Blue Ocean Strategy in the Networked Society – Asian Operator #2

 In the precedent post, I created the Strategy Canvas for the Red Ocean of the Asian operator. In this post we will see how applying Blue Ocean Strategy within the Networked Society will affect the operator’s business, strategy and marketplace.

The ERRC grid looks like this:



Asian operator ERRC grid

•  Pay As You Go: The consumers want to control their spending and because I am proposing to introduce bundles of buckets. This should be eliminated.
• Different Tariff plans: The high number of different tariff plans should be eliminated and replaced by simpler bundled tariff plans. This will lead to reduced operations in the BSS and hence increased cost savings.

Reduce

• National Roaming charges are still high while in other market consumers only pay a single access charge. The regulator should remove these national roaming charges in order to stimulate voice traffic.
• Some of the services are not really adding value to customers; most of them are standard telecom supplementary or sms-based services.

Raise

• Services portfolio: Increase and diversify the portfolio based on consumers needs, behaviors and spending patterns.
• Network performance: This will improve customer satisfaction, reduce churn with a high quality network.
• Coverage: reach a large number of (sub-) urban and rural populations to increase customer reach, customer satisfaction and sales. This will require additional investments in the radio network. This investment should be easily justified by new customers’ acquisition.
• Consumers Intelligence: understanding the consumer’s needs is key for future growth opportunities. Ericsson ConsumerLab can provide valuable input for strategic decisions, through its extensive research on consumer behavior. According to the recent Personal Information Economy report from Ericsson ConsumerLab, more than 44% of the study respondents would let companies use their information to personalize offers, and 41% would let companies use personal info to improve or develop new products. Hence the increase of Consumers Intelligence.

Create

• Bundled plans: This will provide the ‘segmented’ consumers a targeted offering and at the same time provide the means to sell new data services (3G & 4G network are deployed in every region of the country) and fight the so-called over-the-top internet services providers. At the same time, it provides a suitable solution to the cost control drive of the subscribers in this market.
• Innovation: this is an important opportunity for competitive differentiation in this marketplace. To develop value propositions beyond simple voice and data plans, for the growing enterprise marketplace (companies from different industries are connected in the Networked Society), for the non-served rural population and the growing sub/urban addressable market. Cloud computing is an integral part of the Networked Society. Cloud offerings will improve traffic volumes but also drive higher ARPU by moving up the value chain and selling integrated offerings of connectivity, infrastructure and software-as-a-service. These offerings will create longer-term loyalty with customers and increase customers’ stickiness and create a new marketplace.
• Innovative business models: Explore new revenue streams by testing innovative business models to address customers’ needs. In the Networked Society, telcos have the opportunity to become core ICT providers by creating network-centric business through data centers or service-oriented developments. In the Networked Society, different customers from different industries are connected. This totally new marketplace needs to be addressed, served and supported. Tremendous opportunities for growth ahead indeed that will require innovative business models to cater to this increasing demand.
• Cost control: Mobile traffic demand will continue unabated and the need for continued investments in the radio access network, the backhaul, the core and the OSS/BSS will increase. Operating the legacy platforms and services in parallel with the new network introduces significant costs in the network, OSS, BSS and overall service operations. Cost reduction can be achieved with network outsourcing. Ericsson is the world leader in Managed Services. Ericsson operates large multi-vendor networks and related business processes—such as provisioning, network engineering, applications management, field maintenance, network optimization and spare parts management.

And here is the Blue Ocean Strategy Canvas:

Blue Ocean Strategy applied to Telco’s in the Networked Society

Blue Ocean Strategy applied to Telco’s in the Networked Society

I recently wondered why we shouldn’t apply Blue Ocean Strategy to Telco’s within the Networked Society; it is obviously about transforming, rebuilding and creating new market space. So I have decided to give it a try and I must confess that it is a tedious task; a challenge I should say, to do it outside my working time. In this first post I will set the scene and lay down my assumptions. In the coming posts I will elaborate more in details on the results.

Which operator did I choose? It did not take me too long to make a choice. I thought I should better select interesting Telco’s, operating in dynamic and challenging markets. I have decided to take two mobile operators from different part of the world; because the market requirements are different, the competitive factors are different, the competitive forces are different, the consumers and their behaviors are different. Their strategy should be different too. I have selected one Asian and one European (could very well be North American) mobile operator.

Before I start with setting the stage, I would like to briefly tell something about Blue Ocean Strategy. Professors W. Chan Kim and Renée Mauborgne have written one of the best-selling business strategy book of all time: Blue Ocean Strategy. Both teach business strategy & Management at the Blue Ocean Strategy Institute at INSEAD. Blue Ocean Strategies have been applied to Circus (Cirque du Soleil), Wine (Yellow tail), Gaming (Nintendo Wii), Airline (Southwest) and other industries.

The reader is required to have some basic knowledge of Blue Ocean Strategy.

Let’s set the scene now!

The Networked Society

What are the main characteristics of the Networked Society?
      i.        A highly performing Mobile Broadband network with LTE, heterogeneous network
and Wi-Fi. Radio coverage everywhere you go.
     ii.        A variety of connected devices with a variety of services and products serving a variety of industries.
    iii.        A cloud ecosystem providing a multitude of services easy and ready to use, to manage and to configure.

Blue Ocean Strategy approach

Due to time constraints I will not pursue the full blown Blue Ocean Strategy steps and will not use all of its available tools. I will limit this exercise only to two tools, the Strategy Canvas and the ERRC grid.

Let’s start defining the Red Ocean of the selected Asian operator.

Market background

My Asian operator operates in a very large and saturated telecom market, with highly competing operators; providing telephony services, Internet and broadband services. Operators compete fiercely on price; value-cost tradeoff means a lot in this market. A price war added to a declining ARPU makes the market extremely competitive and my operator situation relatively vulnerable. It is clearly a Red Ocean market.

The Strategy Canvas
Let have a look at the competitive factors in order to create the diagnosis for the as-is market situation and plot them into the Strategy Canvas.

1.    Price: Due to a highly competitive market the price is very low.

2.    Services portfolio:  Voice & Video calls, SMS, MMS and ringtones are the main revenue stream. Video calls are not widely used because of high price and bad QoS.

3.    Network Performance: The Quality of service is not good due to ongoing 3G network deployment.

4.    Coverage:  The mobile infrastructure is still not fully operational, and this affects coverage.

5.    Broadband services: All competitors are offering this service but the quality is still not good enough.

6.    Pay as you go: is offered by all operators.

7.    Roaming: Roaming charges are still relatively high.

8.    Different tariff plans: Many different tariff plans for pre/post paid subscribers

9.    Value added services: different supplementary services are offered in bundles or charged for separately.

10.  Media & Music downloads: low penetration due to high price.

And here is the Red Ocean Strategy Canvas. It provides a weighted snapshot of the competitive factors and a high level diagnostic of the market where my Asian operator is competing in.

In the next post, we will see how the application of Blue Ocean Strategy will define the Blue Ocean Strategy Canvas and create the Eliminate/Reduce/Raise/Create grid within the Networked Society.

Why Telco’s are investing heavily in Cloud Computing?

In my precedent post - where I have analyzed the impact of Cloud computing technology on Telcos - I came to the conclusion that this impact was three fold:  Value chain, Operating Model & the need of strategic alliance.

3fold impact

“…Telecom operators are making a land grab for physical assets in order to sell virtual goods. Acquisitions and investments totaling almost US$8 billion were executed in the first six months of 2011, according to Informa’s Telecom Cloud Monitor 1H11 published on July 29^th 2011…”

Telecom Cloud purchase and build - Informa Telecom Cloud Monitor 1H11

Why are operators investing so heavily in Cloud assets? The answer is simple: they have to! They have no choice. The telecom and IT barriers are broken and in front of them the Over-The-Top players are becoming greedy and are investing the Telecom domain/market; the telcos have to restructure their business models and reorganize in order to avoid the disruption threats in the horizon.

Cloud Partnering - Informa Telecom Cloud Monitor 1H11

In North America, Telecom operators are becoming leading Cloud providers through acquisitions and investments. But are Telecom operators getting their strategy right? Are acquisitions and investments enough?


Or will they substitute dumb pipes with dumb clouds?

To be continued…

Book review: The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business

Book title: The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business

• ISBN-10: 1422172813
• ISBN-13: 978-1422172810

Author: Rita Gunther McGrath
review here 

Read this book description  (excerpt from amazon.com)

Are you at risk of being trapped in an uncompetitive business?
Chances are the strategies that worked well for you even a few years ago no longer deliver the results you need. Dramatic changes in business have unearthed a major gap between traditional approaches to strategy and the way the real world works now.

In short, strategy is stuck. Most leaders are using frameworks that were designed for a different era of business and based on a single dominant idea—that the purpose of strategy is to achieve a sustainable competitive advantage. Once the premise on which all strategies were built, this idea is increasingly irrelevant.

Now, Columbia Business School professor and globally recognized strategy expert Rita Gunther McGrath argues that it’s time to go beyond the very concept of sustainable competitive advantage. Instead, organizations need to forge a new path to winning: capturing opportunities fast, exploiting them decisively, and moving on even before they are exhausted. She shows how to do this with a new set of practices based on the notion of transient competitive advantage...