"Why Didn't Telcos Think of That?"

Over the past decade and a half, we have heard lots of noise, and significant spending, in support of innovation by telcos globally, despite the clear evidence that most innovation now happens in other parts of the ecosystem (think iPhone, or any mobile app).

While it might be useful for executives to talk about innovating “at Google speed,” there frankly is little evidence telcos have, can, or want to innovate at such rates. 

One might charitably argue large telcos should not bother with most "innovation" in the app space.

For any number of institutional reasons (scale, culture, need for global standards, sunk investments in legacy operating systems, regulatory issues, huge needs for investing capital in dividends and physical infrastructure), telcos arguably cannot move that fast, even when they want to do so.

Still, it is instructive to look at ways text message enabled  e-commerce is being enabled by U.K.-based FetchMe. Right now, FetchMe requires minimum transaction amounts (£20), presumably to cover FetchMe’s own costs of acting as a middleman retailer.

In the United States, “Magic” offers a similar feature, acting as a sort of texting-enabled concierge service.  

Of course, there is an obvious reason why a text-enabled concierge service would not be commercialized, even if innovators inside a telco operation wanted to do so. As with many other potential services, it is difficult to scale.

And scale normally is a key requirement for any proposed telco-delivered service. The reason is that processes have to be routinized enough that they are easily repeatable. A concierge service is, almost by definition, going to be “custom.” And that always is difficult for any industrial process, which is what any large telco operates.

So even if e-commerce enabled by text message seems like the sort of thing telcos themselves might have commercialized, they have not done so. One might argue they have good reasons for “not innovating.”

Repeated over enough instances, that reality suggests the fundamental limits to telco innovation. They can handle industrial scale, in fact require it. Customization kills scale advantages, so customization prevents telcos from acting.

The Pareto rule probably continues to operate: 80 percent of the results for telcos will flow from 20 percent of their activities. Those activities will continue to be anchored in “access” operations. Like it or not, that is the specific and unique role they occupy in the broader ecosystem.
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