Two cool links courtesy of Benedict Evans:
- WSJ: Taming the New Frontier (1996)
- AT&T: How to Dial the Telephone (1927)
A look back in time
May 21st, 2018The box mobile operators find themselves in
March 16th, 2017I joined Sprint in 2003. Until then, my entire career had been in wireline telecom. In previous roles, I’d cared about wireless because it could be either an opportunity (driver of growth) or threat (substitution). But 2003 was the first time I had really looked at the world as a mobile operator.
One of the first questions I asked was “what applications really require licensed spectrum?”
I was surprised that no one inside the company seemed to understand my question. In 2003, WiFi really wasn’t a threat to mobile operator core revenues (primarily voice in 2003). While I had been talking about a future where everything would be connected to the network for years (I called it “bandwidth built in”), very few people were really thinking about an “internet of things.” The only smartphones with any commercial success (and tiny at that) were Palm and Nokia/Symbian. In fact, in my first few years at Sprint, there was real resistance to including things like Bluetooth and WiFi in our handsets. Can you imagine?
What I was seeing was the first side of the box that mobile operators find themselves in.
Over the next 11 years in strategy roles at Sprint I began to see the other sides of the box. I wish I could claim that I’d been successful helping my fellow executives to see them and to either build the best possible inside-the-box business or launch and fund outside-the-box growth businesses. But Big Bell Dogma rules.
So what are the other sides of the box?
The four sides of the box can best be seen by asking four questions, starting with the one I mentioned above:
- What applications require licensed spectrum? (e.g. what won’t work on WiFi?)
- What applications/services work best using network vs. device intelligence? (e.g. GPS/location based services)
- What applications can best be met by a single operator? (e.g. RCS/joyn vs. WhatsApp)
- What applications are best served via carrier billing? (i.e. What could never be offered for free?)
There is no question that mobile operators offer an incredibly important infrastructure that has enabled innovation that has literally changed every aspect of our lives. I’m proud to have been a part of that. Unfortunately, telecom companies move slowly and have expensive operations. Innovators can’t afford to wait for, or pay for, the mobile operators to provide what they need, so they have innovated around them and increasingly pushed operators back into their box.
To be successful, operators need to figure out either how to be the best inside-the-box (nimble, low-cost commodity transport and related services providers) or… (I tried to find a hopeful way to end that sentence, but each option I thought of I could shoot down. There’s nothing in the nature of a telecom company that positions it to prosper outside the box.)
For today, mobile operators can have some level of success selling voice and data connectivity services to consumers. That’s clearly inside the box. Will the box shrink to squeeze even those services? What options do operators have for growth? Those are great and important questions.
Not Your Father’s AT&T
April 23rd, 2016I’m enrolled in the MBA program at Oklahoma Christian University. (It’s about time, huh?) I’m also serving there as Entrepreneur in Residence. I’m having a blast.
For one of my classes this term, we had a team project and presentation where we had to analyze a company in the Fortune 100. My team chose AT&T. For part of what I presented, I quickly gave a historical overview of the company. While there are lots of twists and turns and details, in general there wasn’t really anything new for me. But for some reason, as I thought about how to organize the history for presentation to make it easy for the audience to get it in a sticky way, I realized something I hadn’t really realized before…
My father’s generation thinks of AT&T as Ma Bell – everything having to do with the telephone, from the device in your kitchen, to the local and long distance networks, to the friendly operator, to the phone book. I remember when we were doing our first Internet startup, Digital Frontiers, back in 1995, one of our early customers was a local publishing company. As we were interacting with their CIO, we asked him who he used for local connectivity to the Internet. This was in the days when many CLECs were popping up to compete with the RBOCs. He answered by saying “AT&T.” So we said, “you mean Southwestern Bell?” To which he said, “yeah, that’s what I said, Bell.” Despite the fact that I know he knew that AT&T had been broken apart about a decade before, in his mind, they were all still parts of the same Ma Bell, even if they were operating as separate companies. (Of course, if he said “AT&T” today, he’d be perfectly and precisely correct, but that’s another story…)
My generation thinks of AT&T as the Long Distance company. Ten cents a minute, if you call after 10pm. Not telephones. Not local. Just long distance.
My audience in my MBA class is roughly my son’s generation. To them, AT&T is a mobile operator. Sure they’re still in local and long distance and they even have AT&T branded telephones, but the ads running during timeouts in the ball game are all about mobile.
What will my grandson (if the Lord blesses me with one) think of AT&T as? A video company? A Mexican company? An IOT company? Time will tell…
When I used to speak frequently to Sprint customers visiting the headquarters in Kansas City, I would be asked to give the corporate overview. I would usually start by saying that part of my job was to cut through the “fog of familiarity.” When we’ve been doing business for a long time with a company, we tend to think of them as the company they were when we first encountered them. Sometimes it’s healthy to step back and get a new perspective on the companies you think you know.
AT&T’s de la Vega confirms glorious payment failure
July 13th, 2015Way back in December 2010, when AT&T, Verizon, and T-Mobile had just announced their mobile payment joint venture (then called Isis), I participated in a panel discussion which then led to a post on this blog that I titled “Glorious Failure.”
That post included this observation:
I responded by explaining that Isis is a perfect example of Big Bell Dogma. Carriers think they can do a better job than Visa, Mastercard, American Express, and others in the payments ecosystem, so they invest billions to try to replicate capabilities and compete with existing players rather than focusing on what carriers actually do well and enabling the existing players and nimble startups to leverage the carrier’s infrastructure to bring real value to consumers. Carriers have been trying to do that for over a hundred years in different industries. Sometimes they get lucky and succeed, but most of the time it’s a miserable failure.
That’s when Jim corrected me and said “it’s not a miserable failure, it’s a glorious failure.” The billions they invest may not actually generate financial returns for the participating carriers, but it will help put in place (either directly or by spurring competition) infrastructure (e.g. near field communications point of sale terminals) and standards (cross-carrier NFC standards) that Sprint and the payments ecosystem will benefit from.
I’ve got to admit – he’s got a point there.
Last month, Ralph de la Vega, CEO of AT&T’s mobile business, commented on that glorious failure. He said that mobile payments “seems like a more natural fit for [an] OS manufacturer.” Carriers have proven time and again that they can’t innovate fast enough. Google, Apple, and startups are where innovation happens. Carriers can help enable it, but shouldn’t try to control it.
What is Google Really Doing?
May 1st, 2015A month and a half ago, I wrote a series of posts around Google’s announcement that they would become an MVNO and offer wireless service. The final post in that series was titled “What Might Google Really Do?” and it included my predictions on Google’s potential plays, based on what Google had actually said, and what they had historically done. Now that Google has officially “launched” Project Fi, it seems like a good time to check in on those predictions.
It’s important to note that, at this point, Google is launching Fi with an “Early Access Program” that is by invitation only. Some aspects of how the service will be delivered in the future will likely be quite different from how it is delivered today (undoubtedly based on lessons learned during the EAP) and some details aren’t yet announced.
But here’s what we do know. Google announced Fi via their official blog on April 22. They said “today we’re introducing Project Fi, a program to explore this opportunity by introducing new ideas through a fast and easy wireless experience. Similar to our Nexus hardware program, Project Fi enables us to work in close partnership with leading carriers, hardware makers, and all of you to push the boundaries of what’s possible. By designing across hardware, software and connectivity, we can more fully explore new ways for people to connect and communicate. Two of the top mobile networks in the U.S.—Sprint and T-Mobile—are partnering with us to launch Project Fi and now you can be part of the project too.” They then outlined three specific areas of focus and innovation.
High-quality network connections: “We developed new technology that gives you better coverage by intelligently connecting you to the fastest available network at your location whether it’s Wi-Fi or one of our two partner LTE networks.”
Communications across networks and devices: In addition to working across WiFi and LTE, Google says “With Project Fi, your phone number lives in the cloud, so you can talk and text with your number on just about any phone, tablet or laptop.”
A simple service experience: “We offer one simple plan at one price with 24/7 support. Here’s how it works: for $20 a month you get all the basics (talk, text, Wi-Fi tethering, and international coverage in 120+ countries), and then it’s a flat $10 per GB for cellular data while in the U.S. and abroad. … Since it’s hard to predict your data usage, you’ll get credit for the full value of your unused data.”
Here are the predictions I made, and a comparison with what we now know about Fi:
- “Google would effectively be proving out new/unconventional approaches to connectivity offers (e.g. unlimited) in a way that proves out to the operators that there’s market demand (enough to be a threat) and that the economics can work (so that it’s attractive)” – This clearly seems to be the case. Instead of unlimited, the real innovation around the plan is refunding customers for unused data. T-Mobile’s CEO has welcomed Google’s “fresh thinking” implying openness to learn from Google’s experiment.
- “I also would expect the scale to be limited, meaning it would have relatively limited retail impact on the operators” – this clearly is the case with the EAP and Google seems to continue to signal limited scale and the operators don’t seem threatened.
- “I also wouldn’t be surprised to see Google want to move it around, so maybe each new Nexus device launched is a new MVNO on a different operator or set of operators” – Time will tell.
- “I doubt they’ll try Google’s original Nexus web-based distribution” – For the Early Access Program (EAP) Google is using web-based distribution.
- “They might try using their physical “stores” in Google Fiber cities” – Not yet anyway.
- “They might also strike a distribution deal with big box retailers, like Best Buy or WalMart” – Again, not yet.
- “I wonder if Google isn’t actually negotiating with the mobile operators to sell the service in their own stores or through their distribution channels” – Again, not yet.
- “I doubt that Google has a desire to employ tens of thousands of customer service reps in both owned and outsourced call centers around the world” – Google has said that customers can call 24×7 and speak to a live US-based agent, but hasn’t indicated how they are providing this support.
- “They may be able to leverage the care resources they’ve put in place to support Fiber” – We don’t yet know.
- “Perhaps, they are going to leverage the mobile operator’s existing customer care infrastructure” – We don’t yet know.
- “They will likely pair the service with a new Nexus device” – The service is only available with the Nexus 6 which has specific hardware and software to support the network switching unique to the service.
- “Google’s issue will be ensuring that only the right customers for their experiment are the ones that choose their brand for wireless” – The invitation-only EAP will help Google target the right customers.
- “Providing openness and choice, managing the network in an open, non-discriminatory, transparent way and giving users a choice of multiple service providers, may be an objective” – This hasn’t been emphasized in Google’s announcements.
- “I can’t imagine that Google would see enough potential upside from [a full competitive entry going head-to-head against Verizon, AT&T, Sprint, and T-Mobile] to offset the serious downside it would have on their core business.” – There’s no indication that Google is pursuing an aggressive attack against the existing operators.
- Maybe “it’s really all about IoT” – so far, it seems to be a smartphone plan, without any IoT elements.
So, out of 15 predictions (most of which were “mights”), I would say that five were aligned with what Google has announced (1,2,11,12,14), three predictions were wrong (4,13,15), and for the other seven, we just don’t know yet. We’ll have to keep watching.
The Watch Analogy is Coming True
May 1st, 2015This story about the swiss watch industry getting on the smartwatch bandwagon caught my eye. Specifically, the story references forecasts from Strategy Analytics that “28.1 million smartwatches will be sold this year, almost matching the 28.6 million Swiss timepieces that were exported last year.”
For a very long time and even now, I’ve often used the watch as an example of the impact of the technology revolutions on products and industries. In fact, for the past couple of decades, I’ve been saying “in the future, most watches will have bandwidth built in.” It’s always fun when predictions you made in the past, which at the time seemed crazy, become reality that everyone takes for granted. (It’s even better when you documented it more than 5 years ago.)
Big Bell Dogma in my backyard
April 14th, 2015Over the years, I’ve probably driven by or through Chanute, Kansas hundreds of times. Little did I know that it would become a key case of Big Bell Dogma. Apparently, the town wants to offer it’s 9,000 residents modern Internet service by building a fiber network. AT&T offers DSL which it thinks citizens should be happy with, even if their DSL costs 40% more than the gigabit service the city would offer, so the company has brought it’s mighty regulatory machine to bear to make every attempt to halt this dangerous technology progress and protect the citizens of Kansas. Read the story here.
Market-Value-Model Matrix
April 13th, 2015Last week I had a mentoring session with a startup that was wrestling with a couple of critical questions. First, they had identified six potential target markets. Second, they were wrestling with which of several different business models to pursue (sell the product, sell a subscription, sell customer data, or some hybrid/variant). After asking lots of questions, I thought it might be helpful to understand how these issues played against each other, and also how each one played against the new value proposition that they were bringing into the market (they have a handful of dimensions in which their product is an order of magnitude better than the traditional existing solution).
In many ways, I was reintroducing some of the tools that we regularly used in Strategy Labs at TeleChoice a dozen years ago, but with a new twist. I started by drawing on the (whiteboard) wall a matrix/spreadsheet with each row being one of the values where they’ve introduced an order of magnitude improvement (e.g. portability), and each column being one of the proposed target markets. We then went row by row and I asked which of the target markets would most highly value that improvement. In that cell, I wrote a “1” and then in the second most aligned market, I wrote a “2” etc. until we had completed the force ranking for that value. We then moved to the next row and repeated the process. At the end, we summed it up and the lowest scoring target market was the one that was best aligned with the revolutionary aspects of their product.
Although everyone agreed that it was imperfect because it was off the top of our heads, we agreed that it was the basis for now “getting out of the building” and validating what we thought the most aligned markets actually did value. (And everyone seemed confident that the well aligned markets really were rising to the top.) The beauty of this approach is that it not only gets us to the “right” answer quickly, but it helps us understand why it is “right” in a way that we can then make additional good decisions – such as where to focus development, what to emphasize in sales and marketing for each target market, etc.
The energy in the room was contagious as the founding team found themselves able to move off of indecision with a clear path to greater focus in an environment that requires efficient execution. My instructions to them were to now repeat the same process two more times – once matching values with business models and another time matching business models with target markets. (In reality, there are 6 combinations possible – switching the rows and columns since you always force rank across the rows, but you can usually pick which you focus on based on where your indecision lies.)
At the end, the team wanted to know what I called this tool. I was stumped because I honestly had never used it like this before. It’s an adaptation of what we used to call the TeleFilter, but it’s a totally different structure with a different goal. For lack of a better name, I’ll call it the Market-Value-Model Matrix (yes, I am trained as an engineer…).
Maybe this could help you with a hard decision you face, or maybe I can help you identify a different type of tool that will fit your unique situation. Drop me a note at russ.mcguire@gmail.com if you think I could help!
The Apple Watch
April 10th, 2015The big news this week is that pre-orders started for the Apple Watch and it immediately sold out. Of course, we don’t know how many watches Apple is producing, but clearly interest is high in this wearable device.
Last week I was asked to teach a class on Innovation at Blue Valley CAPS. At the end of the class, we had a good discussion on a variety of topics. One of the students asked about the Apple Watch. My take on it was that the constraints on the watch that limit the target market to owners of the latest iPhone (and the pricing) will keep it from becoming incredibly common. But the hype will drive innovation across the wearables space.
He then asked what function/feature/capability of fitness watches will have the most significant impact on our lives. I told him that, in my opinion, the beautiful thing is that we can’t possibly know. Although Fitbit, Pebble, and others have provided APIs for developers, the Apple Watch will be the first wearable that will attract a broad developer movement. The apps that we can imagine today are not the ones that some unconstrained innovator will envision and deliver that will truly be game-changing. And it’s those apps that will drive change across the entire wearables ecosystem, not just Apple.
This should be fun!
