The taxi world was unchanged for years until innovators took an interest in it. Hailo made it super easy to get a taxi. Uber makes taxis irrelevant. The worst thing for taxi drivers is that they were out of control of their own destiny. What would be the worst nightmares for telecom operators and traditional network equipment providers?
1) voicemails and millions of VAS that customers love
Why would this be a nightmare? Simply the fact that the most likely provider of millions a really valuable communication services is unlikely to be a traditional telecom provider. They haven’t been able to do it for years. Cloud providers or challengers are ideally positioned to add customisable cloud communications to their portfolio. Salesforce already offers WebRTC.
2) Chatty IoT
Billions of dumb and smart things will be connected to the Internet in the next 12-24 months. What if IoT hardware providers see the internet as a free transport layer and share useless data? Any device that sends 200 bytes every 5 seconds and of which 1 million get deployed, provokes 3 petabytes of useless data every day. After 10 days it would have produced an equal amount of data as the total combined literature in any language from the beginning of time until some years ago. There are many devices that could be chatty, e.g. heartbeat monitors, temperature and other sensors in home appliances like fridges, etc.
3) Cheap 4K security cameras
As soon as 4K cameras become cheap (<$50) then a tipping point will push lots of homes and businesses to install them. One cloud company is enough to provoke broadband hell. There is not a single broadband network that can handle 4K video upstreaming at large scale.
4) Mexico’s community mobile operators being successful
In Mexico there are several remote regions that were not served by traditional mobile operators. The Mexican government allowed anybody to use spectrum in these regions to build alternatives options. The innovators have moved in. What if they become too successful and customers like their services more than what traditional mobile operators are providing?
5) An innovator that uses technology to provoke telecom havoc
Until now over the top players have ignored telecom operators and are trying to eat their lunch. What if the next innovator designs solutions in such a way that operators can choose between the stick and the carrot? Ignore them and suffer or play according to their rules. It is easier to do than operators think…
Truphone showed other operators how open source, telecom solutions & available in minutes can now be combined in one sentence. Check out the details at: https://insights.ubuntu.com/2014/12/16/truphone-uses-juju-to-demo-worlds-first-telecom-solution-in-minutes/
None of the incumbant telecom providers has put into place any Blue Ocean Strategies. Blue Ocean Strategies have made the Circus, Wine, Gaming, Airline, etc. industries exciting again, so why not apply it to the telecom market. The only telecom players, I know of, that implemented some blue ocean strategies are Free in France, GiffGaff in the UK and Freedompop in the USA. So why not do a Blue Ocean Strategy exercise in this blog post.
Here is my strategy canvas:
Traditional operators focus on charging heavily for calls and SMS although lately more and more packages with free minutes are available. International calls however are still charged extremely expensive. Mobile phones are subsidized up to 24 months and as such you need to stay with them for at least this period. Operators spend a lot of their money investing in the roll out and maintenance of their networks. They also have very complex pricing plans and as such need heavy investments in BSS.
MVNOs try to compete on price and most often do not subsidize mobiles. They do not have their own network as such they do not need to invest in it. They offer less tariff plan options. You are often free to change whenever you want. To make up for not subsidizing mobiles, you can get mobile loans which means you have some sort of permanence.
So how would Blue Ocean Mobile do it differently?
In line with Free’s example, call costs should be eliminated, including international costs. Mobiles should not be subsidized but cheap mobile loans should be offered for those that do not bring their own device [BYOD]. Blue Ocean Mobile should focus on LTE and try to win LTE licenses. However instead of doing heavy investments in installing antennas everywhere, Blue Ocean Mobile should only install antenna’s in those areas where few people live but connectivity is required, e.g. major highways. This is in line with Free’s strategy. However unlike Free, the operator’s network should not be built with unreliable WiFi hotspots. Instead specially designed “Personal Antennas” should be sold to everybody who wants one. What is a personal antenna? A personal antenna is a nanocell LTE antenna. A personal LTE antenna in your home that not only gives service to you but also to neighbours and people close to your home. The idea is that you become a sort of mini-LTE ISP to which others can connect. For every KB that gets transferred through your personal LTE antenna, you will get a revenue share. So it is in people’s interest to put the personal antenna in a place where it can service a lot of people and to have a good backbone Internet connection. People should be able to win back their investment in the Personal Antenna in a few months and make money afterwards. This should allow Blue Ocean Mobile to seriously lower their investment in rolling out an LTE network and to get free mouth-to-mouth advertising. Via a software-defined network [SDN] management system all nanocell LTE antennas are controlled by Blue Ocean Mobile.
Since Blue Ocean Mobile is focusing only on data traffic, it should work together with “over-the-top players” to offer a compelling list of services. Ideally Android Phones and the iPhone will use the data network for calling others instead of a circuit network. Customers should have a full range of BYOD management options so small and medium-sized businesses can easily manage the phones of their employees as well as push enterprise applications towards them.
Blue Ocean Mobile should also try to avoid investment in BSS. Tariff plans should be easy with the customer defining how many free megabytes they want to purchase for a fixed monthly fee and a simple extra charge for overage. So instead of operator defined tariff plans, everybody has a personalized tariff plan that they can adjust every day. Calls and SMS are charged based on data traffic not on per minute charges. VoIP solutions is the standard. Blue Ocean Mobile does not have a circuit network or SS7.
Blue Ocean Mobile is also copying the long tail support from Giff Gaff in which customers give support to other customers and are responsible for marketing. Unlike Giff Gaff not only prepaid but also subscriptions are supported. Like Giff Gaff customers get a revenue share when they participate in support or marketing.
Blue Ocean Mobile’s strategy is just very high-level and still needs in-depth analysis but it is an open invitation for innovative people to start applying Blue Ocean strategies to anything they feel in need of disruption.
Maarten Ectors is a senior executive who is an expert in applying cutting edge technologies (like Cloud, Big Data, M2M, Open Hardware, SDN, etc.) and business innovations to generate new revenues. He is currently looking for new challenges. You can contact him at maarten at telruptive dot com.
For the last year and a half Telruptive focused on trying to save operators from becoming bit pipes and with it trying to save employment in the telecom industry. This has been a major limitation for the type of blog posts that could be published. Starting today Telruptive’s focus has been extended. Any innovation, disruptive technology or business practice that has to do with communication between people as well as machines is valid. Communication is not seen as pure telecommunication but is seen in its widest interpretation, moving information between one or more parties.
Why is saving operators no longer a priority?
There has been no proof in the last year and a half that most operators will not become bit pipes. Most operators will either become bit pipes, consolidate or worse. Telecom solution providers will either shrink, consolidate or worse. Only real innovative operators will have a chance to be active outside of communication infrastructure. Unfortunately there are very few of those. LTE will seriously disrupt the operator’s monopoly on voice calls. iMessage, Whatsapp and similar services already crossed the tipping point and are disrupting the SMS business. Operators ‘ answer has been nothing or too-few-too-late. The telecom industry resembles the titanic more each day. It was once the most luxurious cruise ship of its time. But disruptive icebergs are making it sink. Instead of building lifeboats with material found on board, the operators seems to have taken the decision to play music and await what will happen.
Telruptive wants to inform innovators about new ways of communicating, new disruptive technologies they should use, new disruptive business models they should implement, etc. Innovators can be operators, telecom solution providers but can also be dotcoms or people not linked to the telecom industry. This is what Telruptive will be focusing on in the future.
Today Friday 13th August 2014, the conglomerate Ericsson Nokia Siemens Alcatel Lucent Networks has filed for bankruptcy protection.
How can it be that only 2,5 years ago the conglomerate consisted of three companies that were employing tens of thousands employees each? Bad management was not the reason for the downfall. Each company was professionally managed and was trying to provide solutions its customers asked for. Their major business was delivering LTE (5G) networks to telecom customers all over the world.
The downfall initiated at the end of 2012 when their customers started to massively launch LTE networks. Subscribers in 2013 noticed that with the new LTE network calls and SMS could be substituted by free VoIP and instant messaging. All of a sudden telecom revenues started plummeting. To make things worse HD digital content distribution moved from broadcasting to streaming, putting heavy loads on the new networks and the associated costs onto network operators. By switching off digital broadcasting, spectrum all of a sudden became less expensive, triggering major accounting adjustments. Several operators went into panic mode and started large-scale consolidations and cost cuts. This triggered a consolidation between the three major telecom solution providers.
Operators never requested their solution providers to help them build new revenue generating solutions until it was too late. Operators were asking for faster, easier to manage and cheaper networks instead. As a clear example of the Innovator’s Dilemma, telecom solution providers focused on what customers requested, not on what customers really needed.
For the telecom industry IP communications, Cloud Computing, Smart Phones, Tablets, Content Streaming, Social Networks were all disruptive innovations that changed the status quo completely and faster than anybody in the industry expected. Consumers changed their behaviour faster than telecom providers anticipated. Dotcoms, then also called over-the-top-players, were a lot more agile than operators and telecom solution providers.
After the introduction of LTE, also the complexity of the telecom industry changed. For the first time networks no longer had services entangled in obscure protocols. Standardized web technology could be used which massively invited IT players to enter into areas that used to be the exclusive playing field of telecom solution providers. Ericsson Nokia Siemens Alcatel Lucent Networks had a company structure build around complex proprietary-standards and solutions. When these could be substituted by off-the-shelf standard-based solutions, services daily prices got divided by four. This rendered the existing players uncompetitive virtually overnight.
February 2012: This post is fictional but unless telecom solution providers start asking their customers how they will generate new revenues with LTE, nothing will stop it from happening…
When you ask a company about innovation, they talk about how their product manager asks customers what they want and how their R&D delivers new features or new products. Lots of companies are following the pain points to solution approach and engage in evolutionary innovation. Although evolutionary innovation is the best way to grow revenue from an existing customer base in the short run, there are several disadvantages that most underestimate.
Evolution means assuming the status quo will never change
Evolving products based on customer feedback assumes that the current solution is the best possible solution for the customer and only some features are missing. Showing status-quo-breaking innovations, a.k.a. disruptive innovation, to customers will often yield a negative response.
Whoever went to the postal service to try to sell email servers as the next generation letter [letter 2.0], will have had a very negative reply. The postal service would not understand why they would want to offer free-of-charge instant delivery to their customers because it canabilizes their existing business. Instead if you would offer a sorting machine that can sort double the amount of letters in half the time for half the cost, you are a lot closer to a sale.
Whoever read “the innovator’s dilemma“, will understand that disruptive innovation is often rejected by the current customers because it either canabilizes their business or is not resolving their specific pain points.
World-leading companies focus at most 90% on evolution and at least 10% on disruptive innovation. Some like Amazon and Apple seem to invert the equation.
Companies that do not focus on disruptive innovation will sooner then later run into problems. Disruptive innovations are becoming more common place and occur more frequently. Whole industries are being transformed as we speak. Existing players can disappear in a few years:
- Books versus Kindle and eBooks
- CD, DVD and Blu-ray versus P2P, mp3 and DIVX
- Harddisks versus memory cards
- Data center per company versus Cloud IaaS
- PC with Windows versus Tablet with Android
- Physical PBX versus Cloud-based PBX
- Roaming versus VoIP
- Nokia feature phone versus iPhone and Android
- Circuit networks with pay per minute versus flat fee data traffic
- Physical routers, firewalls, loadbalancers versus virtual networks and Openflow
- High priced spectrum licensed versus white spaces
Towards a world of demand creation
Companies that want to innovate disruptively should focus on demand creation. Demand creation is about understanding customers hassles. Customers hassles are different from their pain points in the sense that customers do not always understand their own hassles, and even less tell you.
People never told Nokia that their phones were such a hassle to navigate the internet and to install applications on. Customers will not tell you that you need to build a touchscreen phone and app store to solve the hassles.
Disruptive innovators find those activities that customers waste a lot of time with, think are ackward, cost a lot but deliver few value, etc. by questioning, observating, networking and experimenting.
Disruptive innovators at the same time focus on developing technology capabilities in innovations that have a potential to change industries, e.g. VoIP, cloud computing, big data, collective intelligence, etc.
Disruptive innovators work together with early adopters to map out their hassles into hassle maps. To understand if solutions for these hassles are like painkillers [big market] or just vitamines [no or small market]. They propose the simplest solutions possible. Those that do not require a user manual. First on paper and only when everything is validated [technical solution, business model, distribution, purchasing stakeholders, marketing] do they build a real prototype. Ideally customers can personalize the new solution towards their individual needs. Listening to customers is key. Being able to add features frequently and validating in a statistical manner which one contribute to the bottom line, allows innovators to rapidly go from an early beta to a ground-breaking product.
Disruptive innovations do not need to cost millions to launch. Good books on the matter are: Nail it then scale it, Demand: creating what people love before they know they want it, the lean startup, etc.
- European television will become Cloud-based. Netflix, Apple, Google, etc. will launch all-you-can-eat video on-demand in Europe and change the current industry.
- M2M will become successful in the consumer & SME space but with moderate successes in the Corporate space. Some disruptive players will become market leaders. Due to lack of standards corporate adoption will have to wait till 2013.
- Telecom cloud solution providers will change the European telecom landscape. Twilio is a potential game changer.
- One or more major telecom operators will fail. With the crisis continuing some major telecom operator will get into trouble due to the high costs of LTE licenses and the abrupt drop in ARPU.
- Consolidation in the telecom provider domain. Either ALU or NSN will be losing its independence or Chinese players will merge.
- Nokia and RIM will lose their independence. Microsoft will absorb Nokia.
Let’s hope my negative predictions are wrong and a lot more positive things happen.