Distilling market noise into market sense
The VisionMobile blog is a space where VisionMobile analysts and industry insiders exchange views on the fast-changing mobile market and the trends that define the future direction of telecoms.
-
18
Dec
2012Surviving Disruption: An Innovation Toolbox for Reinventing the Telco
[Today in association with Ericsson we are publishing a discussion paper, the Telco Innovation Toolbox. The paper introduces novel economic thinking that is the result of over 2 years of research of ecosystem economics and telco disruption and is available for free download. The paper introduces ten economics and strategy frameworks that will help operators to accelerate their “digital” strategies, make the right innovation investments and avoid costly mistakes.]
The topic of telco disruption brought upon by over-the-top (OTT) players is high on telecom industry agenda. However few realize that telcos are being disrupted because the basis of competition in mobile has fundamentally changed. It has changed from “reliability and scale of networks” to “choice and flexibility of services”, driven by the transition from “mobile telephony” to “mobile computing”. The change is fundamental and irreversible.
The new basis of competition in mobile
The telecom industry is facing a conundrum today: providing undifferentiated voice, text and data services to smartphone users leads to a competition on price and diminishing margins. At the same time, staying in business requires that telcos keep up with ever-growing demand for data and continued investments in building wireless capacity. Investments in networks are still necessary, but they alone are no longer sufficient for profitable growth. What’s next?
Harvard Business School professor Clayton Christensen recently said: “I think, as a general rule, most of us are in markets that are booming. They are not in decline. Even the newspaper business is in a growth industry. It’s not in decline. It’s just their way of thinking about the industry that is in decline.”
The telecom industry too can greatly benefit from looking at familiar challenges from a new perspective. Telecom is a booming industry with ever-growing demand for mobile data and a rising number of subscribers. But the basis of competition in mobile has changed putting pressure on legacy business models. Building networks alone can no longer guarantee profitable growth for telecom operators. Competing head-on with asymmetric business models of OTT players won’t help either. Instead, seizing the full potential of this booming industry means leveraging mobile digital ecosystems to create meaningful differentiation, lock-in for core telco services and incremental revenues. This requires an understanding of ecosystem economics, development of new organisational capabilities and resetting the KPIs for “digital” initiatives.
The Telco Innovation Toolbox introduces ten important economic models and strategy frameworks that will help operators to make the right choices in their innovation investments and accelerate their efforts to reinvent telco business. We describe ecosystem economics in the context of telco business in chapters 1 to 4, discuss the impact of traditional financial tools and the need for new innovation processes and KPI in chapters 5 and 6, and finally suggest how to leverage ecosystems to the benefit of the telco business in chapters 7 to 10.
The full paper can be downloaded for free here . As usual, we are looking forward to your comments and feedback!
Michael Vakulenko
As a mobile strategist, Michael has over 18 years experience in mobile telecom and wireless Internet with a track record of product and technology innovation. Michael started his involvement in mobile telecom in Qualcomm in early 90s working on first experimental 3G systems. Later on Michael was part of several wireless startups in the US and Israel. Michael's broad professional experience spans mobile internet services and apps, telecom networks, smartphone software platforms and wireless chipsets. At VisionMobile Michael works at the cross section of economics, business models innovation and technology where he leads strategy practice for telco innovation and mobile platforms.
-
