Indian Tele Context

Sahney 45
Volume 4, Number 1, June 2009

Success Factors in the Diffusion
of Innovative Services:
A Case Study Specific
to the Indian Telecom Context

Sangeeta Sahney
Vinod Gupta School of Management
Indian Institute of Technology
Kharagpur, West Bengal 721302, India.
[email protected]
[email protected]

ABSTRACT
The telecom industry in India has witnessed a transformation. From a
monopolistic regime, through an age of de-regulation and privatization, it has
seen the rapid rise of market players who offer innovative products and services.
This change has been commensurate with the growth of the industry, now ranked
the fifth largest in the world and expected, by 2010, to be the second largest.
Faced with a growing market and increasing competition, companies in the
telecom business in India must re-orient their product and service offerings.
These companies need to adapt continuously to the dynamic environment so as to
survive competition. Although many companies focus on innovation of products
and services, it is crucial that these products and services be customer-oriented
for easier diffusion and quicker adoption, thus increasing customer retention and
loyalty. This paper focuses on a telecom company in India, which is a major
player in the market. The company formulated a strategy to launch a bundle of
services program, which would enable it to provide Internet, television (video),
and (telephone) voice simultaneously to its customers, apart from other services.
This paper presents the results of an empirical study to identify the success
factors for the bundle of services program. These results will provide a better
understanding of customers needs, assist in the design of a system that can be
diffused, and thus assist marketers as they construct, manage, and evaluate their
marketing strategies in the Indian context.

Keywords: Telecom industry, bundle of services program, diffusion of
innovation, empirical study, quality function deployment

46 Success Factors in the Diffusion of Innovative Services:
A Case Study Specific to the Indian Telecom Context

International Journal of Business and Information

1. INTRODUCTION
The telecom scenario throughout the world is changing at a phenomenal
pace. In the last decade, immense technological advancement and innovation in
the telecommunications industry around the globe have transformed the industry
into a major sector indicative of economic growth. This transformation has been
commensurate with diffusion and adoption processes that cause both
technological and behavioral changes in business environments and in society.
To survive competition, organizations must adapt continuously to the
dynamic environment. Innovations need to be continuous, maybe even
dynamically continuous, and the process of diffusion must be evolutionary so as
to result in newer technologies and advancements on a cyclical basis. Such trends
have occurred around the globe and are nowhere more evident than in India.
The traditional pattern of a monopolistic regime wherein the telecom industry
in India was owned, operated, and guided by the government saw a revolutionary
change when, post-1991, the government began its policy of liberalization,
privatization, and globalization. Many private players entered the scene, and
competitiveness became a critical factor for success. The telecom industry in
India, which ranks fifth in the world today, is projected to become the second
largest by 2010. With a growing market, rising competition, and an open market
philosophy, companies today must continually offer innovative products and
services in order to survive, exist, and succeed.
In the last five years, various players in the telecom industry in India have
begun to offer innovative products and services. Before the Internet and data
circuit became popular, telecom operators had relied on voice revenue. The
advent of the satellite age and the Internet, however, caused technological and
behavioral changes among the public worldwide. The Internet was being used to
transfer knowledge, technology, entertainment, and above all e-commerce. The
public demand for downloads for knowledge and entertainment purposes affected
market dynamics, prompting changes in the telecom industry that affected
revenue and profits. With the decline in voice revenue from land-line and mobile
services, both private and public telecom operators were left with no option but
to search for new ways to earn revenue. Packages offering multiple service
options through a single subscription and billing system gained popularity and
were soon being offered by government, semi-government, and private players.

1.1. Need and Purpose of the Study
This case study focuses on the XYZ Telecom Company, a major player in
the market. This company formulated a strategy to launch a bundle of services
program that enables a telecom operator to provide Internet, television (video),
and (telephone) voice simultaneously to customers, apart from other services.
The company first conducted a study to determine which bundle of services
would appeal to customers by identifying the expectations and future
requirements of customers with regard to telecom companies. An analysis of the
results revealed that a bundle of services program that would enable a telecom
Sahney 47


operator to provide Internet, television (video), and (telephone) voice
simultaneously would be a profitable proposition. A second study was then
conducted by the company to identify the minimum set of design characteristics
of a telecom system that would meet the customer requirements, with specific
reference to the bundle of services program. A telecom system based on this
approach would enable faster diffusion of services in the system.

1.2. Indian Telecom Industry
The telecom industry in India, as elsewhere around the world, is witnessing a
rapid diffusion across the country, transforming India into an information society.
The Indian telecom industry, now ranked fifth in the world, is expected to
become the second largest by 2010, with 500 million connections. It has the
second largest telecom network in Asia, after China, with more than 429.7
million telephone subscribers (TRAI, 2009), for a telecom penetration of 36.98%.
The telecom industry in India witnessed an upsurge in the post-1990s
because of the countrys policies on liberalization, privatization, and
globalization. Although other sectors of the Indian economy grew faster initially,
the telecom industry saw its greatest upsurge in the last decade. Initially, the
industry enjoyed a state of monopoly, but de-regulation, privatization, de-
licensing, and the removal of restrictions on foreign capital investment opened
the way for private players, both Indian and foreign.
The major milestones were laid by the Telecom Regulatory Authority of
India (TRAI) in 1997; the Indian Wireless Act, 1993; the National Telecom
Policy, 1999, for cellular telecom services; the Broadband Policy, 2000; the
Information Technology Act, 2000; the Indian Telegraph (amendment) Rules,
2004; the Direct to Home (DTH) broadcasting service policy; and, the
Communication Convergence Bill, 2001. The TRAI, which is a subordinate of
the ministry of telecommunications, has played a major role in regulating yet
facilitating the telecom business in the country. Its mission statement is as
follows: To ensure that the interests of consumers are protected and at the same
time to nurture conditions for growth of telecommunications, broadcasting and
cable services in a manner and at a pace which will enable India to play a leading
role in the emerging global information society (TRAI). The deregulation of the
telecom industry in February 2002 brought about huge changes.
The tele-density in India is 36.98% (TRAI, March 2008), much higher than
the planned 15% set forth in the telecom policy of 1999. Much of the expansion
can be attributed to the drastic lowering of tariff rates. About $8.5 billion has
been invested during the last two years, including a foreign direct investment of
$550 million. There is tremendous market potential, especially in rural areas
where the tele-density is only 8%. The growth rate in rural areas is projected to
increase to 200 million rural telecom connections by the year 2012, with an
expected tele-density of 25%. According to a joint report by the Confederation of
Indian Industry (CII) and Ernst & Young, rural subscribers in 2012 will account
for more than 60% of the total subscriber base. This potential is increasingly
being recognized by both Indian and foreign players.


With the coming of the satellite age, fixed land-lines have become just one
of the components in the service system. From 2004 onward, there has been steep
growth in wireless, with two out of every three new telephone connections being
wireless. Today, wireless accounts for 54.6% of the total telephone subscriber
base. Mobile telephony has seen considerable growth. The two wireless
technologies now in use are the GSM (Global System for Mobile
Communications) and the CDMA (Code Division Multiple Access). With around
10 million new mobile subscribers being added to the network every month,
mobile telephony is emerging as one of the fastest growing telecommunication
markets in the world. In addition, the subscriber base for the Internet and
broadband is also increasing. By the end of March 2009, the total wireless
subscribers GSM, CDMA, and WLL number 391.76 million; the wire-line
subscribers, 37.96 million; and the total broadband subscribers, 6.22 million
(TRAI, 2009).
Three types of parties exist in the Indian telecom industry: state/government-
owned companies, private Indian-owned companies, and foreign-invested
companies. In addition to the basic land-line telephone with national and
international dialing services, the telecom service in India includes telex and
telegraph (both manual and automatic), business message networks, voice mail
facility, video conferencing, cellular mobile phone, and related services such as
SMS, Internet, and broadband (wireless and fixed).
This unprecedented growth in the telecom industry has had a multiplier
effect on the entire economy. The players in the Indian telecom industry,
comprising hardware manufacturers, operators, and service providers, are playing
proactive roles by providing innovative products and services, by improving
existing services, and by performing multi-functional roles for quick diffusion
and adoption of such innovations through the application of organizational,
technical, and commercial skills. The focus today is on innovation and value
creation so as to differentiate products and services in order to effectively meet
increasing competition and the needs of the evolving telecom industry.

2. THEORETICAL BACKGROUND
In recent years, the subject of innovation and consumer adoption of
innovation has been the focus of considerable research [Alba, et al., 1997;
Roehm and Sternthal, 2001]. Organizations must continue to innovate or face
extinction [Christensen, 1997; Quinn, 2000, McDermott and O'Connor, 2002];
and any failure to innovate places the organization at a competitive disadvantage
[Scott, 1999; Byrne, 2000]. Successful organizations encourage and foster an
environment of creativity and innovation to ensure long-term success and
survival [Oldham and Cummings, 1996; McLoughlin and Harris, 1997]. The
time involved in the diffusion of an innovation is also an issue of concern; thus,
speed becomes a crucial issue [Kessler and Chakrabarti, 1996]. The innovation
speed, or the amount of time elapsed between initial conceptualization and
development and final commercialization and marketing, has been addressed
Sahney 49


variously across two broad perspectives. The first, commercialization and
marketing, should occur at a fast pace so as to obtain the first-mover advantage
[Birnbaum-More, 1990; Emmanuelides, 1991]. The second is the rate at which
an innovation is diffused through an organization [Rogers, 1983].
Studies have focused on technological advancement primarily because the
products and services are complex and require more customer learning; the
market is competitive; their life cycles are short; and, the risk factor is high with
respect to diffusion among the public and the adoption process as a whole. With
rapid technological changes and continuous innovation, the high technology
sectors such as information technology and telecommunications have focal
research areas. The research on technological innovation includes a large body of
knowledge focusing on issues of technology and behavioral-based change in
organizational and social settings [Wolfe, 1994; Rogers, 1995; Drazin and
Schoonover, 1996]. The two concepts, innovation and diffusion, may be
defined briefly:
I nnovation has been defined with varying orientations firm-oriented,
product-oriented, process-oriented, customer-oriented, and market-
oriented. It has been defined as an idea, practice or an object that is
perceived as new by an individual or other unit of adoption, and as the
process by which an innovation is communicated through specific
channels over time among members of a social system that are linked via
networks [Rogers, 1995]. It is an idea applied to initiating or
enhancing a product, service or process [Hivner, et al., 2003); any idea,
practice or object that the adopting individual or organization regards as
new [Damanpour, 1991]; a process that involves the generation,
adoption and implementation, and incorporation of new ideas and
practices [Axtell, et al., 2000]; and even, a new or innovative idea
applied to initiating or improving a product, process, or service [Kanter,
1988; Wolfe, 1994; Ford, 1996].

A multi-dimensional phenomenon, innovation is newness to the firm
[Brouwer and Kleinknecht, 1996; Song and Montoya-Weiss, 1998];
newness to the customer [Atuahene-Gima and Ko, 2001]; newness of
the product [Ali, et al., 1995; Sethi, et al, 2001]. Most studies,
however, focus on the firm or customer perspective [De Brentani, 2001].
Product and service innovations bring about changes via something new;
the changes that an innovation brings with it are both technology related
[Kimberly, 1981; Rogers, 1983; Kitchell, 1995] and behavioral related
[Rogers, 1983].

Diffusion has been defined as a process by which an innovation is
communicated through specific channels over time among members of a
social system that are linked via networks [Rogers, 1995]. Diffusion is


related to another concept known as adoption, which is a series of
steps in which the consumer passes from initial knowledge of an
innovation (awareness), to forming an attitude toward it (interest,
evaluation, and trial), to reaching an adoption decision [Rogers, 1962].
The rate of adoption is the relative speed with which members of a social
system adopt an innovation [Rogers, 1995], and reflects the fact that
some people adopt innovations faster and more quickly than others. The
market, in other words, does not react to an innovation in a similar
manner and all members of the population do not adopt the innovation
simultaneously (indeed, some never adopt) [Brown, 1981]. The market
may therefore be classified as innovators, early adopters, early majority,
late majority, and laggards [Rogers, 1962]. Rogers [1983], has identified
certain characteristics of innovations that impact the degree of diffusion
and are indicative of adoption; namely, relative advantage, compatibility,
complexity, trialability, and observability.

Studies on diffusion of innovation have been conducted from two broad,
varying perspectives. From a micro perspective, diffusion of innovation is a
driver of strategic change within a company, something that is essential for
sustained competitive advantage. From a macro perspective, it plays a crucial
role in economic development of the country. Diffusion of innovation has been
the underlying factor behind the growth and development in the IT and telecom
industries, as it has in other industries. Innovative products and services in the IT
and telecom sector have diffused into the business environment [Allen and Scott
Morton, 1994], and into personal households [Miles, 1988].
Diffusion of innovation is an evolutionary process that has been studied
from the point of view of stakeholders and social networks [Burt, 1987; Mahajan,
et al., 1990; Rogers, 2003; Iacobucci, 1996; Troshani and Doolin, 2007],
government and quasi-governmental institutions that intervene or refrain from
intervening in the process [King, et al., 1994], and professional associations,
trade and industry associations, standards-setting bodies and consultancies, and
government policy-making agencies [Swan and Newell, 1995; Damsgaard and
Lyytinen, 2001; Kurnia and Dare 2005; Papazafeiropoulou, 2004]. The
innovative products and services offered by the telecom industry are no
exception to having been affected greatly by social networks and the
communication that takes place in such social networks.
Diffusion of innovation is multi-functional and embraces line functions
performed by the R&D and product development team, the production
department, and the marketing department. Diffusion of innovation has
increasingly been studied and researched from a marketing perspective because it
is essentially the marketing of new products [Rogers, 2004]. This perspective
evolved in the 1960s and peaked in the 1980s, with a gradual leveling off after
Sahney 51


that. Present technological advancements and their diffusion among the public,
especially in a competitive environment, has led to a renewed interest among
marketing professionals, researchers, and academicians to study and apply the
concept with a marketing orientation [Mahajan and Peterson, 1985; Simmonds,
1986; Mahajan, et al., 1990; Rogers, 1995; Ganesh, et al., 1997].

3. CASE STUDY: XYZ TELECOM COMPANY
XYZ Telecom Company, formed a decade ago, is among the worlds top 10
telecom companies. It provides an elaborate yet comprehensive range of world-
class telecom products and services in India. The companys vision is to become
one of the largest telecom service providers in Asia. Its mission is to provide a
telecom infrastructure, contribute to the growth of the country's economy, and
provide better communication to the population of India.
The initial objective of the company was to create a telecom network across
the country. Having done that, it has been focusing on constantly improving,
consolidating, and expanding its network and providing new telecom services. It
has one of the largest networks with connectivity across the country. It provides
its customers with an array of services: Wireline, CDMA mobile, GSM mobile,
voice mail, short message, group messaging, Internet, and broadband bandwith
on demand, video and audio conferencing, corporate Virtual Private Network
(VPN), video and gaming VoIP services, wireless application protocol, and
VSAT.
Recently launched services such as Close User Group (CUG) and VPN are
extremely popular. Under these services, a small group can make unlimited calls
among members of the group absolutely free by paying a nominal tariff.
Integrated Voice Response Services (IVRS) linked to fixed lines provides sports
news, astrology, horoscope, and other information. Apart from this, the company
has decided to offer related services under various plans and schemes. In order to
satisfy customers of such services, the company has recently launched a high-
speed, multi-play broadband service of up to 8 Mbps speed.
The company has also recently launched an innovative service, known as the
bundle of services program, aimed at providing Internet, television (video), and
(telephone) voice over a single broadband connection. It now aims at faster
diffusion of the service across the country, making it a viable commercial
proposition.
The company is a major player, with 85% of the market share in the basic
telephone subscriber market and 24% of the share in the mobile users market. It
has a subscription base of 35 million basic phone subscribers, 2.75 million WLL
subscribers, 2.8 million Internet customers, and 0.6 million broadband customers.
The company is one of the market leaders not only in terms of the size of its
subscriber base, but also in terms of the high revenue generated. With the present
gross fixed assets of over US $28 billion, a turnover of over US $8 billion, and a


net profit during the lasts financial year of US $2.26. It has an infrastructure
investment plan of US $16.67 million for the next three years.
In a technology-driven market with educated and informed customers and
other competitive players, both a challenge and a huge opportunity existed in
India for future business expansion through innovative products and services.
Although there are options for a wide array of other services and video-based
applications like video calling/conferencing, video mail, interactive gaming,
video surveillance, video medicine, distance learning, etc, the XYZ Telecom
Company decided to launch a service package called the bundle of services
program. This seemed a viable proposition from the perspective of the company,
which already had band-with efficiency and the infrastructure to bridge the gap
between the entertainment industry and the needs of the customer. The company
decided, therefore, to leverage this golden opportunity to meet the demand of
customers and to earn more revenue.
The bundle of services program is the companys commercial name of a
single package with multiple products and a combined business model.
Customers receive a land line, broadband connection, and Internet Protocol
Television (IPTV) services through a single cable, and can use the telephone, surf
the Internet, and watch cable TV on the same telephone line with a broadband
modem or a set-top box. Customers have to bear the initial cost of the modem or
the set-top box, the installation charges, and the tariff for the products and
services they receive.

3.1. Objectives of the Empirical Study
The success of an organization is based on its gaining customer insight.
Understanding and managing the dynamics of customer expectations are key to
identifying the critical success factors for any service provider. In launching its
bundle of services program, XYZ Telecom Company recognized that it must
be done from the perspective of customer orientation. The company decided,
therefore, to analyze whether the bundle of services program would appeal to
customers at large.
Keeping customer satisfaction in mind, the company conducted the study,
first, to understand the needs of the customer and thus be able to provide
innovative services that can be easily diffused into the market system. Its second
purpose was to design a system based on components and design elements that
can meet the needs and requirements of its customer, so as to gain a competitive
edge in the market. Following are the objectives of the study:
(i) To determine customers expectations and future requirements of
telecom companies
(ii) To assess the performance of the existing broadband service
(iii) To identify the features in the bundle of services program that
would appeal to customers
Sahney 53


(iv) To determine the customers preference for a specific telecom
company to provide their telecom needs
(v) To gain insight into the future of the telecom market and the role of
technology
(vi) To identify the minimum set of design characteristics of a telecom
system that would meet customer requirements, with specific
reference to the bundle of services program

3.2. Scope and Methodology
The empirical study was conducted in two stages. In the first stage, a
research instrument in the form of a questionnaire was prepared and distributed
for pilot testing in the city of Kolkata, India. Eight experts and specialists from
the telecom industry were involved to provide expert opinion on the various
components of the research instrument. Non-probability judgmental and
convenience sampling was used to identify customers of XYZ Telecom
Company services who would be interested in its concept of multiple services, or
bundle of services program. In deciding which of its broadband customers
would receive the questionnaire, the company focused on two kinds of
respondents persons who opted for broadband as soon as the broadband service
of the company had been launched, and persons who opted for broadband service
after a two-months-free offer from the company. The minimum education
qualification was higher secondary examination in order to analyze the difference
in buying patterns across the two groups.
The questionnaire had two purposes:
(i) To gain an insight into customer needs and expectations as a whole and
into the needs and expectations of the two groups, especially with
regard to variables such as interest, price sensitiveness, and social
acceptance.
(ii) To test the questionnaire for reliability and validity so that it could be
used in the second stage of the study
A total of 65 responses were found to be complete and valid for analysis (34
people who opted for the broadband as soon as it was launched; 31 people who
availed the two-months-free broadband offer, and then subscribed to the service).
In the second stage of the study, the statistically proven questionnaire was
modified to facilitate application of the quality function deployment (QFD)
technique. A total of 24 responses were collected and analyzed.

3.3. Variable Conceptualization and Instruments
The objective of the empirical study was to understand the needs of the
customer and to determine ways to provide innovative services that can be easily
diffused into the market system. Design of a customer-focused telecom multiple-
service program was essential in order to gain a competitive edge among other
players in the market. Theoretical and empirical studies on the telecom industry


were reviewed and the various industry players were studied. For the first part of
the study, an exploratory factor analysis was conducted, and factor loadings
above Cronbachs values of 0.50 were considered. The internal consistency
was examined through a reliability analysis. Components that emerged
statistically valid and reliable were as follows:
Expectation and future telecom service requirements
Customer satisfaction
Features in the bundle of services program that would appeal to
customers
Interest in a multiple-services or bundle of services program
Price sensitiveness of the multiple-service or bundle of services
program
Social acceptance among the public with regard to innovators of the
multiple-service of bundle of services program

After the first stage of the study, another questionnaire was prepared, pilot
tested, and modified for use in the second stage, which involved application of
the QFD technique. A pilot study was conducted to examine the validity and
reliability of the scale. The quantitatively and statistically proven items and
attributes were classified under two broad headings: customer requirements and
design characteristics. These were then incorporated in the questionnaires that
were distributed to respondents. Customer expectations and requirements
regarding a telecom bundle of services program were identified and grouped as
customer requirements. A total of 14 items were identified that were grouped
under five factors/constructs, with Cronbachs values ranging from 0.6850 to
0.7851. The various components that could lead to a customer-focused telecom
bundle of services program were also identified and grouped as design
characteristics. Here, a total of 20 items were identified that were grouped under
four factors/constructs, with the Cronbachs values ranging from 0.6245 to
0.8224. These values clearly indicated that the scale was internally consistent and
reliable [Cronbach, 1951; Nunnally, 1978; Nunnally and Bernstein, 1994].
Although the constructs proved to be statistically significant and the validity
could not be negated, the scales for customer requirements and design
characteristics are considered uni-dimensional, and the items are considered a
single composite set of individual measures.
(i) Customer Requirements
Performance
Convenience
Personalization
Interactivity
Reliability
Responsiveness
Sahney 55


Ease of operation
Ease of reach
Connectivity
Customer support
Value-added services
Technical competence
After-installation services
Continuous improvement

(ii) Design Characteristics
Easy accessibility of service
Simple, unambiguous transactions
Clear transaction policies
Quick delivery times
Error-free processing of information
Error-free billing
Billing transparency
Accurate order fulfillment
Interactivity between service provider and subscriber
Reputation
User friendliness
Transaction safety
Up-to-date information availability
Availability of competent representatives
Prompt handling of complaints
Proper speed and bandwidth
Branding
Individualized attention
Customer care

3.4. Data Collection, Analysis, and Interpretation, Stage I
The first stage of the empirical study was conducted to understand the
needs of the customer and to analyze whether the bundle of services program
would appeal to customers at large. A questionnaire was administered to the two
groups of broadband customers previously identified. A total of 65 responses
were found to be complete and valid for analysis. Following are the findings
relating to the five objectives of the study.


3.4.1. Objective 1: To determine customers expectations and future
requirements regarding telecom companies
Customer satisfaction and delight is the true mantra for the survival and
success of any company in the highly competitive telecom environment. The
study revealed that the market was ready for a converged solution, both voice and
data. With the problems that can occur in maintaining multiple-service providers
for Internet, cable television, and telephone, the customers surveyed preferred an
agency or service provider that provided a combined solution, based on quality,
personalization and individualization, customer care and continuous upgrades
and improvement in technology and services. This objective was further explored
in the second stage of the study with the application of the QFD technique.
The sample was also studied as two separate groups: persons who opted for
broadband as soon as the broadband service of the company had been launched,
and, persons who opted for the broadband service after a two-months-free offer
from the company, so as to compare the results with regard to interest, price
sensitiveness, and social acceptance.
First, the correlation among the three variables was studied for the entire
group of respondents.
Interest: This variable refers to the degree to which a person likes a
category and is involved with it. In this case, the category pertains to
entertainment through the Internet and television. Such a person would
be innovative and would act as an innovator with regard to new products.
Price Sensitiveness: This variable refers to the tendency of a person to
buy or not to buy a product or service even if it is higher in price if the
product or service delights him or her. The degree of price sensitiveness
will be low if he or she is ready to buy the product or service, even if the
price paid for it is high.
Social Acceptance: This variable refers to the degree to which the person
is liked by others or, in other words, the degree of influence that the
person has over others behavior. This factor would affect the diffusion
process especially through opinion leadership.
It was observed that interest and price sensitiveness were inversely related,
with a correlation coefficient of 0.679. This finding implied that, if a customer
was interested in entertainment through the Internet and television, he or she was
low on price sensitiveness, and, with an innovative product, he or she could also
act as an innovator. As far as interest and social acceptance are concerned, there
was a direct positive relationship between the two variables, with a correlation
coefficient of 0.767. This finding implied that, when a person was interested in
entertainment through the Internet and television, he or she would be quick to
adopt, his or her social acceptance would be high, and he or she would be
regarded as an opinion leader. With respect to social acceptance and price
sensitiveness, there was no relation between the two variables.
Sahney 57


Next, the sample was studied as two separate groups. A two-sample t-test
was conducted to ascertain whether there was any difference between the group
of people who opted for broadband as soon as the broadband service of the
company had been launched, and the group of people who opted for broadband
service after a two-months-fee offer from the company.
Null hypothesis = The variance/means between the two groups do not
differ significantly and are the same/equal.
Alternate hypothesis = The variance/means between the two groups
differ significantly and are not the same/equal.

Hypothesis 1. There is no significant difference in the level of interest
between those who adopted the service instantly and those who availed the
two-month free broadband service and then subscribed to it.

Null hypothesis H
0
: Interest of the persons who availed the two-months-
free broadband is the same as that of the persons who did not avail the
offer.

Alternate hypothesis H
1
: Interest of the persons who availed the two-
months-free broadband significantly differs from that of the persons who
did not avail the offer.

The data was subjected to the independent samples t-test. The Levenes
test for equality of variances was applied. The F statistic value had a
corresponding significance (or p-values), of more than 0.05. This meant
that the null hypothesis failed to get rejected and that the variances of the
two groups were equal. This supported the use of pooled variance t-tests
for each of these to test the equality of means. The associated values of
significance (p-values), were less than 0.05, and thus, the null hypothesis
got rejected; i.e. the difference in the means is significant (see Table 1).

There is significant difference in the level of interest between those who
adopted the service instantly and those who availed the two-months-free
broadband service and then subscribed to it.

The average interest of the customers who did not avail the two-months-
free broadband is significantly higher than the average interest of people
who opted for two-months-free broadband service. This finding means
that the people who did not avail the two-months-free broadband offer
were more interested in entertainment such as music and movies the
Internet and television. Also, they were comfortable with new
technologies and more open to experiment with them. From the
companys perspective, they were the innovators and would act as
opinion leaders, thereby helping in the adoption of innovation.



Hypothesis 2. There is no significant difference in the level of price
sensitiveness between those who adopted the service instantly and those who
availed the two-months-free broadband service and then subscribed to it.

Null hypothesis H
0
: Price sensitiveness of the persons who availed the
two-months-free broadband is same as that of the persons who did not
avail the offer.

1
: Price sensitiveness of the persons who availed
the two-months-free broadband significantly differs from that of the
persons who did not avail the offer.

corresponding significance (or p-values), of more than 0.05. This meant
that the null hypothesis failed to get rejected and that the variances of the
two groups were equal. This finding supported the use of pooled variance
t-tests for each of these to test the equality of means. The associated
values of significance (p-values) were less than 0.05; thus, the null
hypothesis got rejected; i.e. the difference in the means is significant (see
Table 1).

There is significant difference in the level of price sensitiveness between
those who adopted the service instantly and those who availed the two-
months- free broadband service and then subscribed to it.

The average price sensitiveness of the customers who did not avail the
two- months-free broadband service officer is significantly lower than
the average interest of people who opted for the two-months-free
broadband offer. In other words, people who did not avail the free
broadband service are willing to pay a higher price if the services satisfy
them.

Hypothesis 3. There is no significant difference in the level of social
acceptance between those who adopted the service instantly and those who
availed the two-months-free broadband service and then subscribed to it.

Null hypothesis H
0
: Social acceptance of the persons who availed the
two-months-free broadband is the same as that of the persons who did
not avail the offer.

1
: Social acceptance of the persons who availed
the two-months-free broadband service significantly differs from that of
the persons who did not avail the offer.
Sahney 59


corresponding significance (or p-values), of more than 0.05. This fact
means that the null hypothesis failed to get rejected, and that the
variances of the two groups were equal. This finding supported the use of
separate variance t-tests for each of these to test the equality of means.
The associated values of significance (p-values), were again more than
0.05; thus, the null hypothesis failed to get rejected i.e., the difference
in the means is not significant (see Table 1).

There is no significant difference in the level of social acceptance
between those adopted the service instantly and those who availed the
two-months-free broadband service and then subscribed to it.

The average social acceptance of the customers who did not avail two
month free broadband does not significantly differs from the average
interest of people who opted for two month free broadband.

Table 1
Hypothesis Testing: Hypotheses 1-3

Group

Mean

Std.
Dev.

F

Sig.
(p)

t
Value
Sig.
2
tailed
95%
Confidence
Interval of the
Difference
Lower Upper
Interest Did not avail offer
and subscribed
instantly
4.00 0.50 3.658 0.060 2.374 0.021 5.679E-
02
0.6617

Availed 2 months
free broadband
3.65 0.70
Price
Sensitive-
ness
Did not avail offer
and subscribed
instantly
2.86 0.81 3.274 0.075 2.035 0.046 6.359E-
03
0.7090

Availed 2 months
free broadband
3.22 0.57
Social
Accept-
ance

Did not avail offer
and subscribed
instantly
3.90 0.58 0.476 0.493 1.265 0.211 -0.1116 0.4961

Availed 2 months
free broadband
3.70 0.64



3.4.2. Objective 2: To assess the performance of the existing broadband
service
Customers were asked to give their opinion about the existing broadband
service of the XYZ Telecom Company. The performance was assessed, from
excellent to poor, on five parameters: speed, price, billing transparency, customer
care, and reliability. The results are shown in Table 2.

Table 2
Customer Assessment of Existing Broadband Service of XYZ Telecom Company

Parameter Excellent
(%)
Very Good
(%)
Good
(%)
Average
(%)
Poor
(%)

Speed

12

29

39

14

6

Pricing

2

20

58

18

2

Billing
Transparency

2

22

39

25

12

Customer
Care

3

11

32

25

29

Reliability

6

29

47

12

6

3.4.3. Objective 3: To identify the features in the bundle of services that
would appeal to customers
The study revealed the following attributes, in order of preference, which
would appeal to the customers:
Service agreement where the level of service is formally defined
Cost effectiveness
Customer Support
Branding
Price was also an issue. The customers preferred competitive pricing, but in
return for quality service delivery.

3.4.4. Objective 4: To determine customers preferences for a specific
telecom company for their telecom needs
The telecom industry is highly competitive. Customers are always on the
lookout for newer products and service schemes and packages. They even prefer
to change their service providers to obtain better services and requirements. With
Sahney 61


the advent of new local and global players, the telecom market is being highly
influenced by brand, technology leadership, and innovative service packaging.
Customers are encouraged to try newer offerings from other service providers.
As an existing telecom player, XYZ Telecom Company believed it was crucial to
understand the mind set of customer.
The survey revealed that value-added services were the major factor
determining customers preference for a particular telecom company. They much
preferred a service package that was high on quality and customer satisfaction.
Although bandwidth, speed, and connectivity were the major technical factors,
the marketing spirit lay in providing individualized attention and a system that
was user-friendly. Transparency in dealings was also one of the major things that
customers expected from their service providers. Interactivity between the
service provider and the buyer was also important. The customers preferred a
single service provider. Loyalty was high as long as service requirements were
met without interruption, post-sales/subscription support was provided, and
complaints were handled promptly.

3.4.5. Objective 5: To obtain insight into the future of the telecom market
and the role of technology
Understanding the future of the telecom market is essential for service
providers in order to be proactive in providing innovative products and services
and rightly targeting and positioning them so as to penetrate the market and
enable the diffusion and quick adoption of innovative products and services. The
secondary data revealed that the future of the telecom market is bright. The rural
sector afforded a great opportunity. Investment in basic infrastructure and
bandwidth was the call of the day.

3.5. Data Collection, Analysis, and Interpretation, Stage II
To identify the minimum set of design characteristics of a telecom system
that would meet the customer requirements, with specific reference to the
bundle of services program, the company, in the second stage of the empirical
study, applied the quality function deployment (QFD) technique.
The QFD technique, developed by Mizuno and Akao, is an integrative
process based on the desires of the customer. It is a tool that aims at ensuring that
the voice of the customer is considered throughout the product planning and
design stages [Franceschini and Rossetto, 1997; Hauser and Clausing, 1988]. The
technique has been used worldwide for design of products and services.
The technique uses a matrix with rows and columns, the rows representing
the whats or customer requirements, and the columns representing the hows
or design characteristics. Because the matrix resembles the shape of a house, it
has also been called the house of quality. The QFD matrix comprises two basic
dimensions. The exterior walls on the left of the house represent the whats
(with customer requirements constituting the rows), and the ceiling of the house
represents the hows (with design characteristics constituting the columns). The
rows and columns cut across each other, creating the cells or interior walls of the


house, which represent the relationship between the items of the whats and the
items of the hows. The foundation of the house comprises the prioritized
design characteristics, which are ranked both absolutely and relatively. The roof
of the house portrays the interrelationship between the various design
characteristics.
The QFD technique helps to arrive at a set of design characteristics that best
satisfies customer requirements [Hauser and Clausing, 1988; Pitman, et al.,
1995]. The objective is to understand customer needs and to prioritize the design
characteristics in an order that most effectively meets these needs and to design a
product or service system accordingly [Akao, 1990; Masui, et al., 2003].

3.5.1. Objective of Stage I I
The objective of the second stage of this study was to identify the minimum
set of design characteristics of a telecom system that would meet the customer
requirements, with specific reference to XYZ Telecom Companys bundle of
services program.
The test of reliability and validity identified customer requirements and 20
design characteristics. These were arranged in a matrix that was incorporated in
the questionnaire that was used in the second stage of the study. The respondents
were asked to assign numeric relative importance scores to the various customer
requirements, from the lowest to the highest, on a scale of from 1 to 5. They were
also asked to express in numeric values the weak-moderate-strong relationship
between the whats and the hows on a scale of 1, 3, and 9.
A total of 24 responses were collected and analyzed in this stage of the
study.
Based on the prioritized scores and the relationship scores, the absolute
values were computed for each column (absolute ranks: AR) and the respective
hows were then ranked relatively (relative ranks: RR) (Figure 1 and Table 3).
A correlation analysis was performed to identify the interrelationship between the
different design characteristics, and the correlated pairs with an alpha value of
more than 0.70 were identified (Table 4).

Sahney 63


Figure 1. QFD Matrix



Table 3
Codes and Items for the QFD Matrix

1 Performance 8 Ease of reach
2 Convenience 9 Connectivity
3 Personalization 10 Customer support
4 Interactivity 11 Value added services
5 Reliability 12 Technical competence
6 Responsiveness 13 After installation services
7 Ease of operation 14 Continuous improvement

A Easy accessibility of service K User friendly
B Simple, unambiguous transaction L Transaction safety
C Clear transaction policies M Up-to-date information access
D Quick delivery times N Availability of competent reps
E Error-free information processing O Prompt complaint handling
F Error-free billing P Proper speed and bandwidth
G Billing transparency Q Value-added services
H Accurate order fulfillment R Branding
I Buyer-subscriber interactivity S Individual attention
J Reputation T Customer care

Table 4
Relative Ranking of Items

Relative
Rank
Items
I User friendly
II Individualized attention
III Availability of competent representatives
IV Prompt complaint handling
V Customer care
VI Value-added services
VII Proper Speed and bandwidth
VIII Interactivity between seller and subscriber
IX Accurate order fulfillment
X Billing transparency
Sahney 65


3.5.2. Findings of Stage I I
The design characteristics that ranked as the first 10 in order of rank are:
User friendly
Individualized attention
Availability of competent representatives
Prompt handling of complaints
Customer care
Proper speed and bandwidth
Interactivity between seller and subscriber
Accurate order fulfillment
Billing transparency
A correlation analysis was performed to identify the interrelationship
between the different hows, and the relationship was plotted on the roof of the
matrix. The design characteristics that correlated with each other are as follows
(Table 5):

{A-B},{A-D},{A-I},{A-K},{A-P},{A-Q},{A-S},{A-T},{B-C},{B-E},{B-
H},{B-I}, {B-K},
{B-L},{B-N},{B-S},{C-F},{C-G},{C-H},{C-I},{C-K},{C-S},{C-T},{D-I}, {D-
K},{D-T},
{E-F},{E-G},{E-H},{E-L},{E-N},{E-O},{E-T},{F-G},{F-N},{F-O}, {F-T},{G-
K},{G-T},{H-I},{H-J},{H-K},{H-L},{H-N},{H-O},{H-S},{H-T},{I-K}, {I-
M},{I-N},{I-O},{I-S},{I-T},
{J-L},{J-N},{J-O},{J-P},{J-Q},{J-R},{J-T},{K-L},{K-M},{K-N},{K-O},{K-
Q},{K-S},
{L-N},{L-T},{M-N},{M-P},{M-T},{N-O},{N-R}, {N-S},{N-T},{O-R},{O-
S},{O-T},
{P-R},{P-T},{Q-R},{Q-S},{R-T},{S-T}.

Table 5
Important Pairs after Correlation

Easy accessibility of service AND Simple unambiguous transactions
Easy accessibility of service AND Quick delivery times
Easy accessibility of service AND Interactivity between seller and subscriber
Easy accessibility of service AND User friendly
Easy accessibility of service AND Proper speed and bandwidth
Easy accessibility of service AND Value-added services
Easy accessibility of service AND Individualized attention


Table 5. Important Pairs after Correlation (contd)

Easy accessibility of service AND Customer care
Simple unambiguous transactions AND Clear transaction policies
Simple unambiguous transactions AND Error- free processing of information
Simple unambiguous transactions AND Accurate order fulfillment
Simple, unambiguous transactions AND Interactivity between seller and subscriber
Simple, unambiguous transactions AND User friendly
Simple, unambiguous transactions AND Transaction safety
Simple, unambiguous transactions AND Availability of competent reps.
Simple, unambiguous transactions AND Individualized attention
Clear transaction policies AND Error-free billing
Clear transaction policies AND Billing transparency
Clear transaction policies AND Accurate order fulfillment
Clear transaction policies AND Interactivity between seller and subscriber
Clear transaction policies AND User friendly
Clear transaction policies AND Individualized attention
Clear transaction policies AND Customer care
Quick delivery times AND Interactivity between seller and subscriber
Quick delivery times AND User friendly
Quick delivery times AND Customer care
Error-free processing of information AND Error-free billing
Error-free processing of information AND Billing transparency
Error-free processing of information AND Accurate order fulfillment
Error-free processing of information AND Transaction safety
Error-free processing of information AND Availability of competent representatives
Error-free processing of information AND Prompt complaint handling
Error-free processing of information AND Customer care
Error-free billing AND Billing transparency
Error-free billing AND Availability of competent representatives

Sahney 67



Error-free billing AND Prompt complaint handling
Error-free billing AND Customer care
Billing transparency AND User friendly
Billing transparency AND Customer care
Accurate order fulfillment AND Interactivity between seller and subscriber
Accurate order fulfillment AND Reputation
Accurate order fulfillment AND User friendly
Accurate order fulfillment AND Transaction safety
Accurate order fulfillment AND Availability of competent reps.
Accurate order fulfillment AND Prompt complaint handling
Accurate order fulfillment AND Individualized attention
Accurate order fulfillment AND Customer care
Interactivity between seller and subscriber AND User friendly
Interactivity between seller and subscriber AND Up-to-date information access
Interactivity between seller and subscriber AND Availability of competent reps.
Interactivity between seller and subscriber AND Prompt complaint handling
Interactivity between seller and subscriber AND Individualized attention
Interactivity between seller and subscriber AND Customer care
Reputation AND Transaction safety
Reputation AND Availability of competent reps
Reputation AND Prompt complaint handling
Reputation AND Proper Speed and bandwidth
Reputation AND Value-added services
Reputation AND Branding
Reputation AND Customer care
User friendly AND Transaction safety
User friendly AND Up-to-date information access
User friendly AND Availability of competent representatives
User friendly AND Prompt complaint handling



User friendly AND Value-added services
User friendly AND Individualized attention
Transaction safety AND Availability of competent representatives
Transaction safety AND Customer care
Up-to-date information access AND Availability of competent representatives
Up-to-date information access AND Proper Speed and dandwidth
Up-to-date information access AND Customer care
Availability of competent reps AND Prompt complaint handling
Availability of competent reps AND Branding
Availability of competent reps AND Individualized attention
Availability of competent reps AND Customer care
Prompt complaint handling AND Branding
Prompt complaint handling AND Individualized attention
Prompt complaint handling AND Customer care
Proper speed and bandwidth AND Branding
Proper speed and bandwidth AND Customer care
Value-added services AND Branding
Value-added services AND Individualized attention
Branding AND Customer care
Individualized attention AND Customer care

4. SUMMARY OF FINDINGS
The world has become increasingly dependent on telecommunication
products and services in both the business and private sectors. Tremendous
development in the telecom sector over the last decade is reflected in the rapid
growth of companies, increased competition among them, and the rising number
of players offering multiple, innovative products and services that are being
facilitated through global technological networks. The key to survival and
success lies not only in innovation, but also in the diffusion of such innovations
and their glad adoption by the public. It is essential, therefore, that the dynamics
of success be properly understood and managed.
Sahney 69


This paper examines the success factors of an innovative service offered by
the XYZ Telecom Company of India. Its bundle of services program is its
commercial name for providing three services: high-speed Internet, television,
and telephone over a single broadband connection. The companys challenge was
to diffuse this innovation to private households.
To achieve its goals, the company conducted a two-stage study. The
objective of the first stage was to determine which bundle of services would
appeal to customers by identifying the expectations and future requirements of
telecom customers. The results indicated that a bundle of services program
emphasizing individualized attention would be a profitable proposition. In the
second stage, an investigation was made to identify the minimum set of design
characteristics of a telecom system that would meet customer requirements, with
specific reference to the bundle of services program. A telecom system
incorporating these characteristics would achieve a faster diffusion of its
services.
The findings of the two-stage study may be summarized as follows:

1. The market is ready for a converged solution, both voice and data.
Customers would prefer a service provider who would provide a
combined solution for Internet, television, and telephone over a single
broadband connection.

2. Customers desire a system based on quality, personalization and
individualization, customer care, and continuous upgrades and
improvements.

3. Interest and price sensitiveness are inversely related. This finding
implies that, if a customer is interested in entertainment via the Internet
and television, he or she is low on price sensitiveness, and, with an
innovative product, he or she may also act as an innovator.

4. There is a positive relationship between Interest and Social Acceptance.
This finding implies that, when a person is interested in entertainment via
the Internet and television, he or she would be quick to adopt, his or her
social acceptance would be high, and he or she would be regarded as an
opinion leader.

5. There is no relationship between Social Acceptance and Price
Sensitiveness.

6. There is significant difference in the level of Interest between those who
adopted the service instantly and those who availed the two-month free
broadband service and then subscribed to it. The average interest of
customers who did not avail the two-month free broadband is
significantly higher than the average interest of those who opted for two-


month free broadband. From the Telecom Companys perspective, the
former customers are the innovators and would act as opinion leaders,
thereby helping in the adoption of innovation.

7. There is significant difference in the level of Price Sensitiveness between
those who adopted the service instantly and those who availed the two-
month free broadband service and then subscribed to it. The average
price sensitiveness of the customers who did not avail two-month free
broadband is significantly lower than the average interest of those who
opted for two-month free broadband. Those who did not avail the free
broadband are willing to pay a higher price if the services satisfy them.

8. There is no significant difference in the level of Social Acceptance
between those adopted the service instantly and those who availed the
two-month free broadband service and then subscribed to it. The average
social acceptance of the customers who did not avail two-month free
broadband does not significantly differ from the average interest of
people who opted for two-month free broadband.

9. Customers who opted for broadband connection soon after its launch are
more interested in the Internet and entertainment. They are also less price
sensitive than those who availed the two-month-free broadband offer. If
the XYZ Telecom Company can target such customers and satisfy them,
it can expect positive word-of-mouth publicity for its service.

10. Customers were asked to give their opinion of the existing broadband
service of the XYZ Telecom Company. They were asked to rate, from
excellent to poor, the following five parameters: speed, price, billing
transparency, customer care, and reliability. The findings show that
broadband users are happy with the speed, reliability, pricing, and billing
of broadband service, but a majority of them are not satisfied with the
level of customer service. The Company should improve its customer
care service for existing broadband customers.

11. The study reveals the following attributes that would appeal to
customers, ranked here in order of preference: a service level agreement
that formally defines the level of service, cost effectiveness, customer
support, value-added services, and branding. Price is also an issue.
Customers prefer competitive pricing, but in return for quality service
delivery.

12. The major determinant for preference of customers for a particular
telecom company is value-added services; i.e., a service package that is
high on quality and customer satisfaction. Band-width, speed, and
Sahney 71


connectivity are the major technical factors, but the principal marketing
factor is individualized attention; i.e., user friendliness. Transparency in
dealings is also one of the major expectations of customers. Interactivity
between the service provider and the buyer is also important. The
customers prefer a single service provider. Loyalty is high as long as
service requirements are met without interruption, post-sales/subscription
support is provided, and complaints are handled promptly.

13. The secondary data reveal that the future of the telecom market is bright.
The rural sector provides a great opportunity for growth. Investment in
basic infrastructure and band=width are the call of the day.

14. The minimum set of design characteristics of a telecom system that
would meet customer requirements, with specific reference to the
bundle of services program, are listed here in order of preference: user
friendly, individualized attention, availability of competent
representatives, prompt complaint handling, customer care, value-added
services, proper speed and band-width, interactivity between seller and
subscriber, accurate order fulfillment, and billing transparency.

5. CONCLUSIONS
This paper begins with a discussion of the conceptual background and then
presents the methodology, data, and findings of an empirical study of a telecom
company in India. The purpose of the case study was to identify factors critical
to the successful diffusion of three innovative services offered by the XYZ
Telecom Company of India high-speed Internet, television, and telephone over
a single broadband connection. The variables for the study were identified from
the literature review and expert opinion, and were then pilot tested.
The case study was conducted in two stages. Since the market seemed ready
for a converged solution, both voice and data, the first stage of study involved a
survey to determine which bundle of services would appeal to customers. The
survey results revealed that customers would indeed prefer a service provider
who would offer a combined solution for Internet, television, and telephone over
a single broadband connection. The results indicated that customers desired a
system based on quality, personalization and individualization, customer care,
and continuous upgrades and improvement.
In the second stage, an investigation was conducted to identify the minimum
set of design characteristics of a telecom system that would meet customer
requirements, with specific reference to the bundle of services program. The
voice of the customer was ascertained using the quality function deployment
technique, and factors critical to customer satisfaction were then prioritized.
Incorporating these elements in the design of a bundle of services program
would lead to diffusion of the innovative service and its quick adoption by the
public.


NOTE
The case has been developed to gather insights into the success factors in the diffusion of
innovation, with specific reference to a telecom company in the Indian context. The
identity of the telecom company has been hidden and the name changed for confidential
purposes.

ACKNOWLEDGMENT
The author is grateful to Mr. Ayan Paul, an ex-student of Vinod Gupta School of
Management at IIT Kharagpur, for his valuable input, which has helped the author
develop the case.

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ABOUT THE AUTHOR

Dr. Sangeeta Sahney is an assistant professor at the Vinod Gupta School of
Management, Indian Institute of Technology, Kharagpur, West Bengal, India. Her areas
of specialization are marketing management, with particular reference to consumer
behavior and services marketing. She also pursues an interest in quality management in
services, particularly with regard to quality in education.

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Sahney 45

Volume 4, Number 1, June 2009

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