An interesting post over on Marc’s blog got me thinking. In his post Marc contends that;

Telco’s online reach is smaller than they think. Sure Telco’s have large customer bases but the only time I have gone to my Telco’s website was when I upgraded my ISP plan. It’s anecdotal I admit. What’s your use of their websites like?

Well maybe – but Telcos have a massive channel that they can leverage in new ways in order to sell diverse products. BT Tradespace is an example of this.

Telco’s have bad websites. When I did upgrade my plan, the website navigation experience was agonising. A good analogy is government versus corporate. Their web mail was one of the worst I’ve seen.

Again just because a particular telco has a bad site doesn’t mean they can’t create a parallel path that does work in this 2.0 world

They are big but that doesn’t guarantee a win. When Telco’s spend to compete they serve up a high Cost of Goods Sold (COGS) number for their competitors to squeeze them against. Lean startups can squeeze margins tighter, and if they can hang on to triple digit growth rates then they can drop a big Telco Goliath with a very small stone.

This part I agree with – Telcos need to find ways to circumvent their own high internal COGS while still retaining the benefits of the asset created. This is where partnering, outsourcing and JVs can come in

Telco’s are good at being Utilities, full stop. This is appliance market versus utility market difference. Just because your toaster is an appliance on an electricity network doesn’t mean your electricity utility will be a good toaster maker. They are very different markets, very different sales approaches, very different products and require very different people to execute.
Telcos had the wrong skill set. Telco’s are big ships. Changing the crew from sailors to steam engineers wasn’t and still isn’t quick or easy. Even worse, short web application lifecycles requires you to destroy your mother ship by building newer and better technology quickly. Telco’s extract long term value from long term fixed assets. Two years is frightening when you normally invest for twenty years in fixed assets.
Web business’s tend to invent. Telco’s tend to be slow followers while web startups who successfully commercialise have tended to come from the womb of inventiveness. University assignments (Google), for the fun of it (YouTube) or everyday business problems that need fixing (Salesforce.com). Telco’s tend not to think this way.

But they can take their skills and resources (domain knowledge, money, infrastructure, money, networks, money) and form relationships with partners who can do more than just being utilities. They can find partners that are nimble and agile – how is this any different from other large organisations going down the M&A or partnership path and finding agility and inventive ideas from bit players?

Lessons learnt. Many Telco’s have already tried and failed. Telco’s, since 2000, have been desperately trying to replace falling fixed-line revenues. They just didn’t understand these web business, the appliances of the net. The revenue messiah didn’t come. Consumers were flocking to cool niche shops like iTunes not the big Telco department stores.

Never say never Marc – who remembers when Michael Dell advised Apple to just shut up shop. Don’t discount telcos so readily.

At the end of the day time will tell whether Telcos are a one show pony (and therefore doomed to a slow and irreversible death_ I think they have the potential to keep winning but agree that it will take a big jump in terms of openess and adoption of new practices for them to succeed.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

2 Comments
  • I’d never say never, just pointing to history. I wasn’t born with the give-up gene :). Totally agree on JV’s/Partnering. that is already happening here in Aus an it can work. each does what they know best. 1+1=3

  • History would say that the innovators dilemma is in action. A small number will make it, others won’t.

    The difference here is the utility in itself. Telco is a national asset, this means that its unlikely they will ‘go away’ all together and it also means they will continue to have $ for investment.

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