When you want to innovate, think beyond tech

Joy Tan

President of Global Media and Communications at Huawei Technologies

I’ve just returned from the annual meeting of the International Telecommunications Union in Budapest. It’s a major event, with executives and government officials from around the world discussing how ICT can deliver social and economic benefits.

In each session I attended, and nearly every conversation I had, one word kept cropping up: innovation.

Why do leaders always talk about innovation?

It’s simple, really. Innovation has a multiplier effect. It amplifies talent, time, capital, and other assets. Every company, and every country, wants to be more innovative.

Innovative technology tends to grab the spotlight. And it’s true that Big Data, cloud computing, and other technologies are changing how we live and work.

But business models can be innovative, too; so can regulations. Leaders who want to innovate must consider these aspects of innovation.

New business models are emerging every day. A recent piece in the Harvard Business Review quotes popular author Michael Lewis as saying that the term business model simply describes “how a company plans to make money.”

But HBR also points out that business models are actually focused on the assumptions about what makes a business work. “Sooner or later,” the author says, “some assumption you have about what’s critical to your company will turn out to be no longer true.” Automakers, for example, might assume that a company that owns no cars, such as Uber, will not pose a competitive threat.

Keeping up with the Ubers

Many long-held assumptions about business are shifting. To keep up, we may need to update some of our fundamental ideas about business. For example, concepts such as the value chain are being overhauled.

“Increasingly, value is being created not only within firms, but in the rich interactions between them,” says a report by Deloitte. Value chains are starting to look more like value webs, where any party in the ecosystem can collaborate to create new value. Cases in point: Uber and Airbnb, stars of the sharing economy, where consumers can be suppliers as well as customers.

Stefan Gross-Selbeck, a consultant with BGC Digital Ventures, believes that disruption comes less from technology itself than from companies using technology to “take one part of the value chain, redefine it, and on that basis, rebuild the business architecture of entire industries.”

That’s business model innovation, and it’s just as important as lab-based R&D.

The Regulator’s Dilemma

Equally important is regulatory innovation. The right regulatory frameworks encourage companies to invest in new technologies, and permit new business models to emerge. For example, nationwide broadband is what has allowed the explosion of e-commerce in China. Last year, an online shopping event invented by Alibaba generated USD9.3 billion in sales in just one day. Such volume would be impossible without the high capacity of China’s broadband network. Maybe that’s why, as of mid-2015, 148 countries had adopted a national broadband plan.

Regulators should also find new ways to allocate radio spectrum - a vital part of digital infrastructure because it’s the basis for ultra high-speed mobile broadband. Many countries will need to increase by 50% to 100% over the next five years, the rough timeline for commercial roll-out of 5G mobile technology. 5G will usher in a host of new digital services and business models – but only if there’s enough spectrum available and it’s not prohibitively expensive. Regulators determine whether those conditions are met.

When digital technology emerges quickly, regulations may have a hard time keeping up. As Deloitte’s report notes, some innovative start-ups reach scale so quickly that they may already be serving millions of customers by the time regulators start giving them serious consideration. “The dilemma for regulators,” say the report’s authors, “is to strike a balance by enacting policies that protect the public interest while remaining flexible enough to keep pace with innovation.”

To sum up: In the digital era, technology is one key to unlocking the power of innovation. That’s why Huawei re-invests at least 10% of our annual sales revenue into R&D.

But business models and regulatory frameworks can be innovative, too – and must be, if the benefits of innovation are to be fully realized.

What do you think are the most important aspects of innovation? Post a comment and let us know!
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