1. Open Innovation in Services
Steve Wright
Head of Strategic Research, BT
18th June, 2009

2. Agenda
• BT in the Networked Service Economy
• Digital Infrastructures
– Current
– Future
• Research areas
© British Telecommunications plc

3. The changing environment we all live in
Relationships Competitors
With customers, partners, New entrants, business models,
employees, regulators, channels to market…
competitors, shareholders,
society
New
Markets & customers Social imperatives
Geographies, ecosystems, Sustainability, transparency,
value chains, customer responsibility…
requirements, customer
communities…
© British Telecommunications plc

4. Accelerating our transformation
BT has successfully undertaken several transformations
Traditional telco  ICT services Global communications
services company
Narrowband  Broadband
• Be number 1 for customer
service
Building the most advanced network • Develop innovative
services by collaborating
with our partners
Creation of Openreach
• Simplify and speed up the
way we work
to become a global software-driven services provider
© British Telecommunications plc

5. Revenue - Transformation of mix
The Economist
% of revenue derived from voice – Feb 2006
© British Telecommunications plc
Extract from Economist magazine published Oct 14th, data sourced from Westhall Capital

6. Public Global
Organisations Corporates
Global provider of
software-driven
services
People
© British Telecommunications plc
Business

7. Service Firms*
Knowledge Intensive and
Professional Service Firms
– Employee skills/ knowledge
– Innovation is embraced
– Technology transfer between
industries
– Organisational knowledge/
operating routines (incl. KM)
– People based
Systems Firms
Eg Banking, insurance, supermarkets, airlines
– High division of labour
– Sophisticated technology
– Complex organisations.
– Innovation can be disruptive
– Often subject to regulation
Traditional Services – Asset based ?
– Small
– skills gaps
– threat from system firms
– ‘low skills’ equilibrium
© British Telecommunications plc
* Salter & Tether (2006)

8. Digital Infrastructures

9. Our 21st century architecture blueprint
The ICT infrastructure for the digital networked economy
Customers
Configuration
of products SDK (BT & 3rd party applications)
& services
Assembly Capabilities End to End Customer Experience
C2M
T2R
L2C
of services
& processes
IT Infrastructure
Global
platforms
21CN & Global IP
© British Telecommunications plc

10. Innovation Continuum
Revenue
EBITDA
Customer
Innovate within each stage and through the entire value chain experience
Cost
reduction
Invent Architect Validate Operate Productise Channels People Customers
& Implement & Organisation
© British Telecommunications plc

11. Innovation Continuum
Innovating with our entire eco-system of partners
Revenue
EBITDA
Customer
Innovate within each stage and through the entire value chain experience
Cost
reduction
Invent Architect Validate Operate Productise Channels People Customers
& Implement & Organisation
Customers Universities Government Industry
© British Telecommunications plc

12. Today’s innovation foci
Customers •Customer needs
•Co-innovation
Configuration
of products SDK
•SDK
& services •Ribbit
E2E
Assembly
of services
experience
•E2E Experience
& processes •Right First Time
•Cycle Time
IT Infrastructure
Global
platforms
•Virtualised resources
21CN & Global IP •Next Generation Access
© British Telecommunications plc

13. Future Digital Infrastructure

14. The global context … the INTERNET
Customers
Information
Configuration Services
of products
Services
SDK Information
& services
Infrastructure
People
E2E Objects
Assembly experience
of services
Global Network
Content
& processes
Resources
SaaS
RaaS Communities
IT Infrastructure Web Apps
Global Cloud Computing
platforms
21CN & Global IP
© British Telecommunications plc

15. The transformational
Future Internet
- of Services & Resources
• For our customers –
• IT on demand
• No Lock-in
• Business responsive IT
• For our entrepreneurial partners –
• Global markets
• Painless growth
• Rich eco-system
• For the common person –
• Intelligent and joined up personalized services …
• Smarter access to public services
• …but what they make of it (difficult to predict…)
© British Telecommunications plc

16. The global context … the INTERNET
Web-based Service Industry
Customers
Configuration
of products SDK
& services Cloud
E2E
Computing
Assembly experience
of services
Global Network
& processes
Global
IT Infrastructure
Future Internet
platforms
21CN & Global IP
© British Telecommunications plc

17. Research areas

18. BT Research focus -
Web-based Service Industry
Customers Digital
Configuration Economy
of products SDK
& services Cloud
E2E
Computing
Assembly experience
of services
Global Network
& processes
Global
IT Infrastructure
Future Internet
platforms
21CN & Global IP
© British Telecommunications plc

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25. © British Telecommunications plc

26. BT Research focus -
Web-based Service Industry
BT Engage
Customers
Configuration
of products SDK
& services Cloud
E2E
Computing
Assembly experience
of services
Global Network
& processes
Global
IT Infrastructure
Future Internet
platforms
21CN & Global IP
© British Telecommunications plc

27. Research & Innovation with Customers
© British Telecommunications plc

28. BT Engage programme
© British Telecommunications plc

29. BT Research focus -
Web-based Service Industry
Customers
Service Science
Configuration
of products SDK
& services Cloud
E2E
Computing
Assembly experience
of services
Global Network
& processes
Global
IT Infrastructure
Future Internet
platforms
21CN & Global IP
© British Telecommunications plc

30. Services and Systems Science
Objective:
•Develop scientific methodology for defining compelling services with
predictable levels of KPIs.
–Create systems that are ‘perfectly designed to give customers the
services and experience they want’.
Innovation
Benefits
New ways to New Services
• Improved service design deliver services
– Reduced risk for new
services Delivery Design
Systems engineering Total Customer Experience
– Improved service systems Processes orchestration Customer Journey
Resource co-ordination Supplementary/support
– Lower costs: better use of services
people/ resources Back stage Front stage
• Improved customer satisfaction/
loyalty
© British Telecommunications plc

31. BT Research focus -
Web-based Service Industry
Customers
Configuration
of products SDK
& services Cloud
E2E
Computing
Assembly experience
of services
Global Network
& processes
Global
IT Infrastructure
Future Internet
platforms
21CN & Global IP Future
Internet
© British Telecommunications plc
Architecture

32. The Internet –
Platform for Innovation … ?
3D Content
Internet of Things
Service Internet of Services
Value
NGA
WiFi HPSA
DSL
V31bis VDSL
© British Telecommunications plc

33. The Internet –
Platform for Innovation … 3D Content
?
Internet of Things
Service Internet of Services
Value Plateau
Catastrophe
NGA
WiFi HPSA
DSL
V31bis VDSL
TCP Various “patches”
Small Optics, Scale:
congestion NAT, DPI, QoS, Security …
academic Terabit BGPv4
control
© British Telecommunications plc routers

34. Plateau ahead ?
• Value flow broken:
– Over the top services
• Joost
• Google
• i-player
– RoI for NGA
• Rising operational costs:
– P2P
– Traffic management (DPI etc)
– Spam, virus, malware
– DDOS from nation states
• No “user” feedback or choice:
– Best efforts
– TCP “fairness”
• Security, privacy & trust:
– What?
© British Telecommunications plc

35. Future Internet Vision: A Sustainable Internet
We need a new sustainable architecture - urgently!
• Economic Sustainability
– Value flow across the value chain
– RoI
– Lower cost of operation
• Environmental Sustainability
– Zero Carbon Internet (2%)
– Sustaining Internet
Socially (ICT impact on 98%)
Sustaining • Socially Sustaining
Economically
– Security, Privacy & Trust
Sustaining – Digital divide / access
– Culture & spiritual background
Environmentally – Improved Usability
Sustaining
• Sustaining Innovation
– New applications
– New business models and industry
structures
– Open for innovation
– Dynamic - MUST sustain change
© British Telecommunications plc

36. Open Innovation in Services
Thank You!