Technology Foresight in the ICT sector Exploration of new business opportunities

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1 Technology Foresight in the ICT sector Exploration of new business opportunities Nico Thom* Technische Universität Berlin, An-Institut Deutsche Telekom Laboratories, Ernst-Reuter-Platz 7, Berlin, Germany. René Rohrbeck European Center for Information and Communication Technologies, Ernst-Reuter-Platz 7, Berlin, Germany. * Corresponding author Abstract: Rapid changes in technology and growing competition in consumer as well as business customer markets are forcing industry to explore new ways to foster innovation. This is also true in times of economic crises, where innovation can lead to the competitive advantage needed for success and survival. Making the right decisions is crucial and has to be supported by means of identifying developments and trends in an organizations environment early. These developments can be both, opportunities or threats and demand sufficient time for developing appropriate action. Deutsche Telekom Laboratories have introduced a tool of technology foresight the Technology Radar. This paper describes the methodology of the tool, which uses networks of experts for the identification of discontinuous technological change. Based on insights from the Technology Radar energyrelated developments have been identified and will be presented as an example for new business opportunities for telecommunication providers through technological change. Keywords: innovation management; technology foresight; telecommunication; energy; Green IT 1 Introduction It is widely acknowledged that global economic competition intensifies and that most industries repeatedly face disruptions coming from emerging technologies, political and legislative regulation, alternative business models, as well as from socio-cultural shifts. 1 1 Christensen, The Innovator s Dilemma: When New Technologies Cause Great Firms to Fail (Cambridge: Harvard Business School Press, 1999), Day and Schoemaker, "Driving Through the Fog: Managing at the Edge," Long Range Planning 37 (Apr 2004): 2. Electronic copy available at:

2 This increasing complexity results in growing uncertainty about the future. 2 It is also believed that success and survival of companies in such markets among other factors depends very much on their capability to innovate. 3 In order to cope with complexity and uncertainties companies also have to be well informed about current and future developments and trends worldwide. 4 Especially technology-driven companies have to scan and monitor their environments continuously in order to maintain their competitiveness and being able to develop new promising technologies and use them to move into new business fields. Foreseeing future developments in a complex environment requires the integration of corporate foresight activities. 5 Weak signals in the environment of an organization have to be detected, analyzed, and assessed. 6 But being aware of discontinuous technological change alone does not ensure that the company will be able to produce adequate reactions. 7 Hence it is not only important to identify, anticipate and assess discontinuous change, but also to effectively use this information to plan and execute appropriate reactions. 8 Moreover, external resources and capabilities have to be facilitated by large companies in order to innovate in areas where they lack experience. 9 Telecommunication companies have been faced with discontinuous change in many dimensions, including technology, legislation and regulation, consumer behaviour and competition. It is believed that it has become one of the most volatile industries overall. 10 Therefore they have a high perceived need to develop appropriate approaches to proactively manage discontinuous change. Deutsche Telekom Laboratories, the corporate 2 Patton, "The role of scanning in open intelligence systems," Technological Forecasting & Social Change 72 (Nov 2005): 9. 3 Brown and Eisenhardt, "Product Development - Past Research, Present Findings, and Future-Directions," Academy of Management Review 20 (Apr 1995): 2, Rothwell, "Successful Industrial-Innovation - Critical Factors for the 1990s," R & D Management 22 (Jul 1992): 3. 4 Ashton, Kinzey and Gunn, "A Structured Approach for Monitoring Science and Technology Developments," International Journal of Technology Management 6 (1991): 1,2. 5 Andriopoulos and Gotsi, "Probing the future: Mobilising foresight in multiple-product innovation firms," Futures 38 (Feb 2006): 1, Costanzo, "Strategic foresight in a highspeed environment," Futures 36 (Mar 2004): 2, Slaughter, "Futures studies as an intellectual and applied discipline," American Behavioral Scientist 42 (Nov-Dec 1998): 3. 6 Day and Schoemaker, "Scanning the periphery," Harvard Business Review 83 (Nov 2005): Lucas and Goh, "Disruptive technology: How Kodak missed the digital photography revolution," Journal of Strategic Information Systems 18 (Mar 2009): 1, Paap and Katz, "Anticipating Disruptive Innovation," Research Technology Management 47 (Sep 2004): 5. 8 Slaughter, "Futures studies as an intellectual and applied discipline," American Behavioral Scientist 42 (Nov-Dec 1998): 3. 9 Chesbrough, "The Era of Open Innovation," Sloan Management Review 44 (Apr 2003): 3, Rohrbeck, Hölzle and Gemünden, "Opening up for competitive advantage - How Deutsche Telekom creates an open innovation ecosystem," R & D Management 39 (Aug 2009): Rohrbeck, Hölzle and Gemünden, "Opening up for competitive advantage - How Deutsche Telekom creates an open innovation ecosystem," R & D Management 39 (Aug 2009): 4. Electronic copy available at:

3 R&D institute of telecommunications company Deutsche Telekom, have introduced the Technology Radar as a tool of technology foresight, which based on expert networks aims to enable both: awareness and reaction concerning technological change. 2 Technology Foresight at Deutsche Telekom Goals Technology foresight is aiming at identifying emerging technologies. 11 Facilitating a network of scouts and other experts allows Deutsche Telkom to identifying opportunities and threats arising from technological developments at an early stage and to provide the technological capabilities needed to face these challenges. The scouting approach of the Technology Radar follows four major goals: Early identification of emerging technologies, technological trends and disruptions Raising attention to the threats and opportunities of technological developments Stimulation of innovation by combining the technology reports with assessment of business potential and by addressing decision makers Facilitation of the sourcing of external technologies by reaching through the network of technology scouts to their sources of information Process The process of technology foresight consists of the identification (technology scanning) and observation (technology monitoring) of upcoming and existing technologies, assessment of their potential, and the storage and dissemination of the gathered information. 12 The Technology Radar process is designed accordingly (see Figure 1). 11 Lichtenthaler, Organisation der Technology Intelligence - Eine empirische Untersuchung der Technologiefrühaufklärung in technologieintensiven Grossunternehmen (Zürich: Verlag Industrielle Organisation, 2002), Martin, "Foresight in Science and Technology," Technology Analysis & Strategic Management 7 (1995): Ashton and Stacey, "Technical intelligence in business: Understanding technology threats and opportunities," International Journal of Technology Management 10 (1995): 1, Lichtenthaler, "The choice of technology intelligence methods in multinationals: towards a contingency approach," International Journal of Technology Management 32 (2005): 3-4, Reger, "Technologie-Früherkennung: Organisation und Prozess. Quantensprünge in der Entwicklung erfolgreich managen," in Management von Innovation und Risiko, eds. O. Gassmann and C. Kobe. (Berlin: Springer, 2006).

4 Figure 1 Deutsche Telekom Technology Radar process. Identification Selection Assessment Dissemination International Scouting Network uses sources in industry & academic world Innovation Strategy CTOs and CMOs R&D & Product Manager The fast clock speed of the telecommunication industry makes it difficult to build foresight entirely on explicit knowledge, represented in publication or patent databases. Therefore in the identification phase of the Technology Radar an international network of scouts is used that gather first-hand information from universities, research institutes, start-up companies, conferences and through the scouts personal informal networks. These scouts are both, internal and external to Deutsche Telekom. They are all characterized by a broad knowledge in their search fields and use a strong social network to get first-hand information on current activities. Currently scouts are located in the US, Europe and Asia. For technologies with potential relevance a short description is prepared by the scouts, including technology assessment, research status and business potential. This summary is send to Deutsche Telekom Laboratories technology exploration unit, which is responsible for the Technology Radar. In the selection phase the proposed technological topics are being selected according to their degree of external novelty and the newness to Deutsche Telekom. An expert panel consisting of representatives of the corporate innovation strategy department, business units representatives, researchers and project field managers of Deutsche Telekom Laboratories and Technology Radar editors is screening the long-list of proposed topics respectively resulting in a short-list of topics to be reported on in detail. In order to emphasize technological topics with a high need of awareness in the assessment phase a portfolio rating framework is used (see Figure 2). The technologies are ranked according to two criteria: market potential (with the underlying factors potential market size, cost savings and disruptive potential ) and technological realization complexity (with the underlying factors complexity, implementation risk and development costs ). The ranking is done in a workshop with technology scouts, internal stakeholders and the editors of the Technology Radar. In the dissemination phase a one-pager of each technology is published including a description, latest developments, research status and a discussion of the business potential. Different aggregation levels and formats are used including reporting documents in printed and electronic form, an interactive Intranet presence as well as workshops for deepening topics or clusters of topics.

5 Figure 2 Portfolio rating framework (illustrative). - Market potential Technological realization + - complexity The highest aggregation level of insights from the Technology Radar is the visualization of a radar screen giving an overview of all observed technological developments and their perceived relevance (see Figure 3). The Technology Radar screen is divided into six generic thus stable technological fields which are typical telecommunication operator domains: fixed & mobile devices, access network, core network, network services, end-user services and a cross-functional area. Furthermore, the screen displays the maturity of the observed technologies, divided into five levels: basic research, applied research, product concept, market ready and market presence. Finally, the need of awareness and its possible values high, medium and low is represented by symbols of different shape and colour. Figure 3 Technology Radar screen (illustrative). Segments Maturity Need for Awareness High Medium Low

6 Information Usage The insights from the Technology Radar are used for the development of new product concepts and the assessment of the competitiveness of existing product concepts. The analyzed information is used for strategic decisions on future activities and budget allocation. Furthermore, sourcing of know-how can be facilitated by the scouts. In an environment of high technological complexity and volatile market needs, external technology sourcing is becoming increasingly important for ensuring the competitiveness of a company. Broader trends identified by the Technology Radar also allow for the definition of new business fields. Such trends are being dealt with in further detail and represent the so-called Focus Topic of each edition of the Technology Radar. In a feature paper wellknown academics or industry representatives, preferably from outside of Deutsche Telekom, are covering a technological trend in detail. Actors, drivers and indicators of a trend are being identified and a conclusion concerning the relevance for a telecommunication company is being drawn. Lately, energy-related topics have been emerging on the Technology Radar screen increasingly. Triggered by these developments in October 2009 the feature paper eenergy has been published and Deutsche Telekom Laboratories has organized the conference Labs TALKS eenergy with 120 participants from different Deutsche Telekom units, universities, research institutes, governmental institutions and companies from the ICT and the energy sector. Presentations on Smart Metering, Smart Grids, Green IT, ICT infrastructure and design have been given. The possible impact on ICT business discussed in feature paper and conference is being described briefly in the following section as an example of new business opportunities derived from the Technology Radar. 3 eenergy ICT in a low-carbon society The European Union has set the frequently discussed 20/20/20 target to increase the energy efficiency by 20%, reduce emissions by 20% and to raise the share of renewable energy to 20% until the year The energy-demanding ICT sector has a huge potential contributing to reaching the target goals. eenergy describes a number of ICTbased concepts addressing energy efficiency. 14 New technologies allow for increasing the energy efficiency of ICT infrastructure and devices. Examples of technologies identified by the Technology Radar include solutions for data centre power management and means of converting ambient energy into electric energy for charging devices. Moreover, ICTdriven approaches can support the target goals providing intelligent management and control systems for the energy grid, turning it into a so called Smart Grid. In addition, consumers can be enabled to monitor and hence decrease their energy consumption. Replacing the current metering infrastructure with so called Smart Metering not only 13 European Union, "Climate change: Commission welcomes final adoption of Europe's climate and energy package," ged=0&language=en&guilanguage=en, accessed October Picot and Kranz, "Introduction," Proceedings of the Labs TALKS eenergy, Berlin, Germany, October 19, 2009a, p. 3.

7 increases transparency concerning power usage, but also enables smarter power management, e.g., for home appliances. In October 2009 the United States government announced investing $3.4 billion to modernize the energy grid. 15 These investments will take place under the American Recovery and Reinvestment Act of 2009 aiming at investing in economic growth. 16 The Recovery Act can be seen as one of the means for confronting the economic crisis. Hence the crisis situation is also a chance, especially for infrastructure-providing sectors including energy and telecommunication. Green IT While ICT can support energy efficiency in other sectors it also has a huge potential making itself more efficient. Green IT addresses major domains of telecommunication providers, including communication networks and data centres, end-user devices and engineering services for buildings. 17 It is not exactly a new business field for telcos, but with increasing costs for energy and a growing awareness of environmental issues it is an area where new activities can help remaining competitive. Broadband demand is increasing and the growing number of subscribers and increasing traffic volume will also lead to an increased energy demand. As network extensions are necessary, the related investments also constitute the opportunity for increasing the energy efficiency of networks and data centres. Home and access networks can be addressed by energy-efficient home devices and access network architectures. The most promising approach is using adaptive networks which allocate resources as they are needed. 18 Data centres hold the most potential for more energy efficiency in the design of power supply and cooling systems. Also end-user devices have a potential for reduction of energy consumption. The carbon footprint of telecommunication devices (such as mobile phones, routers, etc.) is expected to reach 51 MtCO 2 e by 2020, most emissions from mobile phones coming from their standby mode. 19 Smart chargers and optimized standby modes can help reducing the carbon footprint of (mobile) devices. However, energy is not only consumed during operation, but prior in manufacturing and supply chain. This can be countered by influencing vendors in the way they source materials and energy, but also by increasing the life-cycle of devices and encouraging the recycling of old devices. Offering devices 15 The New York Times, "Obama s Remarks on Smart-Grid Projects," accessed October Recovery.gov, "About Recovery.gov," accessed 30 October Schaefer, et al., "Green IT - Making IT more efficient," Proceedings of the Labs TALKS eenergy, Berlin, Germany, October 19, 2009, pp Ibid.. 19 The Climate Group and the Global e-sustainability Initiative, Smart 2020: Enabling the low carbon economy in the information age, accessed September

8 and related services that help consumers being green themselves can also contribute to competitiveness. Finally cost saving and new business potential for telcos lies in dematerialization and digitalization. Dematerialization of paper, multimedia, travel, etc. could reduce emissions by 500 MtCO2e. 20 One million customers of Deutsche Telekom already make use of online billing saving three million sheets of paper each month. The digitalization of music not only reduces emissions related to the production and distribution of CDs. It also represents a new business field for telecommunication companies, offering storage, network capabilities, billing, etc. Moreover, also thanks to the economic crisis and related cost cutting on business travel applications for tele- and videoconferencing are experiencing tremendous growth. Such applications have the potential to replace global business travel by up to 20%. 21 Smart Metering & Smart Energy Grid Much potential for increasing energy efficiency is in the energy grid itself. Supply and demand of electricity could be managed more efficiently with the support of ICT, turning the energy grid into a Smart Grid. 22 Smart Grid technologies could reduce carbon emissions of 2.03 GtCO 2 e by Major elements of a Smart Grid include virtual power plants for enhancing the controllability of the grid, demand side management for making energy consumption adaptive, control of the power flow in order to link supply and demand, and means of storage and buffering of energy. 24 Virtual power plants are distributed power generating facilities connected via ICT. Thus operation of facilities can be scheduled and optimized, increasingly important with the growing share of unpredictable renewable energy. On the demand side ICT can provide possibilities to manage power consumption in order to reduce demand peaks. An important enabler will be the introduction of Smart Meters. 25 By 2010 energy meters in newly constructed buildings in Germany (and other European countries) must reflect actual power consumption and usage time and power providers will have to offer load- or time variable tariffs. Thus consumers will be enabled to monitor their energy consumption and to manage home appliances energy-efficiently through direct or indirect load control; energy suppliers can give incentives to consumers through variable tariffs. Opportunities for telecommunication companies are manifold. As Smart Metering involves gathering and transfer of private data telcos could offer safe 20 Ibid. 21 Ibid. 22 Strunz, Knab and Lehmann, "Smart Grid - The central nervous system for power supply," Proceedings of the Labs TALKS eenergy, Berlin, Germany, October 19, 2009, pp The Climate Group and the Global e-sustainability Initiative, Smart 2020: Enabling the low carbon economy in the information age, accessed September Strunz, Knab and Lehmann, "Smart Grid - The central nervous system for power supply," Proceedings of the Labs TALKS eenergy, Berlin, Germany, October 19, 2009, pp Picot and Kranz, "Smart Metering - The B2C perspective," Ibid. pp. 4-7.

9 transmission, analysis, and archiving of generated and saved data. The ICT sector as a whole could implement the necessary new IT systems for energy providers. Moreover, telcos could integrate data into Internet- and mobile-based information portals and provide wireless connections for Smart Metering. Power flow control and storage and buffering can be realised with the help of new devices. Network control devices can be used to manage supply and demand effectively by reducing parallel flow. High-power storage devices (such as super capacitors) and high-energy devices (such as compressed air energy storage) can work as buffers between power supply and demand. Conclusion We have argued that technology foresight allows firms perceiving and responding to technological change. Particularly the approach of technology scouting has been proven successful for Deutsche Telekom. Building on a network of people not only enables fast and early identification of developments, but also supports the sourcing of identified technologies and increases the openness of the company to potential partners. The willingness to exchange has attracted experts from different organizations and therefore also provided new insights and contacts to Deutsche Telekom. In particular when addressing a topic such as eenergy it is important to synchronize innovation activities of multiple actors. We thus also contributed to understanding the open innovation phenomenon. We have shown that collaborative future exploration can spark the creation of new networks for joint research and development. In addition we explained how collaboration on foresight gives the additional benefit of cross-industry learning. The energy industry can learn from the telecommunication industry which went through liberalisation 10 years earlier and has much experience in network management. We have also shown that telecommunication companies are well positioned to contribute to carbon emission reduction in many ways. At the same time they can explore and exploit new business. It is believed that ICT could reduce business-as-usual emissions of 7.8 GtCO2e by 2020 saving energy, fuel and carbon costs worth $1,015 billion. 26 With the early knowledge of available technologies and the willingness of governments to invest in infrastructure there is a huge opportunity not only for telecommunication companies and energy suppliers to generate new revenue, but also to lay the foundations for a stable and sustainable power system. 26 The Climate Group and the Global e-sustainability Initiative, Smart 2020: Enabling the low carbon economy in the information age, accessed September

10 References and Notes European Union, "Climate change: Commission welcomes final adoption of Europe's climate and energy package." TML&aged=0&language=EN&guiLanguage=en, accessed October Recovery.gov, "About Recovery.gov." accessed 30 October The New York Times, "Obama s Remarks on Smart-Grid Projects." accessed October The Climate Group and the Global e-sustainability Initiative, Smart 2020: Enabling the low carbon economy in the information age, accessed September Andriopoulos, C. and Gotsi, M., "Probing the future: Mobilising foresight in multipleproduct innovation firms." Futures 38 (Feb 2006): Ashton, W. B., Kinzey, B. R. and Gunn, M. E., Jr., "A Structured Approach for Monitoring Science and Technology Developments." International Journal of Technology Management 6 (1991): Ashton, W. B. and Stacey, G. S., "Technical intelligence in business: Understanding technology threats and opportunities." International Journal of Technology Management 10 (1995): Brown, S. L. and Eisenhardt, K. M., "Product Development - Past Research, Present Findings, and Future-Directions." Academy of Management Review 20 (Apr 1995): Chesbrough, H. W., "The Era of Open Innovation." Sloan Management Review 44 (Apr 2003): Christensen, C. M., The Innovator s Dilemma: When New Technologies Cause Great Firms to Fail (Cambridge: Harvard Business School Press, 1999). Costanzo, L. A., "Strategic foresight in a high-speed environment." Futures 36 (Mar 2004): Day, G. S. and Schoemaker, P. J. H., "Driving Through the Fog: Managing at the Edge." Long Range Planning 37 (Apr 2004): Day, G. S. and Schoemaker, P. J. H., "Scanning the periphery." Harvard Business Review 83 (Nov 2005): Lichtenthaler, E., Organisation der Technology Intelligence - Eine empirische Untersuchung der Technologiefrühaufklärung in technologieintensiven Grossunternehmen (Zürich: Verlag Industrielle Organisation, 2002).

11 Lichtenthaler, E., "The choice of technology intelligence methods in multinationals: towards a contingency approach." International Journal of Technology Management 32 (2005): Lucas, H. C. and Goh, J. M., "Disruptive technology: How Kodak missed the digital photography revolution." Journal of Strategic Information Systems 18 (Mar 2009): Martin, B. R., "Foresight in Science and Technology." Technology Analysis & Strategic Management 7 (1995): Paap, J. and Katz, R., "Anticipating Disruptive Innovation." Research Technology Management 47 (Sep 2004): Patton, K. M., "The role of scanning in open intelligence systems." Technological Forecasting & Social Change 72 (Nov 2005): Picot, A. and Kranz, J., "Introduction." Proceedings of the Labs TALKS eenergy, Berlin, Germany, October 19, 2009a, p. 3. Picot, A. and Kranz, J., "Smart Metering - The B2C perspective." Proceedings of the Labs TALKS eenergy, Berlin, Germany, October 19, 2009b, pp Reger, G. "Technologie-Früherkennung: Organisation und Prozess. Quantensprünge in der Entwicklung erfolgreich managen." In Management von Innovation und Risiko, eds. O. Gassmann and C. Kobe. Berlin: Springer, Rohrbeck, R., Hölzle, K. and Gemünden, H. G., "Opening up for competitive advantage - How Deutsche Telekom creates an open innovation ecosystem." R & D Management 39 (Aug 2009): Rothwell, R., "Successful Industrial-Innovation - Critical Factors for the 1990s." R & D Management 22 (Jul 1992): Schaefer, M., Lanser, W., Dittmar, L., Gladisch, A., Lange, C. and Westphal, F.-J., "Green IT - Making IT more efficient." Proceedings of the Labs TALKS eenergy, Berlin, Germany, October 19, 2009, pp Slaughter, R. A., "Futures studies as an intellectual and applied discipline." American Behavioral Scientist 42 (Nov-Dec 1998): Strunz, K., Knab, S. and Lehmann, H., "Smart Grid - The central nervous system for power supply." Proceedings of the Labs TALKS eenergy, Berlin, Germany, October 19, 2009, pp