engage
with the really significant changes that were happening. Particularly around
what I saw as an enormous amount of innovation, around the Web, around the
Internet, the telcos where really playing catch up I think
I put it to
him "but surely telcos should get some praise for upto a hundred billion dollar
a year SMS market? Would you regard SMS as innovation?"
most definitely,
but just remember that the impulse for SMS did not come from the telcos. No
operator ever envisaged that SMS was going to be a business and indeed if you
had prepared a business case 10 years ago saying that I've got a wonderful idea
for a new business which is this thing called SMS and that you put forward the
business case as to how it would work and construed what it cost and
everything, you either would have been fired or drummed out of the boardroom...SMS
is a great example of exactly what I am talking about, it was exactly the kind
of areas we were studying which where, you had the telecom operators going on
about WAP, and about 3G and how you where going to surf the web with your
mobile phone and you know blah blah blah. And what did the customers do?
Particularly younger people. They started texting. Which as I said earlier, was
never envisaged as a service. And thank
God for the young people and texting became what it did become, as that as far
as I am concerned, really saved the operators, because without it, they
would not be enjoying the revenues that they are enjoying today...of course they
reinvent history so everything is read backwards so that they take the claim for that innovation . You know the innovation
had nothing to do with what it subsequently became. And indeed I think the
history of the telco industry is precisely that; that they've got this God
given right because they've invested some money in the network, which is great
and I've got nothing but praise that they've rolled out these networks, but
that does not therefore give them the right for in perpetuity, to charge people
because they've laid out this expense. I think they've got to understand that
the world has changed and it has changed as a consequence of what they have
done. But they really have to get with
the programme now and adapt themselves to this new environment not hold it
back, which I think in fact they are more often than not, doing.
I had to
lead on and ask "do I detect that telecoms innovation is and should be,
decentralised and a part two to that question is that you are saying that
operators are hindering that decentralisation of telecoms innovation, is
decentralisation the issue at the heart of what we are really speaking about
here?"
I think it
is....it's very interesting, if you look at the Internet space, if you look at
the web, the point is that once you establish this backbone, once you establish
this IP network and you establish the simple rules like the end-to-end principle,
it meant that you no longer could control it, in the way you might have done in
the past. Because nobody needed permission to put something onto the web, as
long as whatever you built, conformed to those basic principles, you know you
could put it on there, to be consumed by anybody; anybody could get access to
it. And as a consequence of that, it's almost like despite themselves [telcos],
innovation occurred, and this kind of platform was created, that enabled
anybody to come along and build some new services, new ideas Etc. which was
fantastically fruitful. But I'd say that happened you know, despite the telcos,
it was like outside of their control. And indeed what I see today, I see the
structural barrier...I think the [mobile operators], they are basically where the PC industry was 10-15 years ago.... I
think what is really important here is what has happened within business, is
you've got these large telcos, which potentially are more accountable to the
financial markets than they are to their end user customers. You have a very
kind of institutionalized , structural barrier now to a lot of innovation, and
the structural barrier is the following. They are very much based upon short
term financial returns, i.e. what are you figures going to look like in the
next quarter? And that is basically what every CEO in every telco around the
world is doing. They are concentrating
on the next quarter. They are not
thinking long term. They are only concerned about, basically, the
requirements, the commitment they have made to the financial institutions, to
the shareholders Etc. So what you have now is a kind of short-termism that is
very much geared towards what can we get out of the door, in the next quarter
that is going to generate revenue? And therefore what is happening is that if
you look at the investments which are going into R&D, increasingly it is
based more and more around development rather than the research side of things.
And that I think is a real problem, because all that means is you have a kind
of pragmatic culture which is looking for success continuously now. For me
innovation is about making mistakes as well as successes. You know you learn a
lot more from failed projects than projects that might be successful, because
the success can be related to a number of issues, which you have very little
understanding. But the more you create a culture that enables you to take
rsisks that fail, a failed project is not necessary a failure, because you can
learn an enormous amount and it can set you off in a new direction, which might
be very very fruitful, in the future. That culture does not exist. They
[telcos] pay a lot of lip service to this. But that culture does not exist
within the telcos. It is all about success driven endeavour. And
therefore what happens is, you stay safe, i.e. you don't take risks, you stay
with what you know, and you stay with what so far has been generating you
revenue and basically you try and cling onto that. But of course the
contradiction in all of this is that it
no longer suffices. So even now we
see we see the decline of revenues to voice for example, as we see
disruptive technologies become much more mainstream etc etc. So that no longer works, so you have this
kind of real, what I call institutional stasis, where you have this kind of
tension continuously that immediate short term goal and that which you are
going to have to do in the long term. And at the moment I can't see within
the cultures of these organisations that they have the management, the vision
or the courage or the kind of risk culture that will enable them to break out
of this kind of vicious cycle. I think the only thing that will force them to
do that will be changes in the market as we see other players come into the
space as we've seen very interesting, in the last five years or so. Some very
new players who are starting to impinge upon them. And you know they are
beginning to recognise the threats and that fact will be possibly will spur
them, but it really comes down to the quality of the kind of thinking of the
management that they have which, in these organisations, which I don't think
have the agility to manage this kind of process, I'm, as you can tell, it was
the main reason why I decided to get out of that [telecoms] environment, an environment which was not productive,
which was not fruitful of any real innovation. It was just copying; it was just
following on from what everybody else was doing.
I next put
a rather largely worded question over to Norman - "What I am hearing here is
that telecoms has two vertical products, voice and SMS which are couple with
the device and the connectivity. Voice makes large returns, so does SMS. It is
a trillion or multi-trillion dollar industry depending on how you measure it.
And it is an industry that is working its vertical two products which are
generating revenue; the mobile industry is the world's largest market. Now you
are expecting them to be agile and to move and so on, but surely if you where
in their position, which I guess you where, you would just stay protecting
those two vertical products as they are doing and paying lip service to
innovation. Is it not correct of them to try and protect those two vertical
products?"
His reply:
Of course
yes, there is certain truth in what you saying, but it is very self-defeating
process because it is maybe one they can
milk for the next ten years. But unless they innovate in this space, unless
they take notice of what is happening outside, they are going to get to a point where this is not sustainable -
because their revenues are being eroded....I
spent a lot of time going to our R&D labs across the world. We were in China, Japan,
Korea;
we met with all the key operators there.
Everybody showed exactly the same slides.
Different language, slightly difference cultural emphasis but the same slide,
which essentially was that you have
access and the value of access going down. And you have this other graph
which is showing usage going up and the
problem you have got is this massive gap, growing gap between the revenues you are
generating through your access product and your basic, what your calling your
two products [voice and SMS] and the usage that is going up and the
economics are just unsustainable, and so the gap between them, they all had the same slides saying the way
we will overcome that is thru value added services. And so we said, so what's
the value added service and of course they said that is the key question.
Of course they don't know the answer to that because they [operators] have
never been able to anticipate these things because these things have been much
more driven by user behaviours than by anything that has came out of the telcos,
they [users] have adopted the technology and used it in ways that never where
understood or envisaged in the first place. So they [telcos] recognise in the long term that there is a big
problem here. Because you have this growing gap and it is going to become unsustainable at a certain point where those
revenues [from telephony and SMS] are not going to be enough to generate, to
enable them to realise the demand that there is going to be from the end user.
There's just a lot more people to be connected on this, you know there is a lot
more a lot more speed, bandwidth and everything else that will be needed to
drive usages in the future and that is going to require investment, that is
going to require an understanding. Now if your approach to this whole thing
[disruption] is simply to be defensive and to try and hold onto what you have
got [telephony and SMS revenues], you know, as I said these are rich cash cows,
there is no doubt about it - you know there're generating billions but those
billions, relatively speaking, in the
next three to five years are not going to be as big as they are now. And
they are going to be representative of a major problem which is where are you going to sustain longer term
investment that can prepare you for the next generation of things and that is
where I think you are seeing other players coming into the market, who are
taking a bit more of a longer term of it and being a little more disruptive.
And I think this has long term consequences for the whole ecosystem and I
really think this needs to be discussed and debated much more so we can start
shaking this up and changing the way people are thinking about this
At this
point I jumped in to ask if he could name at least one player who is taking such
a longer view? He replied:
Well I think if you look at some of the web
based players, if you look at the Amazons of this world, if you look at Google,
if you look at some of the strategies that they are beginning to evolve where
you know, they have a much more deeper understanding where things are going and
what they need to do to take advantage of this IP world. I think they, you see them, you
see the kinds of moves that they are beginning to make which I think are very
very interesting. I think they are going to pose some very big questions. Can I
just get back to you on just one other point though? The problem with this defensiveness is they are missing a huge
opportunity. That to me is the frustration. As I said earlier I understand
why you would have this culture [defensiveness within telcos] and most
certainly that was the frustration I had a lot of the time when I was in,
working in that space. That you know, if you were responsible for this revenue
[telephony and SMS] and this revenue was coming in, you know you would be
sitting there feeling quite good and you would be very jealously guarding that
and ensuring that nothing disrupted that.
But for me the real tragedy if I could use that term, is that there is such a
huge opportunity now such a huge space for innovation that could generate new
value that if we were able to take advantage of the innovations and the
technologies that we now have at our disposal. You take something like voice and
now for me one of the most interesting and challenging questions is what the
future of voice is going to be? I think voice has been static for the past
hundred years. I think for the first time now, that you have IP I think it is
quite possible that voice becomes something quite different to what it has been
up until now. Voice just becomes another application that can be delivered
across this network that means you can integrate voice into things that you
could not have done in the past. So the whole experience of voice and how we
use it, if you combine voice with presence and things like that, it just means
the experience for the end user is going to become that much greater. And that
represents a huge space for changing the way we think about communications and
the way we will communicate in the future. That to me is an enormous
opportunity. In fact I am doing some work on this question on trying to
quantity what the new opportunities might represent and my instinct, although I
don't have the research to back this up yet is that I think there is a huge pot
there that no one is even envisaging as an area of value creation. In fact in
time I suggest it will be bigger than existing voice revenues
I had to
chirp in a verbose fashion then cut myself off having remembered I was meant to
be the interviewer not the interviewee, to which Norman then replied:
I really couldn't
agree with you more. I think when you look at something like voice and you
think about what you could do, it's really remarkable to me, actually I've been
doing some work with Martin Geddes on this very question and it's remarkable to
me that looking at all this research, I might be wrong, but from the research
so far there is very little qualitative study on a very basic question which is
why do people make phone calls? There is a lot of quantitative stuff which say when they do it [make calls],
how they do it, etc. etc. but there is not qualitative studies that really
break down what is behind a phone call, what's the motivations, what's the
emotional content, of phone calls. Because very very often phone calls are just
signals of something else and not just practical things about you know I am
doing such as such or I will meet you at such and such. There are so many subtleties to why people make phone calls and what
they are doing in a phone call, that I think if you understood that better, and
if you could embrace some of those motivations, I think you could create an
entirely new communications experience. Which I think people will value very very highly. And there for me is
the future of value expansion
Again I had
to chirp in and add my own views in agreement, so Norman continued:
This is the
frustrating thing you see because, it's almost like this [telecoms] industry
despite itself has made, as you said, billions of dollars, and it's a trillion
dollar industry and everything but what is remarkable about it is that they do
this despite themselves, I find that remarkable. Obviously something has to be written about this at some point,
historically, about the relationship between intended outcomes and conscious
application of technology because there is such a huge gap between the two
things here, but for the telco industry, they've, they are obviously meeting
such a basic human need. That despite the fact that they themselves still don't
understand what that is, they are still able to generate billions.
