Western Electric: The original innovators

It’s very tough to outsource innovation, but yet this exactly what today’s telephone company’s (they like to refer to themselves as “communication service providers”) are trying to do. Have vendors come in, listen to their pitches on how to “earn money fast stuffing envelopes at home” , poorly implement it, badly price it, toss it out with a single marketing campaign, then quietly kill it when it fails to attract any subscribers. Yet this is the cycle for many products launched by these service providers.

The reality is, if I have a good idea, why would I possibly give it to you?

Unfortunately, they didn’t start life this way. In fact, the telephone companies were quite innovative early in their life. In the beginning days, there was no Ericsson, Huawei or ALU sales guy sitting in their lobby ready to ‘pitch’ their latest deck on what they thought the market wanted.  There was no handy vendor with pages full of SKU’s that could be ordered like a pizza. There was nothing.

So with a need to provide a service and no ready manufacturer, telephone companies became manufacturers. In 1856, George Shawk started Western Electric Manufacturing Company which subsequently went on to become the prime equipment providers to what grew to be the AT&T Bell System and for many, many years afterwards, Western Electric, affectionately named WECo.

Nearly 140 years, WECo was the factory of innovation for AT&T. If the company needed a new service offering, WECo was charged with  figuring out how to do it.  WECo was soon owner to numerous patents, considered a leader in business processes and spun off numerous other technologies companies involved in everything from movie projection equipment to satellite tracking systems for NASA. If you were a geek in the early 1900’s, there was no better company to be at than WECo.

It was a excellent long run, but it came to an end with the carpet bombing impact of divestiture. But this good as well, WECo had grown old and stale and the new companies like Northern Telecom and other nimble innovators were willing to change the game. A new era of  innovation had begun.

But where are we today? Well it appears, we’ve gone full circle. The telephone companies find themselves competing against companies built predominately with their own customer software. I remind those around me often that Google “did not” put out an RFP for a search engine. If it’s your core business, you kinda of have to own the technology.

This isn’t good news for today’s vendors, who want every operator to have the same equipment and economics of scale. They’ll fight each other to the last breath, drop prices, fire employees and pray they are the last man standing (wait — isn’t that what’s happening now?).

But there is good news, similar to divestiture, the melt down of the big supplier will spark renewal. The big service providers will have to invest to build their own services, it will require an entire new group of skill set employees. These employees will need tools, base components and systems to make these services come to life.

So as fast as the junk dealer can haul off NSN, ALU and Ericsson — the sooner the renewal will begin.