Professor Julian Birkinshaw on mobile broadband success
Success in mobile broadband is about speed, agility and making smart choices, says Julian Birkinshaw, Professor of Strategic and International Management, London Business School.
Professor Julian BirkinshawAs operators roll out mobile broadband across their networks, they are naturally keen to build successful businesses around the technology and maximize the return on their investments.
As well as addressing the technological challenges and opportunities in mobile broadband, operators also need to identify the right strategies for turning the technology into a commercial success and the changes they need to make in how they address this uncertain and fast-changing sector.
Mobile is the new service battleground, and all kinds of players are lining up to take a slice of the revenue pie, from software and IT equipment suppliers, to social networking players, and media and entertainment companies.
People have very quickly understood the value in having mobile access to broadband internet services – whether for working more effectively while away from a desk, staying connected to social networks, or simply being entertained. The big question for operators is, having created this value for their customers, how best do they capture value today and into the future?
From academic studies of leadership in dynamic industries, it is clear that value creation is not the same as value capture. We can see this today with the dilemma that Facebook is facing – it has created enormous value for its 570 million users, and now needs to find a way to capture this value in the form of revenue, without driving users away.
Mobile operators need to be careful not to lose their way in capturing the huge value they are creating through the delivery of mobile broadband.
Another lesson from history is that first movers don’t always win in the longer term. For example, online bookselling pioneers Charles Stack and Books.com have long since been left behind by Amazon, which found a way to successfully scale up the market. The same is true of pioneering internet service provider CompuServe and software pioneer Sun – both of which lost out to players that ultimately grabbed far larger market shares.
Often, it seems, it pays to be a “fast second” rather than a pioneering first – taking the opportunity to adapt the business model to be successfully scaled up. This is especially true for incumbent players who can defend their positions and dominate their channels by leveraging their resources to meet average user needs more successfully.
In technology fields like telecommunications, larger players have the advantage of being able to back several horses at the same time, and shift resources to the emerging winner when the time comes.
A further lesson is that a central position in a business value chain does not necessarily translate into good margins. In the car industry, for example, the profit margins for finance and insurance providers are far higher than for the car makers and main dealers.
Smart companies try to influence the market structure so that the segment they choose to play in is the most profitable. For example, by controlling the operating system, Microsoft has been able to generate huge profits on the back of PC sales by other companies.
It does not seem likely that this trick will be repeated in mobile handsets, however, and it seems likely that the real money will be made elsewhere. But where? Who will be the winners in mobile broadband?
The answer is not yet clear. A more important question for incumbent players in the mobile broadband market is what can they do to give themselves the best shot at success? From a high-level perspective, there are four guiding principles in making the right strategic choices:
Make the strategy process more agile – Keep the strategy simple, and in a form that can be easily implemented at lower levels of the organization, to enable the business to move with the flow. In a business environment that is in constant flux, the strategic goal must be constantly to gain temporary advantage, through an iterative and flexible process enabled by an alert, agile and innovative organization.
Balance agility with absorption – Agility needs to be balanced with the benefits of business clout, the market presence to be able to respond quickly and effectively to new opportunities. These benefits include the ability of a strong balance sheet to fund expansion into new areas and withstand shocks, and the fostering of multiple relationships with different market players.
Be immersed in the user experience – Like a trader in the stock market, companies need to be immersed in the flow of information. The quality of this information, and the ability to act on it, will be improved if it conforms to what my colleague Don Sull, Professor of Management Practice at London Business School, calls the RUSH principle: real-time, unfiltered, shared and holistic. Companies need to work to remove filters between people on the ground and the top decision makers, to enable them to gather the collective wisdom of the organization.
Rethink the management model – We need to become as innovative in how we work as we are in developing new products and services. The traditional hierarchical management structures of the industrial age are not appropriate in fast-changing markets like mobile broadband. We need to reduce layers of management so the organization can be creative and agile enough to respond quickly to new opportunities wherever they appear.
It is also vital that operators understand their core strengths. What are the company’s “inalienable rights” in doing business? These might include the right to own the technology and the bandwidth, or the right to own existing customer relationships. In any customer-facing business, the right to make money is a function of the quality of the customer relationship. That means innovating in services and delivering a high quality of experience, but above all it means developing and maintaining intimacy with the customer.
Professor Julian BirkinshawAs operators roll out mobile broadband across their networks, they are naturally keen to build successful businesses around the technology and maximize the return on their investments.
As well as addressing the technological challenges and opportunities in mobile broadband, operators also need to identify the right strategies for turning the technology into a commercial success and the changes they need to make in how they address this uncertain and fast-changing sector.
Mobile is the new service battleground, and all kinds of players are lining up to take a slice of the revenue pie, from software and IT equipment suppliers, to social networking players, and media and entertainment companies.
People have very quickly understood the value in having mobile access to broadband internet services – whether for working more effectively while away from a desk, staying connected to social networks, or simply being entertained. The big question for operators is, having created this value for their customers, how best do they capture value today and into the future?
From academic studies of leadership in dynamic industries, it is clear that value creation is not the same as value capture. We can see this today with the dilemma that Facebook is facing – it has created enormous value for its 570 million users, and now needs to find a way to capture this value in the form of revenue, without driving users away.
Mobile operators need to be careful not to lose their way in capturing the huge value they are creating through the delivery of mobile broadband.
Another lesson from history is that first movers don’t always win in the longer term. For example, online bookselling pioneers Charles Stack and Books.com have long since been left behind by Amazon, which found a way to successfully scale up the market. The same is true of pioneering internet service provider CompuServe and software pioneer Sun – both of which lost out to players that ultimately grabbed far larger market shares.
Often, it seems, it pays to be a “fast second” rather than a pioneering first – taking the opportunity to adapt the business model to be successfully scaled up. This is especially true for incumbent players who can defend their positions and dominate their channels by leveraging their resources to meet average user needs more successfully.
In technology fields like telecommunications, larger players have the advantage of being able to back several horses at the same time, and shift resources to the emerging winner when the time comes.
A further lesson is that a central position in a business value chain does not necessarily translate into good margins. In the car industry, for example, the profit margins for finance and insurance providers are far higher than for the car makers and main dealers.
Smart companies try to influence the market structure so that the segment they choose to play in is the most profitable. For example, by controlling the operating system, Microsoft has been able to generate huge profits on the back of PC sales by other companies.
It does not seem likely that this trick will be repeated in mobile handsets, however, and it seems likely that the real money will be made elsewhere. But where? Who will be the winners in mobile broadband?
The answer is not yet clear. A more important question for incumbent players in the mobile broadband market is what can they do to give themselves the best shot at success? From a high-level perspective, there are four guiding principles in making the right strategic choices:
Make the strategy process more agile – Keep the strategy simple, and in a form that can be easily implemented at lower levels of the organization, to enable the business to move with the flow. In a business environment that is in constant flux, the strategic goal must be constantly to gain temporary advantage, through an iterative and flexible process enabled by an alert, agile and innovative organization.
Balance agility with absorption – Agility needs to be balanced with the benefits of business clout, the market presence to be able to respond quickly and effectively to new opportunities. These benefits include the ability of a strong balance sheet to fund expansion into new areas and withstand shocks, and the fostering of multiple relationships with different market players.
Be immersed in the user experience – Like a trader in the stock market, companies need to be immersed in the flow of information. The quality of this information, and the ability to act on it, will be improved if it conforms to what my colleague Don Sull, Professor of Management Practice at London Business School, calls the RUSH principle: real-time, unfiltered, shared and holistic. Companies need to work to remove filters between people on the ground and the top decision makers, to enable them to gather the collective wisdom of the organization.
Rethink the management model – We need to become as innovative in how we work as we are in developing new products and services. The traditional hierarchical management structures of the industrial age are not appropriate in fast-changing markets like mobile broadband. We need to reduce layers of management so the organization can be creative and agile enough to respond quickly to new opportunities wherever they appear.
It is also vital that operators understand their core strengths. What are the company’s “inalienable rights” in doing business? These might include the right to own the technology and the bandwidth, or the right to own existing customer relationships. In any customer-facing business, the right to make money is a function of the quality of the customer relationship. That means innovating in services and delivering a high quality of experience, but above all it means developing and maintaining intimacy with the customer.
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