In 1975, a young engineer at Kodak named Steven Sasson began demonstrating his new invention, the world’s first digital camera. If he had pointed the .01 megapixel box in the right direction, the first-ever digital photos might have captured expressions of disbelief on the faces of Kodak management. The company filed numerous patents on their new technology, but moved cautiously to enter the market under their own brand. Today, Kodak is working hard to reposition itself as a pioneer and leader in the digital imaging marketplace.

Of course, this wasn’t the first time new technology threatened an established business. In 1877 another Rochester, NY-based company, Western Union, was confronted with the invention of the telephone. The company, at that time the largest in the U.S., declined to purchase Alexander Graham Bell’s telephone patents for the “outrageous” sum of $100,000.

Step forward to 2002 and the introduction of yet another potentially disruptive technology to face the 100 year-old telephony market: VoIP, or Voice over Internet Protocol. “BT had not been worried about VoIP,” says Rob Hull, Vice President of Business Development, Technology and Innovation and a member of the Global External Innovation Team.

The External Innovation Team, however, recognised the early opportunity. “We introduced US-based VoIP start-up Vonage to the BT Retail leadership team and, almost straight away, the company went ahead and embraced consumer VoIP, explains Jean-Marc Frangos, Senior VP of Technology and Innovation, and leader of the team.

Ears to the ground
Formed in 2000, the External Innovation Team is chartered with keeping BT on the forefront of new technologies and trends. “A growing proportion of BT innovations come through our global scouting function,” says Hull.

The group makes its home in Palo Alto, CA, but keeps offices in China, India, Korea, Japan and Israel. “The venture capital firms are located in Palo Alto,” explains Hull, “so the start-up companies all come here looking for money.” The four-person California group spends approximately 60% of its time talking to start-ups and VC companies. They also maintain close contact with strategic partners such as Microsoft, Cisco and Intel. “North America is a good early warning system for Europe,” Hull explains, “if it works in the US, it will very likely work in Europe as well.”

The External Innovation Team focuses on identifying four factors: market trends, disruptive technologies, innovative new services, and processes. They look at over 1,200 new business plans each year, hold approximately 400 face-to-face meetings from that list, and ultimately make deals within the neighbourhood of five new companies each year.

Members of the team are chosen because of their duel competencies. “Each individual has to be able to not only understand the technology,” Frangos explains, “but they must also be experts in the innovation priorities of BT’s lines-of-business, so that they can select the right technologies for the business strategies.”

Success is measured by another two-word phrase: innovation dividend, a function of revenues created and revenues saved. BT estimates that the team, through its efforts, creates an innovation dividend to the tune of hundreds of millions of pounds each year.

Eyes on the prize
Over the past seven years the team has helped bring a number of crucial products to market. One example is San Jose-based 2wire, which had implemented high-quality home gateway technology in the U.S. before ADSL broadband had taken off in the U.K. "We recognised the enormous potential of 2wire's product a long time before home networking had become established and acquired the technology for BT," said Jean-Marc. Other BT products that the External Innovation Team was heavily involved with include BT Vision and BT Fusion.

Some technologies get incorporated into BT processes, often with huge savings. Bringing an automated text service agent to customer self-support is one example. Now known as Ask Emma, the smiling Web agent answers millions of inquiries that previously would have required the attention of a live customer service representative.

So what’s next for the External Innovation Team? Well, they’re not saying, but whatever it is you can be sure BT is hard at work to bring it to market quickly.