How do companies innovate to succeed? An industry giant and cable start-up explain their approaches to Adrian Pennington
Regardless of an organisation’s business or industry, to be successful, innovation must be a core component of its culture, and there are many ways to nurture it.
“By hiring the right people you can try to lay the foundation for progressive, resource-efficient people to hire others in their own image,” advises Layer3 TV co-founder and CEO Jeff Binder.
He believes you should drive innovation from the top down and bottom up. Empower everyone. Accept but learn from failures. Allocate dedicated time for innovation and tools without too much structure.
“Have a clear, customer-focused mission of what you want to change in the world,” is the advice from Federico Guillén, president, Fixed Networks Business Group at Nokia. “Have a bias toward action. Collaborate – not only within the company – but with complementary companies, universities, agencies and the like. Identify metrics and incentives that encourage innovation and give new ideas an opportunity to prove their value.” And the list goes on.
The cable industry has had to evolve and innovate time and again since its start as a way to bring TV signals to a town in a valley, and the rate of change continues to increase. In recent years, MSOs have been actively fostering their innovation culture in order to respond to new subscriber consumption patterns and needs. And, ultimately, to hone a next-generation customer experience and perception of the brand.
This has meant faster time to market for enhancements and new services, as well as looking for new partnerships. Some projects fail, but others quickly come through to replace them.
But here’s where one difference between how innovation at a software company versus an internet software company is realised.
“Cable operators have a unique relationship with their customers as the gateway for everything in communications and entertainment,” says Guillén. “While a badly conceived enhancement or even a complete crash of Facebook, Amazon or Google may be frustrating to users and have some revenue impact, it is unlikely to have the consequences, both for the customer and the MSO, that an equivalent misstep would have for a cable operator. The web is awash with innovative concepts and projects; cable operators must take a somewhat more calculated, pragmatic and focused approach, but still move quickly and decisively.”
Innovating embedded: Nokia
Nokia Bell Labs describes itself as a “world-renowned innovation engine”, always “thinking ten years ahead” to push the limits of technology. It can point to 150 years at the forefront of every major communication technology shift: analogue, digital and mobility.
“We continue that innovation heritage today, introducing powerful, simple and useful tools that support people, business and society in the era of the Internet of Things, ultra-broadband, cloud, virtual reality, digital health and more,” says Guillén.
Nokia Bell Labs is laying the groundwork for the 5G network, which promises to drive economic transformation in cities and industries.
In terms of innovation culture, Nokia embeds innovation across the company – “changing the way we work with digitalization, automation techniques to save employees' time, collaborative ways of working and better information sharing, simplification of processes and tools,” says Guillén. “Innovation is broader than just technology. It’s an attitude, a way of living. It is about continuously questioning the way we do things and looking at how we can improve further.”
Nokia Growth Partners invests in innovative companies connecting people and things in consumer, enterprise and vertical spaces. Nokia Innovation Steering creates internal and external incubation environments for innovation collaboration to accelerate the pace of in which new applications and technologies are brought to market.
The focus on innovation permeates every aspect of Nokia. Its ng Connect program, for example, works with more than 300 member companies to “drive open collaboration, business modelling and market trials that drive industry adoption across automotive, utilities, smart cities, health and public safety,” he says.
Another example is the recently launched Nokia Innovation Platform, a live development and trial environment for start-ups, industry and other IoT contributors. “Co-innovation accelerates Nokia’s innovation in rapidly evolving areas like the IoT. This is because no one single company has all the required competence and diversity to continuously innovate and build and maintain a leading position.”
Specifically addressing cable operators’ needs, the lab has developed a unified cable access solution built on a Distributed Access Architecture (DAA). This uses Software Defined Networking (SDN) techniques to virtualize the Converged Cable Access Platform, eliminating Big Iron hardware from the head end and delivering a seven times reduction in rack space and an eightfold reduction in power.
The solution also replaces legacy analogue optical transmission with 10 Gbps Ethernet and supports both last mile access for both cable and fibre.
As an example of its commitment to provide the cable industry with leading-edge technology, Guillén points to Nokia’s role in working with CableLabs on the specification for Full-Duplex DOCSIS 3.1 which is expected to enable multi-gigabit symmetrical services.
“Nokia’s approach to DAA is particularly well suited to implementing Full-Duplex DOCSIS,” he says. “Moreover, Nokia Bell Labs has already demonstrated, via a proof of concept in 2016, that providing 10 Gbps symmetrical services over HFC networks is a real possibility for operators.”
Innovative as market opportunity: Layer3
Bucking cord-cutting trends and the expectations of analysts,Denver-based start-up Layer3 launched in Chicago last autumn with a nationwide ambition to take on Comcast, Verizon, Charter et al on at their own game.
“The reality is that cable operators are among the most hated companies in America,” says Binder. “It doesn't surprise you that customers would be complaining about price and value, given the experiences that have existed over the past decade or so.”
Binder and co-founder David Fellows, a former Comcast CTO, believe they can change that perception with a renewed focus on customer service and on a technology and programming mix to beat both IP and cable companies at their own game.
“Our focus is on all aspects of the consumer from onboarding a consumer, to how they access a service across devices, to video quality, to great content sources and on top of that adding new interactive experiences with social and IoT to take advantage of mobile, flat panels and other technologies like Zigbee and Bluetooth,” says Binder.
“There is a core pay TV audience who want multi-room TV, DVR and high quality and low latency integrated with a large VOD library and a guide. You don’t get that in the OTT world and you won’t for many years because the delivery model and infrastructure don’t lend themselves to that.”
Binder insists “there’s an infatuation with cord cutting” in the press but the reality, at least in the US, “is that roughly 20% of US households don’t pay for TV” and that number has not materially changed.
“Cord cutting is not happening on a scale casual observers are led to believe,” he says. “We hear about consumers who tried to cut but realised they couldn’t get what they wanted and are coming back to pay TV. That is the bigger story.”
He adds: “The large operators have saturated their market but we start from a place which is zero so can grow for a very long time.”
It helps that Binder is a serial entrepreneur with insider knowledge of the big cable companies. He made his money as co-founder of Broadbus Technologies, developer of a DRAM-based server for VOD,that Motorola acquired for US$180m in 2006. He says there’s been little innovation from incumbents for a decade and a half since the introduction of VOD and DVR.
“Cable delivered video is a US$100bn industry dominated by a handful of companies with technology that to some degree is democratised. What that tells us is that technically it is much more difficult to achieve than it appears and secondly that it takes enormous capital to launch. What that has done is remove the competitive pressure one would expect to see in normal market conditions and therefore the drive to innovate has been softened.”
Backed with US$100 million, mainly from a fund run by Texan private equity outfit TPG and talent agency CAA, Layer3 is betting it can do a healthy business with just 1% of the nation’s pay TV market, or just less than a million subscribers.
It leases its own 12,000-mile fibre backbone striking deals with ISPs for the last mile, offers 250 channels, some in 4K including NASA TV and mixes on-demand services like Hulu and Netflix into one DVR-style box designed by BMW Design Works. It is also deployed in Denver and Washington DC.
“Much of the core infrastructure is unchanged over the past decade yet there is an insatiable desire among consumers to interact across devices,” he says. “As a greenfield we are able to look at opportunities to build out a next gen platform leveraging DOCSIS 3. You have to merge legacy technology like security and DRM at the same time as innovate.”