“Why Telcos Keep Failing at Innovation — and How to Fix It”
Insights from Gamma, Sandbox Industries, and Intel at CASA25
When you put a telco CEO, a venture capitalist, and a technology investor on the same stage and ask them to “fix telco innovation,” you don’t expect consensus.
At CASA25, Nicolai Schaettgen (Match-Maker Ventures) did just that—casting Mike Mills (Gamma) as the telco CEO, Dan Phillips (Sandbox Industries) as the corporate shareholder, and Mark Castleman (Intel) as the tech and investment veteran.
The result was an unfiltered reality check on why innovation in communications keeps stalling—and what needs to change.
1. The innovation illusion
Telcos, Mills admitted, know where they want to go—but can’t always find how to get there.
“We know our strategy. We know the direction. What’s missing is finding capabilities that aren’t mainstream—investing where one plus one can become three.”
For years, telcos have poured money into “innovation” through corporate venture capital (CVC) arms, incubators, and R&D labs. But the hit rate is abysmal.
Why? Because most telcos still apply improvement logic to innovation problems.
2. You can’t get ice cream from a meat grinder
Castleman, who’s raised hundreds of millions as a founder and investor, put it bluntly:
“Large systems like telcos are designed to improve what they do, not to deviate. Every output is the perfect output of that system. If you want something different, you need a different system.”
Innovation, he argued, means deviation, not optimization. You can’t expect a compliance-driven, quarterly-report-focused machine to suddenly start taking moonshots.
“You can’t put ice cream ingredients into a meat grinder and expect ice cream,” he joked. “You need a different system.”
The reason most corporate venture units fail is because they’re still tethered to the parent company’s antibodies—its incentives, KPIs, and politics.
3. Why telco CVCs don’t work
When Schaettgen asked who would still set up a corporate venture fund, none of the panelists raised a hand.
Castleman:
“If I’m not in the business of making bets, how am I suddenly going to succeed at venture investing? Better to put that capital into professional funds that already have access, insight, and deal flow.”
In other words, invest in the investors.
Don’t pretend to be one.
For telcos, the goal isn’t financial return—it’s access to innovation.
That access can be achieved far more effectively by becoming a limited partner (LP) in specialized funds or joining curated ecosystems—like the CPaaS Acceleration Alliance—where visibility, not ownership, creates advantage.
4. What shareholders actually want
Phillips, representing the shareholder view, described the telco dilemma succinctly:
“My focus is growth and margin. My frustration is that telcos build the infrastructure, but others capture the 90 percent gross margins and giant exits.”
To many investors, telcos look like annuities—slow-growth, dividend-paying utilities.
When those companies start putting cash into “high-risk, low-promise” innovation bets, shareholders see it as their dividend being spent.
The smarter play?
Spread smaller investments across a wider ecosystem. Gain visibility into innovation rather than trying to control it.
“What you really want is clarity so you can reduce your five-year risk horizon,” Castleman said. “Spread visibility of access—not ownership.”
5. What it takes to absorb innovation
Even if telcos partner with external innovators, success depends on internal readiness.
Phillips warned that without structure and leadership commitment, innovation dies in the middle:
“There needs to be organizational buy-in from the CEO down, and a process for working with startups—or scaleups. Otherwise, things stall after a few pilots.”
That means:
Dedicated processes for contracting and onboarding smaller partners (not the same RFP that takes three years for a core system). Clear KPIs for pilots—defined outcomes, time limits, and ownership. Different language—talk about scaleups and tech partners, not startups. The word alone is a red flag in boardrooms.
Mills agreed:
“The clash between telcos’ need for scale and compliance and a startup’s need for speed is very real. Managing that cultural challenge is hard—but necessary.”
6. Startups: grow up
The other half of the problem lies with the innovators themselves.
Castleman reminded founders that working with a telco isn’t a playground—it’s mission-critical infrastructure.
“If your network goes down for minutes, you can calculate churn by the minute. Startups need to stop acting like startups and start acting like grown-ups.”
Innovation doesn’t mean chaos. The goal isn’t to stay a startup forever—it’s to mature fast enough to meet enterprise-grade standards.
As he quipped:
“A six-year-old startup is a startup that’s been failing for four years.”
7. The CPaaS angle: sell outcomes, not features
Finally, the conversation turned to the CPaaS perspective.
Castleman reframed how platform players should approach telcos:
“If I’m a CPaaS player, I’m going to go to the telco CEO and say: I understand your outcome. I’ll help you achieve that with X percent more growth. Let’s define it together and hold me accountable.”
This is the opposite of a typical tech pitch—no laundry list of APIs, no “400 tools to help you do more.”
It’s co-creation around measurable outcomes.
And it’s exactly how intelligent engagement and network-API ecosystems need to evolve.
8. The CASA25 takeaway: change the system
Schaettgen closed the session by thanking the panel for the candid discussion—and for playing along with his “role-play therapy for telcos.”
The verdict was unanimous:
Stop building CVCs that mimic VCs but operate like procurement departments. Invest in visibility through specialized funds and innovation alliances. Build internal processes that can actually absorb external innovation. Speak the right language—scaleups, not startups; outcomes, not ideas. Remember: innovation isn’t about tweaking the machine. It’s about building a new one.
Epilogue: From CASA25 to CASA26
The conversation at CASA25 echoed a growing truth across the industry: the future belongs to ecosystems that can learn faster than any single company can innovate alone.
As capital, cloud, and communications continue to converge, the winners will be those who stop guarding the gate—and start opening it.
