Corporate Innovation/Opinion/

Slow innovation is better than fast with big companies like BT

BT started and then closed down had innovation units in the 2000s. Now it has opened a new innovation unit. Schizophrenic — or smart?

Rabbit and turtle in a close-up image
Julian Birkinshaw

By Julian Birkinshaw

BT is taking another stab at innovation with a new approach — and the UK telecoms giant’s stop-start innovation projects over the years might leave some asking if big corporations are able to run innovation agendas clearly and consistently. But BT’s evolutionary approach may actually be a good model for corporate reinvention and holds lessons for other large enterprises.

Here we go again

There is a sense of deja vu around BT’s latest innovation project. The venerable UK telecoms giant is has created a new unit, BT Incubation, focused on creating and incubating startups and exploring categories and ideas.

Tom Guy, who has taken over as managing director of BT Incubation, is keen to emphasise he is no “suit”. He dislikes “stiff corporate culture”. “We want to ensure the unit has a startup and founder approach,” he says. “We don’t want this to be another incubation unit being run like a corporate, in a corporate.”

This is not BT’s first attempt at investing in startup ventures. In 2000, BT launched Brightstar, a corporate venturing arm led by Chris Winter and Harry Berry, and it invested in a range of new technologies and business ideas before being spun out and merged into an independent organisation called New Venture Partners.

BT also started an open innovation scouting unit in Silicon Valley in the early 2000s, headed by Jean Marc Frangos, as a way of tapping into the latest ideas coming out of California. The unit eventually closed down owing to the complexities of a company restructure.

“A slow yet shrewd approach to digital technology adoption [seeks] to marry the best of tried and trusted methodologies with the latest thinking in digital tech”

There is quite a mélange of “something old, new, borrowed and blue” about BT’s approach to innovation. Underpinned by the company’s world-leading BT Labs in Martlesham, BT’s reputation for “purposeful innovation” — a first-rate marriage of scientific breakthroughs team with practical engineering — is well founded, and the company has been a pioneer in digital network transformation, mobile telephony and optical networking.

Yet the company has also met with its fair share of challenges. From the 90s through the early 00s, BT failed in a series of proposed global mergers. Today, while the company operates in 180 countries and has had contracts with big-name companies such as Fiat, PepsiCo and Procter & Gamble, it is not a global top 10 telecoms business, an ambition that it clearly held back in the mid-90s.

Is BT’s stop-start approach to innovation a bad thing, however?

In an article for the MIT Sloan Management Review, my colleagues Ivanka Visnjic, Carsten Linz and I explore how industrial companies — and this might apply to long-standing telcos too — may not and never will be the poster boys of digital disruption. However, their evolutionary approaches may have led to better outcomes in the end.

We looked at Italian electric utility Enel, Swedish industrial company Atlas Copco and Sandvik, the Swedish mining equipment company, and found a slow yet shrewd approach to digital technology adoption. It is the type of approach that sought to marry the best of tried and trusted methodologies — approaches that best serve core business structures attending to the needs of a well-understood market — with the latest thinking in digital tech.

BT — innovation despite indigestion

BT’s own story of transformation, innovation and growth has been weighed down both by what it inherited and its mission to act as a responsible custodian of a former national asset. Since the UK government sold its remaining interests in BT in the 90s, the telecoms company has been the inheritor of its legacy infrastructure and management teams. Simultaneously leading on digitising its network, moving into the mobile arena and changing its culture while pursuing ambitions to become an international giant was always going to give the company a degree of indigestion.

This epic process of transformation has also of late been continually challenged by takeover scare stories, and BT has fought to keep its share price buoyant. Bloodied but unbowed, it keeps hold of its ambitions to be a leading innovator.

“Digitising its network, moving into the mobile arena and changing its culture while pursuing ambitions to become an international giant was always going to give BT a degree of indigestion”

A great example of this dogged approach to innovation is promising news that BT Group has said it will only back “responsible tech” in future. On the back of its latest 10-year plan, the company promises to reclaim a leadership position in sustainability and the circular economy.

BT Group CEO Philip Jansen has said customers, and society generally, now rightly expect businesses to act in a “responsible, inclusive and sustainable way” and is formally committing to the circular economy model. Products and services will be designed to have as little impact as possible on the planet, and companies will be developing products that can be reused, repaired and remanufactured.

A steady eye on the future

Our conclusions were that most industrial companies, while late to the party in digitalisation, may have experienced a late-in-the-day boon to their businesses. This, we thought, may have been a blessing in disguise, allowing these companies to learn from the successes and failures of their consumer-oriented counterparts.

A steady evolutionary progression can allow companies new ways to create, deliver and capture value through digital technologies. And for BT, the unique challenges that have made it slow may now produce a well-earned dividend as a leader in the circular economy.

Professor Julian Birkinshaw is professor of strategy and entrepreneurship at the London Business School.

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