Telco Accelerators : Hitting the digital tarmac at top speed !!

Presentation1

The latest issue of Ey Inside Telecoms 15 has a very interesting update on Telco Accelerator Programs. Now what is that ?? Basically when Telco operators establish new incubators as part of digital transformation initiatives with the creation of new business units to nurture entrepreneurial start ups.Operators are working with partners as part of accelerator initiatives, underlining how service innovation is increasingly reliant on harnessing expertise from across the telco ecosystem. Over the last few corporations have moved to an open innovation model or outsourced R&D. They’re doing less basic research in house and essentially looking to bring that in through acquisitions. Ask Google and Facebook what they did to become so big !!

So why the sudden surge investment in Accelerators by Telcos ? For one the appearance of incubators in emerging markets underlines the role operators can play as leaders of technology ecosystems, particularly in countries where entrepreneurs may lack support structures. Accelerator programs offer a number of established advantages to operators — from lowering the risks and costs associated with new projects to enabling operators to tap into a wider talent pool. Not bad at all because it is not a merely a CSR initiative but a genuine effort to create new digital products and services with the help of small time developers on a shared risk basis : you know …the same kind of small timers who built Facebook , Instagram , Twitter , WhatsApp etc into multi billion dollar titans that threaten to render Telco networks into unprofitable dumb pipes !! With the cost of developing new technologies coming down so dramatically, it makes sense for corporations to take smaller bets on new technology offerings developed in partnership with entrepreneurial apps developers .

As an example Wayra is Telefonica’s Accelerator program. With the financial backing of Telefónica, and with the support of a global network of mentors, investors and partners, they aim to help the best entrepreneurs to grow and build successful businesses.They know the next digital revolution can emerge from anywhere, in technology nobody has the final word. If you have a business or an idea that uses technology to solve the problems of the future, Wayra is your place to make it grow so they opine. Their irresistible value proposition is : Our acceleration programme will give you funding up to $50,000, an incredible place to work, mentors, business partners, access to a global network of talent and the opportunity to reach millions of Telefónica customers. (http://wayra.co/)

In a typical deal in exchange for an equity stake of around 10 percent, successful applicants will gain access to an office space in the newly established Wayra Academy, financing, mentoring, access to technology expertise within Telefónica. After six months in the programme, they will be turfed out of their luxury abode and released to fend for themselves in the real world. Wayra is aimed at early stage technology startups less than two years old working in spaces including cloud services, financial services, M2M, digital security, e-health, mobile applications, social networks and e-learning.

A truly disruptive hardware or core technology investment can generate some lofty returns for Telcos who are battling with stagnating returns in the 4 G data era.Marrying incubation activities with a wider program of crowdsourcing, ecosystem collaboration and venture capital funding in an effective way is no easy task,and regular reviews of innovation agendas are a must. While many operators are focused on partnering frameworks and incubating new services as a route to service innovation, a robust internal collaboration structure should never be overlooked.

The « Orange Fab » is open to all US-based start-ups and is managed by Orange Silicon Valley, Orange’s development center in San Francisco, California. Orange Fab aims to help start-ups grow their businesses and develop amazing products and services that benefit Orange and its customers. There were 4 – 6 start-ups selected to be part of the program that started in May 2013. Start-ups joining the program have access to mentoring sessions from notable Silicon Valley entrepreneurs, world-class engineers and experienced designers. All the start-ups that are selected for the program were offered $20,000 in funding. (http://orangefab.com/)

The French operator has expanded the Orange Fab program to markets including France, Japan and Poland, with additional innovation investments in the likes of India and Tunisia.17 Africa is proving to be an important focus area: in May, Orange set up an incubator called CIPMEN to support SMEs in Niger, having already set up incubators in Senegal and Mauritius. Meanwhile, Millicom has set up a tech incubator in Rwanda, launching a purpose-built facility in the capital, Kigali, in March.

Believe it or not one of the pioneering Accelerator programs ( MAGNET ) was initiated by Motorola over a decade ago. The MAGNet program provided application developers, included a membership structure, providing to the developer community a combination of products, services and benefits to produce robust and exciting applications and bring the best of them to market.

The program included: Software Development Kits (SDKs) and tools, application testing and certification, technical support (both onsite and online), training, developer services, networking events and an interactive web-based community/portal to support developers worldwide.Applications that were marketed through the MAGNet programme were tested by independent test agencies against predefined criteria and evaluated as best in class. Motorola endorsed this approach as a way of ensuring high quality, safe and reliable software products in the increasingly open world of wireless application development. The company that birthed the cellular / mobile industry was a great visionary indeed !!

SK Telecom’s venture capital arm launched SKTA Innovation Accelerator with a view to seed start-ups in core technologies such as data center and IT, in what the operator cloud technologies and software.16 Partnership is a key focus of the initiative, with SK Telecom Americas pairing entrepreneurs with strategic advisors as part of its value-add. Meanwhile, in July, Japan’s KDDI announced the launch of its latest US$50m fund, Open Innovation II. At the same time, it announced that it had invested US$8m in four US start-ups — an educational social network (Edomo), a free digital publishing platform (ISSUU), a seat upgrading service (Pogoseat) and technology news media (VentureBeat). Fellow Japanese operator NTT DOCOMO already has a US$109m fund in place, while Softbank created a US$250m fund in 2013.(http://sktainnopartners.com/overview/ )

In February last year , Telecom Italia announced a €4.5m fund targeting the most innovative players in digital, mobile and green information and communications technology (ICT). The move forms part of a broader initiative, complementing its Working Capital Accelerator that has funded 19 start-ups and assigned 109 grants in Italy over a 5 year period. One of the most interesting features of the current wave of accelerator initiatives is how operator needs are shaped by local market needs and competitive dynamics. Asian operators have been bolder than many of their peers in terms of the scope of their capital arms’ most recent initiatives.

A Safaricom ( Kenya ) fund has been launched for an initial period of two years and will offer equity and other debt solutions of USD75,000 to USD250,000 to start-ups. Eligible start-ups must have a functioning product or service, an active user base, a team in place capable of achieving goals presented, and be based in Kenya. The establishment of the fund shortly follows Safaricom’s partnership with Dynamic Data Systems to launch M-Pesa payments tracking mobile application M-Ledger.

Telekom Malaysia (TM) is to launch its first startup accelerator programme in January 2015 in a move that aims to address two problems with a single solution. The country’s largest telecom and ISP giant wants to find innovative solutions to problems within its own verticals and at the same time help nurture startups in Malaysia‘s ecosystem. TM, with its 2.3 million fixed broadband customers and 500,000 SMEs, is looking for a way to stay relevant in its market through its new Innovation Exchange, but at the same time wants to position itself as a player in Malaysia’s emerging startup ecosystem that is taking on an ever-larger role in Southeast Asia.

TM is spending around US$1.8 million to US$2.3 million on creating solutions for its verticals. But the development time is slow and often the company discovers only after the spend that it doesn’t require the whole suite of services developed. This is where it hopes to bring in innovative startups. One such example is Ebizu, a startup that TM is currently working closely with. It is a point-of-sale system provider that was just a small startup when TM discovered it. Now TM is packaging Ebizu’s product together with its SME package known as ‘Shop In A Box’, which offers a range of tools for merchants. No doubt that it’s important to be in contact with disruptive innovators creating products that Telcos might want to sell to its customers.

Bottom Line : In the era of declining voice profits Telcos should be looking for innovative products to bundle together with their core offerings .Telcos need to deepen their relationship with startups so that they can have small experiments and pilots with the products and services which would add value to their business.

Actually the philosophy behind an Accelerator program is predicated on savvy thinking and the inclusivity mindset. A mindset that says I cannot develop disruptive new innovations in house because I am too busy ensuring the integrity and quality of my network : so lets outsource this activity to people who enjoy this apps / platform development game and still keep some control.

Sadiq Malik ( Telco Strategist )

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