RSS 2.0 FeedJanuary 2009, Cover Stories, Telecom, The Bleeding Edge
For Telecom service providers, relevance is the most relevant question of all...
Communications Service Providers across the globe are frantically trying to reposition and reinvent themselves in order to remain relevant in the new internet-fueled economy and the digital supply chain that is rapidly evolving to service it. Are they succeeding? Or are they still making the same old moves without realizing that it's an entirely different game? Time will tell, of course, who the winners and losers will be. In the meantime, John Lee expresses in his unique own way his thoughts as to where the real games are being played... and where they're not.
Welcome to the inaugural issue of TeleMedia Strategy—and the first installment of “The Bleeding Edge.” I hope you enjoy what you find here, but be warned: the edge is pretty far out there…
Once upon a time, in a land far, far away, I had the opportunity to work with some communications service providers, developing different transformation strategies for parts of their businesses. As is typical in the telecom space, most of these initiatives were too tactical to be called truly transformational, disconnected as they were from the rest of the business. And, more than likely, they were doomed to failure anyway, thanks to the standard, incessant infighting.
You know, it’s really a shame that so many companies still allow various cliques and fiefdoms to pursue competing agendas, needlessly diluting available budgets. Ultimately, this competition prevents anyone from making any real transformational impact. It’s unfortunate most of the time, but it's especially disatrous in this time of retrenchment, reorganization, and what is approaching general panic in the industry.
Everyone knows it’s a problem, but it seems that the largest companies—the ones who need it the most—simply lack the executive will to tackle the wholesale organizational restructuring that needs to occur. But hey, if you can’t do it in the middle of the worst economy we’ve seen since the Great Depression, and use that as a convenient excuse, when can you? But then again, those silos hold a lot of power and really don’t like to share. So, with their businesses being threatened on every front, why would anyone in the executive ranks want to take on the real internal issues that prevent them from creating agility in the business? Let's just build things bigger, faster, and with zero down! Hello...? Detroit calling…
Anyway, back to those transformation initiatives… The one thing that stood out for me was the lack of agreement within the middle-management set with regard to whether they even needed some kind of transformational change. Huh?!
Now, I’d been hearing for some time (via the media) that the vision was Telco 2.0 (meaning content would save us all). Executive management's rationale was that, left unchecked, Web 2.0 would quickly start commoditizing broadband. Hence, the telecoms needed to get into content transactions streams. Made sense to me…
I don’t think everybody got the memo, though. Lots of people seemed to be waiting around for instructions. It was almost as if someone higher up walked in and said, “Hey, we need to change,” but then walked out with no further vision, guidance, or rationale. Maybe everyone did get it, but decided it wasn’t their job. Maybe they figured that sooner or later Moses would show up and lead them to the Promised Land. Who knows?
I’ve been with both AT&T and Verizon (back when it was still called GTE), so I wasn’t totally shocked at the whole thing. But I was definitely disappointed. All I know is that everyone seems to roll their eyes, as if to say, “Here we go again...” The more things change the more they stay the same. The whole thing reminded me of a discussion I had some years ago. About trains…
About seven or eight years ago I found myself in the Main Operations Center for Burlington Northern Santa Fe (BNSF) railroad. I’d been in a lot of MOCs over the years, and none of them can touch BNSF. I was told that, from the BNSF center, you could find out the color of every railroad crossing light in the western United States at any given moment – all arranged from east to west on three walls of a gigantic hangar. I didn’t believe it until they walked me over to the crossing nearest my house and I watched the traffic stop as a train went by. Total Mission Control. After that I just shut up and admired all the cool lights.
But I digress… So, shortly after the tour I sat down with Fred, the guy who invited me over. We talked about the huge telecom network that BNSF owned, the cost drivers of that end of the business, and eventually the competition. I assumed that the competition was the five or six other railroad companies scattered across the northwestern hemisphere. Imagine my surprise when I was politely but firmly corrected. It turns out that Fred and the other railroad execs were not at all worried about their competing rail-lines. In fact, they engaged in a running dialogue. They held regular industry meetings together. They shared track, operating crews, management tips, and many other things. If someone got in a jam, one of the others might send an engine and crew to help out. Needless to say, I found all of this quite amazing.
What did keep Fred and the other guys up at night was what the trucking industry was doing. It was Mayflower, Yellow Freight, and all the other 18-wheeled brethren that posed the real threat to the railroads. To the railroads, the trucking companies represented an entirely different distribution system, and at a very different price point. And what's more, the trucking companies also controlled the last few miles to the point of consumption. Ever seen a freight train behind a supermarket?
What's more, trucking companies frequently use trains to move their trailers over long distances—because it's cheaper than driving. So, not only were the trucking companies taking their business, but they were also using the railroads' own infrastructure and pricing models against them.
I will say one thing for those railroad execs – they figured out who the real competition was. It wasn’t the most obvious conclusion to be reached, but once it was explained to me, I understood where the long-term threat was. While they may have had their disagreements, the rail-lines all understood that there was a bigger competitor out there, threatening them all. I must admit—I was thoroughly impressed.
If you examine technology from about a century or so ago, you’ll find another industry that has been around for a long time and is now trying to deal with a newer, faster, and much more agile distribution system. Instead of vegetables, hard goods and coal (all of which actually have SLAs in the railroad world), the commodities being moved today include songs, movies, games, blogs, advertising, and other forms of digital content; not to mention millions and millions of financial transactions. Here, too, the interloper stacks its loads on the incumbent’s infrastructure, and then uses their own infrastructure against them.
So what’s a communications service provider to do? Well, it depends. If the service provider wants to be the best railroad in the business, then it should strike an exclusive deal with the coolest and most dominant content distribution company. It should make sure that the content company can fully load the warehouses on one side, and that they, in turn, can sell directly to the consumer on the other. Perhaps through a multi-colored supermarket the size of a credit card. Or, better yet, let them embed the credit card into the supermarket. That way they wouldn’t have to deal with anything other than transportation. Then help them sell millions of ’em.
Of course, the competition would be forced to cut similar deals, and they, too, would help their content distributors by trying to help them sell more supermarkets. That way you could all try to capture a few (or maybe many) more points of subscriber market share in what is otherwise pretty close to a zero-sum game. If nothing else, it would clarify your role and that of the rest of the industry – you are today’s version of railroads, a.k.a., “dumb pipes.”
But what if you didn’t really want to be relegated to being a “dumb pipe” because the pipe margins were thinning and you were worried about getting pushed further and further away from (what everyone believes will be) the next great source of potential revenues – a.k.a., digital content. What would you do? Exactly how would you make yourself relevant in a transaction stream that started and ended with some kid pushing a button on a device you don’t control that billed a credit card that wasn’t in your database in the first place?
Could be worse: Imagine that, along the way, the transaction didn’t work, and even though nobody knew why, you were the one who had to pay a refund - even though you didn’t actually get a piece of the transaction? Now that would be a nightmare scenario. But look on the bright side: you are now somehow relevant. Kind of like how Adam became relevant when Eve got him ejected from Paradise for taking that first little bite.
Sorry, I got lost again… So just who is the real competition for service providers in the here and now - other railroads or the trucking companies (Web 2.0)? I’m pretty sure it shouldn’t be both. If the answer is the other railroads, well, that leads to one version of the future. If it’s the trucking companies, then that’s a different rabbit hole altogether. Maybe it’s neither one. Maybe it’s some combination of both. Maybe it’s something else entirely.
I do know one thing with 100% certainty – I know that I do not know the answers. I also know that we are going to spend a lot of time and energy exploring the questions. Maybe this month’s article on the Digital Supply Chain – Part 1 is someplace to start. I’m pretty sure that before this whole TeleMedia convergence thing is over I’ll have a huge headache. Actually, I have one already.
Makes me wish I took the blue pill instead. Or was it the red pill? The heck with it—give me one of each. Who says you can’t have it both ways? Gotta run. My iPhone’s ringing...
John Lee is a visionary strategist, technologist, respected author, and subject matter expert in Business and Operational Support Systems (B/OSS). He has a spent over twenty five years within the telecommunications industry, most recently as VP, Strategy with Amdocs Consulting. Prior to his role in Strategy, Mr. Lee was charged with founding and leading global OSS consulting for Amdocs. He helped lead development of the corporate OSS penetration strategy that resulted in the $375M acquisition of Cramer Systems and also led concept, design, and requirements definition for an advanced NGOSS process orchestration tool that eventually became Amdocs B/OSS Manager, released in 2006. Within two years of his joining the company, Amdocs was named the top OSS company in the world by OSS Observer.
Prior to working with Amdocs, Mr. Lee held executive positions with a number of telecommunications companies including: GTE (now Verizon), CapRock Communications (acquired by McLeod), NetVoice Technologies, AT&T, and FieldDispatch.com (acquired by One Network Enterprises). Mr. Lee’s work with start-up companies directly contributed to the initial public offerings (IPOs) of CapRock Communications and Viryanet, in addition to the private equity sale of FieldDispatch.com. Mr. Lee is the founder of Lee TeleMedia, the creators of TeleMedia Strategy magazine and is available for strategic advisory. He may be reached at john.lee@leetelemedia.com.