Two events within 24 hours of each other triggered this blog post. The first was a discussion with some colleagues about the growth of a whole new segment in the telecom mobility market worth in the UK alone around $1.5 billion in 2007; and the second was the arrival by email of the Ovum ‘Straight Talk’ opinion piece that they send out monthly. The opening article was entitled; ‘Fear and Self Loathing in Telecoms’ and amongst an overall interesting point of view was the sentence that really kicked home for me. To put it in context I include the previous sentence as well;
“In particular, the seemingly unstoppable rise of the Internet players is causing untold anxiety amongst telecoms executives. Not content with attacking traditional voice revenues, these companies are also soaking up value from new digital services before Telcos have even heard of them.”
Spot on! In the so called ‘Last Mile’ of the Cell Phone market has arisen a huge industry around marketing specific services to specific people as part of overall marketing campaigns with highly sophisticated marketing players like Coca-Cola leading the way. This has occurred in less that five years, and continues to grow, and strangely enough doesn’t yet involve the Internet or Web to any great degree. It’s mostly based on good old SMS texting, yup not only did the Mobile Telecom operators miss the interest of their customers in SMS the first time round, they have then missed it the second time round too! It also uses WAP, Wireless Access Protocol, which to me personally is not an elegant technology but hey it works!
What’s the challenge? Well as with most of the new markets that are springing up using the ‘long tail’ principle to niche market successfully everything depends on identifying the people who have the right profile. The Telcos ought to have the people profiles, but in the rush to get pre-paid phones out into the market they loaded the supermarket shelves with stacks of phones who are now in the hands of people, read “potential consumers”, about whom they know nothing. The key to success in their traditional telecoms mind set was to get connections and calls, but this whole business model is under attack as call revenue is ‘cost’ in customers minds therefore they switch regularly to find the cheapest provider.
If you compare the situation with the newspaper industry then the difference is in all the additional work that Newspapers do to establish their customer base by profile, and then to use this to collect advertising revenue. A national newspaper can claim to ‘own’ certain economic groups, collect them together as readers, and influence them with its content, allowing them to charge for use of its ‘space’ for targeted advertising. Telcos have missed this, and are still not quite with this argument. It is foreign to the mindset of whole generations of their staff, and has allowed a whole market place to develop around companies who collect and use this information to create profiles for advertising.
By the way at this stage I should say this is not yet another ‘death of the telecos’ piece, not too likely to me given the actual strength of their position in the market, I am really using them as an example brought about by the trigger of the two events of a broader issue applicable to many industry sectors.
Nature abhors a vacuum is an old saying about physics, and it seems the same rule holds true in markets as well. It’s not necessarily good enough to assume that you can choose when to ‘change your game’ and seek out moves into ‘new’ markets. What the Business Schools refer to as ‘Business Model Innovation’. It seems that assuming you can resist change and continue to make money from traditional activities and markets until you decide to change has led in every case to the incumbent dominate player losing out. Whether in book selling, banking, or even telecoms, the company that breaks their own business model is the one that wins.
If the principle is both simple, and there is no lack of current interest in ‘innovation’, why is it so hard to achieve?
After a lot of practical experience with a wide range of enterprises I think I can pin it down to one major issue; the lack of a structure for reversing the current normal way of working. Traditional IT is about carrying out what the business asks for as a cost reduction method for operations and the better this is done the better the ‘alignment’.
But under this working practice nobody is tasked to investigate new technologies, initially with no direct business mandate, to see what opportunities they may offer to innovate the business model. Nor is there anyone outside the conflicts of the traditional business model and P&L structure able to decide this is an opportunity that should be taken based on its value to the market, revenues, margins etc. There are some CIOs who have moved up to take this role, the one increasingly known as ‘converged’ where technology and business are the same activity, but not many. So expressed in the diagram below, we have two roles missing in the top half of the matrix that correspond to extracting business value from technology, and all the focus on the bottom half of the matrix around cost management.
Put that way it’s not too hard to explain the problem for the poor telecoms, or even most enterprises out there today! Might be harder to make the move to appointment people with the right qualifications to the two new roles!
who is the decision maker.png