The topic of efficiency in value creation has been debated by most of us in the industry. With the proliferation of smart devices especially iPhone and Android devices coupled with proliferation of a mobile broadband, the CEO of wireless company should be debating this very topic – should I be relegated to a “dumb” pipe or should I move up the value creation chain by offering my own consumers apps and content. This article makes the case that it is not bad idea to spend your limited resources to be a “dumb” pipe for your mobile broadband services.
The 2 primary cost drivers for an operator are the Operational Costs or costs for running the networks/upgrading the network and SG&A. For those that are inching to contribute, yes device subsidies is a big chunk of change the operator has to spend here in the US and it is in factored in the SG&A. Keeping SG&A aside, let us focus on network expenses or operational/capital expenses.
As a wireless operator the most important asset you own is spectrum. To begin, operators need to make the best use of the spectrum, by providing the best coverage at best possible speeds and the price the consumers will pay for. Standardization is an amazing thing during a technology transformation, it encourages new entrants and enables you to keep your suppliers in check. Assuming that the right technology choice has been made that enables you to chose from a wide variety of infrastructure and device manufacturers, now the network defines you.
Your network is where your knowledge base lies. This is where you have the most control and wherein you can strive to be most efficient. In the long run your key metric for success with your consumers is the satisfaction they derive from having a service provider they can rely on, the one that guarantees them service they paid for. We have seen in the case with AT&T, that even though their consumers love the device -iPhone their satisfaction with the network is the lowest. Whereas Verizon Wireless claim to fame is that it is the most reliable network. We have not seen consumers migrating en masse from AT&T to Verizon post iPhone launch because of contract commitments and differing technologies, i.e. an iPhone 4 bought for AT&T network will not work on Verizon’s network. But it is only matter of time, the new iPhone 4S and beyond will have multiple technologies in the same phone which will enable easy migration across networks.
My advice, invest your resources in ensuring that your service delivery commitments to your consumers are met at the same time investing in ensuring the cost of delivery/bit through your system is the lowest. This by no means a one time exercise but a continuous work in progress. This also does not mean you squeeze most of your operations, on the contrary invest your valuable efforts and resources in tools that help your employees make the system and processes more efficient. Focus on the key benchmarks of system availability, reliability and cost/delivery/bit. Improve on these benchmarks every period. This continuous improvement in cost will enable you to fund your innovation.
Invest in understanding where your consumers are spending their time and what applications they are using and see how that impacts your network. If your consumers spending more time in streaming audio and video from sources like Netflix and Youtube, instead of competing with Netflix and trying to become another Netflix, invest in infrastructure that enables efficient delivery of video through your network. Seek out expertise from cable industry that have spent considerable amount of time in squeezing more and more HD channels through their plant. By better understanding your consumer behavior, offer them SLAs that enables a better user experience. Over time your consumers demand will shift or change. So be nimble and ready to address this changing demand while at the same time ensure your network availability and cost/bit/delivery is not compromised.
Innovation is a good thing and enabling innovation to benefit you as an operator is even better. But at the same time, let us look at history and determine where a new Foursquare of Facebook or an Angry Birds has been invented. It is outside the confines of a big corporation. As a developer of a new application, why would I want to tie my innovation to one network? I am more interested in ensuring the innovation reaches the maximum potential and will develop into Apple/Android/Windows ecosystem rather than something tied to Verizon or TMobile.
If you need to innovate, invest in simplification of your customer care or invest in offering choices that fits what the consumers want. Not one service bundle fits all. Provide means for consumers to control their experience. If you have coverage issues, look to nontraditional means to provide coverage like investing or partnering on outdoor WiFi. Innovate in these areas and I am sure your consumers will stay loyal and continue paying you more for the experience.
I know I am short on statistics to prove my point that simplification and efficiency. But I believe as a wireless operator offering mobile broadband you are better off being efficient and ready for the new innovation cycle in your industry – beyond 4G. Instead of competing with OTT providers, seek out ways to make it easier and efficient for your consumers to use this service. Offer tiering plans based on experience they are seeking. In the end it is worthwhile being efficient than dumb…
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