The challenge of smooth transition from R&D business for innovation in a telecom company

Abstract

The environment surrounding telecom companies has changed dramatically since most were privatized in the 1980s. Under the influence of regulations, they had faced globalization and have repeatedly divided and consolidated to improve competitiveness. From the technology and marketing points of view, two disruptive innovations occurred in the 1990s: IP and wireless communications. Originally, IP was used only for data communications, but it has now evolved to include voice communications as VolP. This had a huge impact on telecom companies because IP has destroyed the legacy cost structure that was based on a pay-as-you-go system; the new demand is for a flat rate fee structure. IP also moved forward the commoditization of communication network services. At the same time, demand for cellphone service grew exponentially, and the number of cellphone subscribers surpassed that of fixed phone in 2000 in Japan. As a result, competitive superiority is shifting from long- distance companies to local and wireless companies. In this thesis, I discuss the telecom industry's situation, and compare three major carriers: AT&T, BT and NTT.

(cont.) I describe the organizational structures of each company to determine where there are-or if there is a requirement to improve- smooth transitions from R&D to business as one way to enhance the telecom companies' competitiveness. My research found that their strategies regarding the acquisition of competence are totally different: AT&T did internal development; BT purchased necessary technologies from the market; NTT led joint development with manufacturers. From the comparison and analysis, I determined that the R&D structure should be changed from the legacy linear model to a circular model that produced fast clock speed. In addition, companies must have relationships with external companies and universities in order to purchase products or technologies quickly and efficiently. Managing NTT Group effectively is another key issue to be executed. If NTT can turn these changes into an opportunity, the company can transform itself into an IP communication services company that is able to use its huge technical resources to give themselves a marketing advantage.