Author Archives: Kassir Hussain

Facebook IPO

I have to say watching the hype around the Facebook IPO you’d be forgiven for thinking that this was a “must buy” of the century. Actually, I’d say that I agree with a lot of the larger (and shrewder) investors that its one to pass on. You have to ask why many of the early investors such as Tiger Global are increasing the shares they’re selling from 3m to 23m? Is it because they think its peaked and its got as good as its going to get?

I really hope that a lot of people give it a wide birth. The valuation has gone to ridiculous levels that I just can’t see how it will ever be justifie

 

Let’s see what the next few days of trading brings!

 

Innovation is more than a process and tools

Watching all the developments in the innovation space you’d be forgiven for thinking that you can become an innovative company by simply having an innovation process and throwing in a few innovation tools and hey presto, Apple here we come! Wrong… sorry if it were that easy everyone would be doing it and we’d be overwhelmed with innovation. The reality is that innovating consistently and constantly is achieved by very few companies. What we hear less about is the companies who’ve tried some form of innovation activity and failed. I don’t mean a 70% or 80% failure rate but a 100% failure rate. Now failure is not a bad thing and is actually an essential part of the innovation process, but out of the failure you hope some gems will come forth offsetting all the failures.

There is a huge industry building around the whole innovation space and there are more public speakers on the subject than I can count. A lot of what I hear is quite simply common sense that doesn’t take a genius to figure out and lot of it is just high level stuff that gives no clues in how to execute innovation. We can all talk about common sense things and strategy at a high level but very few can talk about what it takes to execute an innovation strategy successfully. I do wonder if the industry is just perpetuating the innovation hype to continue the dollars rolling in for whatever innovation thing they happen to be touting around. This is bad news for people who are committed to innovation and want to see some real innovation happen because where the hype goes so does expectation. When innovation successes fail to materialise the hype is followed by disillusionment and this can result in a real disappointment and cynicism for innovation. The damage from this could really harm innovation to the point that companies just decide its not worth investing in again, or at least don’t try innovation again for many years.

So what does it really take to be an innovative company? Yes a process is important and yes tools are important but they’re actually some of the lesser important things. Many successfully innovative companies have these tools and processes, but these are a peripheral to what’s really enabling innovation in the company. The real enablers for innovation are hidden beneath the surface and are often not even apparent to those working in an innovative company. What’s important for innovation is:

  • The right culture and behaviours
  • Senior level management commitment
  • Having people who understand innovation
  • Having the right creative types in an integrated organisation
  • A route to market for testing concepts

The right culture and behaviours – this is probably one of the biggest barriers and enablers for innovation. The culture of the company is what will ultimately make innovation fail or succeed. Innovation requires a culture that is open to new ideas regardless of where they come from. Companies that have strong functions, particularly Marketing, that think it’s their job in the company to come up with new ideas or that their ideas should get higher priority than anyone else are simply wasting all that latent knowledge, talent and capability in the organisation. There are lots of studies about culture and a strong view that you can’t change your companies culture, at least not easily, so its therefore important to focus on the behaviours. Reinforce positive behaviours for innovation and eventually the culture will follow. As a company you need to identify the key behaviours that are important for innovation and then put in a plan for making those behaviours happen. Start small, start on a key group of influencers and let their influence permeate throughout the company. It’s like nurturing a small plant; keep watering it and watch it grow. Another important factor in the culture of an innovative company is freeing up people to work on innovation. So often the innovators in a company are people who have an important day job that their line managers will be reluctant to let them leave even temporarily. How are you going to free these people up without having a battle with line managers every time you need to do this?

Senior level management commitment is more than just unleashing a few junior managers to go innovate or that. Putting a CxO’s name on an initiative doesn’t means their sponsorship guarantees success. That’s not going to work in a lot of companies unless its a truly flat hierarchy with a really democratic culture. Board level members make key strategic decisions about the companies future and are often involved in the execution of projects that are deemed critical for the company. Innovation too should be firmly in that critical category with direct board level involvement. Senior people need to be running the innovation effort or at least be heavily involved in it. It’s their day to day involvement in innovation projects that’s showing the company they are leading by example. Marshalling important but finite resources will also often require senior management involvement to secure those resources whether it be money or people. If innovation is really the route to success then the most senior people in the company should be involved in it and not leaving it to someone else.

Having people who understand innovation. People who understand some of the deep cultural and organisational changes that are necessary to become an innovative company are a must. These aren’t people who just understand what an innovation process or funnel is, but can understand the often hidden or subtle signs that point to innovation blockers. These people are politically savy enough to know who needs influencing and who’s support they need to get the innovation effort to succeed. These people probably aren’t the innovators (but they can be) but rather focus on removing the roadblocks to a more innovative environment.

Having the right creative types in an integrated organisation. Innovation requires creative people because make no mistake innovation is born out of a creative process not a logical one. These are the people who think differently, people who constantly seeking new meanings in things, people who test new ideas on themselves as well as customers. These are people who are so passionate about what they do that they immerse themselves in it. These are the innovators and can they can be anywhere inside the company, the key is unleashing them and their talent. However having such people inside the organisation may not always be possible so in that case the organisation has to seek out partnerships with such people to collaborate on new ideas and concepts. Too many companies create bland offerings because the corporate environment is about safety and not creativity. Innovation is an art and has to be treated as such. But creative people won’t succeed on their own and this is where an integrated organisation is important. It doesn’t matter that you have the best innovators in the world in your company because if you can’t pull the various strands across the company to implement the ideas then you’ll hit a brick wall. When working on innovation there are many people involved in the chain from idea to conception. An integrated organisation brings together the people who are responsible for each component of the chain. In these companies people work in less formal hierarchical structures (at least some of the time) but more in a project based environment where people from across the company come together to achieve a common set of objectives. Question companies need to ask themselves is how do you create an integrated organisation to deliver? The one other thing that I’ll add is you need passionate people. People who care and love what they do. These are people who ooze enthusiasm about what they’re doing. Do you have such people in the company?

A route to market for testing concepts. Everyone knows that innovation can be a hit an miss affair. Various research studies for example conclude over 67% of new product launches fail within the first twelve months. Therefore anyone bringing new innovations to market needs to be able to test ideas and concepts directly with customers. It’s important that there is that direct relationship with customers so you can observe first hand what they think of your innovations.

In summary I hope this gives people some food for thought. Innovation isn’t just something companies can wake up and say “we’re going to be innovative now” and learn from a text book. Innovation is a capability that takes serious time and effort to nurture and there will be many failures along the way. Innovation is about getting underneath the surface and looking at the process start to finish and asking yourself what works and what doesn’t work and then having the power to change what doesn’t work and strengthen what does work. Innovation will be contending for finite resources with the BAU stuff which is never an easy debate to win. What works will be different for every company because every company has a unique character. The trick is working out what works for your company.

Bye Bye Meego Bye Bye Symbian

It was interesting watching Stephen Elop declare his loyalty to the Windows Phone 7 os and implicitly ditch Symbian and Meego. Question is did he do the right thing?

I’m in two minds about whether this was the right thing or not and none of my reasoning is because of my love for Android or Windows Phone 7. I have to confess I was a little surprised at Nokia’s choice. It’s not a surprise of the desire to ditch Symbian for a range of reasons which included the fact that it had been out innovated by other OS’s and was looking rather dated therefore loosing market share. Rumour also has it that the Symbian code base was forked so many times that it was out of control leading to poor quality and increased number of defects. So on that score did Elop just look at the internal Symbian development effort as requiring too much effort to bring it back in line? Did he think the legacy was an additional hindrance? Possibly. Before we completely write off Symbian as a child gone bad we have to remember that it’s still one of the largest device OS’s in use, even if iOS and Android have caught up. I’m less clear about the reasons for ditching Meego, but clearly it didn’t inspire any confidence in Elop.

Another reason for my surprise at Elop’s choice was because I’d have thought that the Android platform would’ve been potentially more attractive to Nokia at least from a technical stance. The leap from developing on Meego to Android would’ve been potentially less than jumping to Windows Phone 7. The learning curve for the Nokia development teams would surely have been less since they were pretty comfortable with linux based systems? The move to Windows Phone 7 I’m sure is going to be bigger effort to switch. The other thing I’d have thought would’ve been more attractive to Nokia would’ve been the fact they’d have had more flexibility with Android that with Windows Phone 7. Microsoft will seek to lock down many aspects of their platform whereas Android would’ve been more ‘open’ for them and Nokia would’ve had a bigger say in the Droid community than the Microsoft one.

Conversely though its no bad thing to have diversity in the handset OS market to create competition and on this front Nokia adopting Windows Phone 7,  as well as being a needed boost for Microsoft, is going to create more competition in the device OS market. Having a huge device supplier like Nokia adopting your platform is a real win and ultimately consumers may feel the benefits of competition in the future. However, what does Nokia jilting Intel over Meego mean for Meego?

Perhaps Elop felt that better the devil you know, or rather, better the devil he knows hence his choice of Windows. At MWC Elop stated that Symbian and Meego will be used for experimentation and disruption, but frankly this is wishful thinking. If you were a developer would you expend effort on an OS that’s going to die? It’s not cool to develop on a platform that has no future is it? Would you want to invest your time and future in Symbian and Meego knowing that Nokia is moving to Windows Phone 7? So if the developers don’t write code and there are no apps and no community then what experimentation and disruption is there going to be? Additionally why would Nokia employees want to waste time experimenting with Symbian and Meego when the future is Windows Phone 7? Surely you’re better of experimenting and disrupting with the Windows platform Nokia?

Let’s face it the one thing we can be sure of is that Symbian and Meego are going to die for Nokia devices. It might not happen next week, it might not happen next month but at some point the stark realisation that these platforms have no future will dawn on many people and they’ll stop developing. The question is not if, but when and how fast the demise of Symbian and Meego will happen.

Could the mobile data tsunami be reduced to a trickle?

I was reading the latest Cisco report (click here) on the growth of data and it was some pretty interesting reading. The growth on mobile saw a 2.5-3 times increase during 2010 compared to 2009. 24% of phones sold in 2010 were smartphones so 76% weren’t, meaning more growth is sure to come. Cisco are predicting it’s going to get a whole heap bigger by 2015 and specifically global mobile data traffic will increase 26-fold between 2010 and 2015. Mobile video traffic will exceed 50 percent for the first time in 2011. Yep I can believe the growth forecasts here without hesitation, but only in a scenario where something doesn’t constrain demand.

But something will constrain demand and that is the customers willingness to pay and quite possibly the operators ability to build such a large increase into their networks. One caveat I’ll add right up front is how do you define mobile traffic. For the purposes of this discussion I’m going to take an extreme view that mobile data is traffic going over mobile cellular networks i.e 2G+3G+4G. If traffic is going to grow 26 fold between 2010 to 2015 then that means we need to increase capacity by that amount in the mobile networks, BUT, I don’t see customers willing to pay 26 times more (or even 5 times more for example) for this increase in capacity – demand side won’t pay significantly more. Conversely I don’t see operators being able to drop prices so significantly that the 26-fold capacity increase can be absorbed without passing it onto the customer. Remember that operators’ margins for data are already considerably lower than voice and the demise of “unlimited” tariffs has shown just how unsustainable the business case for unlimited data really was. So operators will  increase prices and/or introduce caps to keep the margins at an acceptable level, which means customers have two choices, either pay for more capacity or reduce consumption on mobile networks (or a bit of both). The question that arises is are customers willing to pay more? Do customers value mobility enough to pay more or can they even afford to pay more for mobile data? I am not convinced getting a much greater share of the customer’s disposable income is possible. If I’m paying the phone bill would I surf for convenience on mobile or can I wait till I find a local wifi hotspot or wait till I can access my fixed data pipe at home or work? Many people will of course value the convenience of mobility and pay, for example remote workers or company employees who don’t pay the bills and therefore are insensitive to cost, but there’s a whole bunch of people who can’t or won’t pay. In that case then is there a big enough pool of people willing to pay to make it worthwhile for carriers to continuing investing in mobile network capacity?

So how can demand on mobile grow by 26-fold given these supply conditions? There are a couple of things that could help the situation:

1. A new earth shattering technology arrives that means you can deliver 26 times more data at the same price

2. A new mobile network topology and deployment is used to reduce cost

3. Operators use aggressive traffic shaping and policing to reduce peak throughput

4. Charging for delay sensitive data such as video is priced higher than non delay sensitive data such as email

5. Operators charge by time of day with the peak periods being more expensive than off peak periods, very much like the way electricity charging works

6. More offloading of mobile data to WiFi hotspots

Personally I don’t see some earth shattering technology round the corner to allow 26 more times data at the same price – no LTE is not going to cure famine and rid the world of Aids. At best LTE will give a 20%-30% improvement in efficiency, but the radio electronics aren’t the biggest cost component of operators networks, it’s the number masts that operators have to deploy, which won’t reduce with the advent of LTE. Network topologies and deployments could change to reduce cost, for example greater use of Femto technologies, but Femto mobility has its challenges and handing calls between cells as you move will be difficult. Aggressive shaping and policing could help to reduce peak throughputs by throttling lower priority traffic. Charging for delay sensitive data is something that’ll constrain demand because suddenly those free YouTube videos won’t look so free any more and the consequence is a reduction in the demand for video. Operators charging by time of day could be something that would flatten the peaks of usage and make people consume during less busy periods but then that sort reduces the value of mobile data if you can’t use it when you want to use it . Offloading mobile data to wifi means its not strictly mobile data any more right? It’s now public hotspot wifi data isn’t it? None of these in summary is going to close the gap between what a 26-fold increase in traffic will cost to deliver and what customers will be willing to pay.

As an aside, 2011 is going to be an interesting year for Wifi. Virgin have announced the launch of a wifi services, Sky have bought The Cloud and O2 are rolling out a wifi network too. The impact of these wifi hotspots on the mobile network will be interesting as the density and number of hotspots increases rapidly. Will wifi hotspots provide just enough mobility to deflect demand from the mobile networks? Will most of the future demand go over WiFi rather than mobile cellular technology? Will consumers adopt public WiFi hotspots technology? Clearly there are a number of parties who think so.

So how do we get to a 26-fold increase in mobile data traffic? I am sure that the overall increases in data (fibre+ADSL+cable+mobile+wireless etc) will occur, but how much and what proportion of it will go over mobile networks is not clear to me at all.  When I figure it out I’ll let you know.

What is 4G

What is 4G?

4G is a term used by people to apply to a lot of different technologies. It stands for 4th generation of wireless cellular standards. The definition of 4G from the International Telecommunications Union (ITU-R) is the ability to deliver:

  • Up to 100Mbps in the downlink (from base station to mobile device) in high mobility conditions such as vehicle and trains
  • 1Gbps in the downlink (from base station to mobile device) in stationary or low mobility conditions such as walking

To give you a feel of what this means, if you are using fixed broadband at home using ADSL then you’re getting on average 5 – 8 Mbps. If you’re one of the lucky ones with cable then you’re probably getting closer to 20Mbps. So it’s quite a challenge to meet these speeds on a wireless system. By the way, regardless of the hype you hear wireless systems in a majority of cases will never be faster or cheaper than fixed systems in countries where there is extensive existing fixed line infrastructure – spectrum is a scarce resource and has to be shared where as fixed line capacity is more abundant and more easily able to offer the higher data rates.

None of the systems deployed today or to be deployed in the next two years meet the criteria for a true 4G system. However, the Long Term Evolution standard (LTE) at least meets the 100Mbps with LTE Advanced being planned to meet both criteria. Let’s just walk through what LTE is and some history on cellular technologies.

The operators around the world at the moment are operating a number of flavours of cellular technologies but by and the large the most popular standards are GSM and UMTS. GSM is a 2nd generation technology that was initially designed for voice but then modified to accommodate data. It’s still the most commonly deployed technology globally. UMTS is a 3rd generation technology that was designed to be backwardly compatible with the 2G GSM standard and allow a much higher data speed than 2G. They key thing is that it was designed for data as well as voice or so the theory goes. Basic UMTS offers speeds of up to 384kbps from the base station to the device (download speed) and up to 64kbps from the device to the base station (upload speed). The 3G UMTS standard was then beefed up with HSPA to provide faster data speeds. There are two parts to HSPA, HSDPA (high speed downlink packet access) and HSUPA (high speed uplink packet access). HSDPA allows in theory up to 14.4Mbps and HSUPA up to 5.76Mbps. There have been further evolutions of HSPA that allow HSDPA speeds of 84.4Mbps and HSDPA speeds of 23Mbps, though these haven’t been deployed at least on an significant level. In practise with basic HSPA most users don’t get more than 1Mbps and very few will see speeds 2Mbps or more, but this is adequate for most tasks such as email and browsing.

The new standard LTE in the strictest sense is more like 3.9G as it doesn’t quite meet the ITU-R’s definition above of 4G where a data rate of 1Gbps is required. Later variants of LTE called LTE-Advanced (yes I know the naming conventions show a lack of imagination 🙂 ) do achieve the 1Gbps requirement.

Without getting into the technical intricacies of the technology LTE gives the customer some real benefits. The two most important enhancements with LTE are higher speeds and lower latency. The benefits of higher speeds are obvious, but what’s less obvious is the latency benefit. Lower latency means that response times are much faster and things will feel snappier and you’re more likely to achieve the higher speeds as well. In theory LTE allows 100Mbps in the downlink and 50Mbps in the uplink, but in reality customers are unlikely to experience more than 5-10Mbps in the downlink and 1-5Mbps in the uplink if for no other reason than the need to share capacity amongst multiple users. At a push assuming enough spectrum is available to the operator a speed of 20Mbps might be feasible. LTE offers a definite improvement in speed and better customer experience. The table below summarises the different data speeds for each of the technologies discussed.

Technology

Data speed (uplink/downlink)

GSM EGPRS

59.2kbps/236.8kbps

UMTS

64kbps/384kbps

UMTS HSPA

5.7Mbps/14.4Mbps

UMTS HSPA+

22Mbps/84Mbps

LTE

50Mbps/100Mbps

LTE Advanced

500Mbps/1Gbps

What’s going to be interesting is what anyone will do after LTE-A because we’re fast approaching some the theoretical limits of what radio systems, at least for cellular applications, can do with the current network topologies. To increase speeds further much smaller cells sizes (i.e the coverage radius from a single network transmitter mast) will be required and this is where microcell, picocell and femto technologies will see increased deployment if the economics work.

4G deployments globally

2010 saw the first LTE deployment though most of these were nothing more than early PR shouts intended to show the operator as being a “leader”. Operators who deployed LTE in 2010 were:

  • NTT DoCoMo in Japan
  • MetroPCS in nine USA cities
  • TeliaSonera in Denmark, Norway, Sweden and Finland
  • Verizon in 38 USA cities
  • Vodafone in Germany

Expect to see more deployments through 2011 with critical mass during 2012 and 2013. At the moment the devices that support LTE are quite limited and are mainly data modems and data devices. In many countries operators will need additional spectrum to deploy LTE.

Data limits

I’m also expecting that in the next 2-3 years timeframe more operators will have implemented traffic shaping/policing with some strict usage allowances. Traffic shaping means that operators can manage the load on their networks to try and reduce the peak-average traffic ratio. Shaping and policing will manage traffic more intelligently by giving some traffic types higher priority than others, for example email can be sent with a lower priority compared to web browsing because users won’t really notice it. This shouldn’t necessarily be viewed negatively if it helps operators keep data costs down for customers and its certainly not something that contravenes net neutrality as long as operators don’t bias against against similar types of traffic due to a commercial relationship with one or more of the traffic/content providers.

The other trend that’s emerged over the past 12 months has been the reduced number of “unlimited” data tariffs from operators. AT&T and Telefonica O2 have both introduced caps on the total Megabytes of data customers can have per month and it likely more operators will follow suit. The era of “unlimited” data is fast coming to an end. This won’t affect most users as they never exceed the caps, but a small minority of customers who consume a disproportionate amount of resources will certainly feel the pinch. Unlimited data bundles were introduced when the operators’ 3G networks were empty, but as demand and usage grew so these networks filled up. The challenge for most operators is that the investment for capacity to continue the rate of growth seen over the past 12-18months is unsustainable when one looks at the revenue that hasn’t grown as quickly as the total traffic. The operators have received a lot of negative publicity about being greedy over data charges but this isn’t the case. The revenues for operators have not kept up with the levels of traffic growth for data as they did for voice and this means that operators margins are declining steeply. This is a major challenge when one recognises networks are a capital intensive business. Building network capacity requires huge investment and if the revenue and profit isn’t there then there is no incentive or ability to invest.

One of the other things we can expect to see in the future is a tiering of the services provided similar to the model some fixed line ISPs have. The tiering could be based on:

  • Higher levels of quality of service the more you pay
  • High tier users getting priority for resources over lower tier users
  • QoS for real time services such as video

Operators need to think long and hard about how they manage data pricing going forward. Bill shock for data has to be avoided but knowing how much data you’ve consumed, even for technical people, is very difficult to gauge. It will be worthwhile for operators to invest in real time or near real time data usage dashboards for customers so that they can see how much data they’ve consumed at any given point in time. It’s a challenge having real time data metrics, but I believe its an investment worth considering. There’s an interesting article on the topic that can be found at http://www.telecoms.com/24006/keeping-it-real-time/.

4G the operator saviour?

There is an expectation amongst some operators they’ll be able to charge a premium for LTE, but in my opinion I don’t think this is likely. I heard the same thing when 3G was introduced, but I acknowledge the difference now is that demand for data has been established whereas back in 2003 mobile data was non-existent. I’m not convinced there are enough people with enough disposable income who value mobile data enough to want to pay more for LTE services than their paying for 3G services today. Verizon’s 4G pricing on its website is comparable to the 3G services it offers and this has probably set the price point for the USA market. People do indeed value mobility but there is a limit to what they’ll pay or can afford for that privilege. Conversely operators can’t significantly reduce prices for LTE more than 3G services because large components of their cost base are fixed regardless of the improvement in capacity LTE provides. Yes LTE provides more capacity but it doesn’t offset the site rents, transmission backhaul and other fixed costs, at least not with the deployment models employed today. I hate to say it but I think LTE is a necessary investment just to keep up with the competition in the market. Most markets will see at least one operator who’ll price LTE data comparable to 3G UMTS data and once that happens it becomes difficult for the other operators in that market to charge a premium for LTE.

However, the biggest challenge for operators remains as to whether its profitable enough just being a data pipe given the sorts of margins operators have been used to until now. Most operator initiatives for value added services that run over their pipes have had limited, if any, success at all, at least to date. But that’s another conversation for another post. As Booz&co stated in a 2011 Telecommunications perspective:

“The winners in the race for growth will be the operators that can successfully
manage the five ingredients of innovation: a consistent ideation process; the
ability to consistently nurture new ideas at every stage in the innovation life
cycle; a culture of innovation; fresh talent from outside the telecom industry; and
an entrepreneurial leadership style that brings all of these elements together

http://www.sophiekayani.co.uk/whitlockdisney2010/

What I want for Christmas

Dear Santa

Could you let me have the following pressies for Christmas please?

1. Identity management from device to device – I’d like to be able to walk up to ANY device I use and be able to login and have the same set-up and everything else as my main machine, wherever appropriate. There will be a range of devices I might use, so the set up needs to be smart not to try and replicate my entire desktop on my smartphone for example. And I’m not part of a large corporate with a Windows domain set-up so roaming profiles aren’t there to do it so help me out here. The technologies are there now so let me have it now please!!!!

2. I want my documents in the cloud – but still feel like they’re on my local machine – easier said than done. Yes Microsoft you’re really getting there with Skydrive but you know what, it’s not quite the finished article. My office applications hang while documents are being uploaded/downloaded….and I know I should be on an Gigabit ethernet at home but my ISP just hasn’t got round to putting fibre to my house…yet. O and while you’re at it do you think you could Apple-ize it so my mum and dad can use it too without calling me up?

3. A slightly more polished Office 2010 – I love Office 2010. Microsoft you really made some great improvements on what was already a good product. But why o why does Outlook and the other office apps still hang every now and then?! It mostly recovers, but sometimes I have to kill the app and start again….Surely after all these years of Office and with Windows 7 its not too much to ask that it doesn’t hang? Don’t force me over the dark side i.e a Mac machine 🙂 The Apple Fanboys are circling and trying to tempt me………

4. Stop people talking about the Cloud just because its the latest fad – Santa why do all the providers who really do hosting now call it the Cloud? Why is every hosted app now in the Cloud? Why has the entire industry moved to talking about anything not being local to the machine being in the Cloud? Did I miss something while I was sleeping? Was there a mass migration to the Cloud that I wasn’t around for??! It wasn’t the cloud before so why has it become the cloud now? Maybe because………

Take 1:
Small business “We have a fantastic hosting business that we’d like you to invest in…..”
Investor “O really? Isn’t hosting so yesterday? …Let me see your biz plan…..I think you’re valued at 5 pence…”

Take 2:
Small business “We’re a fantastic provider of Cloud services”
Investor “O really! GREAT. I think you’re valued at £50m….If its got cloud in the title then I don’t need to see your biz plan….. Let’s get it on…..!!”

O and if hear another evangelist tell that the Cloud is going to cure famine and prevent the spread of Aids please give me the strength not to punch them :-).

5. Stop people fawning over companies – Yes Apple is cool, yes Google is great and yes I love Facebook too……..but let’s get real…..At the end of the day they’re companies that provide goods and services like anyone else does. Just because they do it well and they’re big doesn’t mean people have to talk about them with more affection than their wife/child/mother/sibling. We don’t have to worship them! I’m just waiting for that cult to spring forth…………don’t say I didn’t warn you…..actually the cults might already be here 🙂

6. Let me have the apps I paid for forever more – I buy an app and so I assume its mine. Please o please let me take across to any device or any service provider I choose. Why is there so much in-operability in this world?

7. Can I have instantly on for my devices – 20 minutes of boot up time just doesn’t cut it any more. When I hit on I want instant on…..I want it now! I know if I wait a few more years it’ll come for all devices but can’t I have it now please? I know the iPad’s fast but I’m just not ready to move to a dumber device just yet. I can only have so many cups of tea in the day waiting for the machine to boot up:-)

8. Stop advertisers brainwashing my kids about the latest gizmo – Do you know how hard it is to say “no” to a six year old?! And if I say “no” I don’t want to feel like a criminally negligent parent! The life expectancy of my 6 year olds toys seems to be diminishing daily. Now I’m not from the era where kids only had a hoop and a stick to play with, but things seemed to hold my attention a lot longer than they do with kids nowadays.

9. Stop useless updates on….. – Look I’m not interested that someone has woken up, yawned and scratched their left ear. Putting it on Twitter or Facebook doesn’t make it any-more interesting. Why don’t I just stop following or unfriend these people? Well simple, because they are the same people who also produce good quality stuff!……..These tools are great, but boy are they bad in the wrong hands………Some things are best left unsaid.

10. A semantic web – It’s getting to be the wild west out there with regards to data! We need to turn that data into information to make it useful. Please bring some structure and meaning to the web to make it more accessible. I  don’t mind if it’s RDF (or RDFa), OWL, RIF or some other variant, but its high time we did something.

11. No closed internet – I don’t care how popular Facebook is. Sorry you can’t close off the web. You may not want Google indexing your data but you know what…..Its search that empowered the users of the internet and Google made one of the biggest contributions to that so don’t close the door to them and others. Remember its your customers’ data not yours.

Okay I’m not done yet…..but just so you can start here’s my list….

Yours sincerely,

Kass

Big company bigger challenges

Intuitively one thinks that when moving into a new business venture it’s the new start up that has the greatest challenges to face. You’d think with the inordinate resources at the disposal of a large corporate that it’s going to crack any nut that it wants. Well actually you don’t have to look very far too realise that the reality is very different and the size of an organisation is a trivial element when it comes to determining success in a new venture. Many big companies have tried something only to fail where smaller ones have succeeded.

If the new business venture is something that’s very different to the core business for a larger organisation then I’d argue that they got bigger hurdles to overcome to be successful than smaller start ups. Sure a corporate in theory has infinitely more money and people to throw at a problem, but in this case size really doesn’t matter or rather it matters but not in the positive way you’d want it to. What’s a better determinate of success is a companies culture and approach to new business development.

Let’s list some of the challenges larger corporates and start ups face when trying a new business venture.

Start up challenges

Larger corporate challenges
Lack of money and collateral Lack of agility due to size
Not enough resources and hours in the day Inappropriate financial assessments or financial assessments more suited to core businesses
Access to the right sort of talent at a low price Constant compromise and consensus leading to a dilution of the original idea/vision
Lack of specialised skills in all areas of the business Trying to force the new business into the existing business model, culture and processes
Financial backers pushing their agenda rather than letting the original vision happen Assumptions and biases from the core business that are applied to the new business ventures
Reliance on individuals for key tasks and function Aversion to risk and moving into the unknown
Limited number of attempts to get it right before money and/or patience runs out Smaller return from new business venture as a percentage of the total revenue in the short-medium term making the business disinclined to invest
Less negotiating power with larger partners and suppliers Portfolio management and contention with the core business for resources and funding
Lack of trading history making partners and investors harder to find Setting the wrong KPI measures and targets

As you can see from this list, there are some really significant hurdles that can make it harder for a larger business to succeed. Let’s look at a few of these in more detail.

Lack of agility and slow decision making process

This is probably one of the most common challenges faced. Bigger organisations are like oil tankers. Everyone can agree that we want to move in a certain direction but it’ll still take a lot of time to turn the ship as you have realign many more people and get further approvals from departments and functions that weren’t directly involved in the original decision making process for the new business venture.

However, the first challenge isn’t getting the oil tanker to turn its to get everyone to agree that you have to turn! The more people that are involved in the decision making process the more likely there will be differing views on how it should be executed. The more democratic and consensual the culture of the organisation the worse it can be, which is ironic because you want to be part of a democratic and consensual organisation.

Constant compromise and consensus leading to a dilution of the original idea/vision

You’ll hear comments inside the company along the lines of:

  • Well it doesn’t quite fit with the brand so if you do X, Y and Z then it’ll be a better fit
  • The business case for this doesn’t really work so if we monetise it like this (because that’s what others/we do) then we’ll get a better deal
  • Why are we doing it like this?
  • We’ve tried this before and it didn’t work
  • Actually our experience with X says that you need to do Y and Z
  • Unless we do it this way I can’t support this

All the time you’re trying to get this new venture off the ground and you can’t because of the lack of consensus and in the end you compromise because you figure its better to compromise and get it launched rather than try and hold your ground at the risk off never getting it out there.

One of the things that I admire about Apple is that they come up with a vision and a product and then stick to their guns. There is no dilution (or very little) of the original idea and people strive to make it happen. So many times big companies start off with a grand vision and plan which really is a wow, but slowly and surely it gets watered down until you end up with standard family saloon rather than the Ferrari you wanted.

Inappropriate financial assessments or financial assessments more suited to core businesses

Lots of big companies manage large portfolios and each of the items on the portfolio goes through some form of  investment appraisal. These are usually in the form of discounted cash flow or net present value. In themselves these measures are not bad, but they are based on some fundamentally flawed thinking that can give the wrong impression. These measures compare the cash flows of the new business venture against the do nothing scenario. The do nothing scenario often assumes that the core business cash flows will continue in the future as they are today, which is a pretty big assumption to make particularly if the existing business is in decline or some major disruption comes along to cause a sudden drop in revenue or profitability. The second major problem with these measures is that if the new business venture is truly new in that there aren’t many companies currently doing it, then the future predictions of cash flow are just that – predictions – and they are predictions that can be very wrong if there is no historical data to go on.

Big businesses may also use a investment appraisal that’s suited to the core business. If the new business venture is very different to the existing core business then the models applied can at best be inappropriate and at worst lead to answer that shows a less favourable return than investing in the core business. In this case companies may shy away from investing.

Smaller return from new business venture as a percentage of the total revenue in the short-medium term making the business disinclined to invest

The larger the existing revenue stream for the core business the larger the challenge to invest in a new but smaller business venture that doesn’t make a huge impact on the top line immediately. Let’s say for example a company has a £1bn annual revenue stream and it seeks to improve the revenues by 5%. Well a 5% improvement on £1bn is still £50m. Growing a new business venture to this size could well take 2-4 years and that means once again there will be a tension on whether to invest in this new business venture or something else in the core business that might give a bigger, more certain return sooner.

This is also one of the reason that some companies are more inclined acquire larger established businesses with bigger revenues rather than growing their a new business from the ground up. The larger revenues register a higher percentage increase on the core business revenue almost immediately.

Portfolio management and contention with the core business for resources and funding

Lots of larger companies operate a portfolio for projects to ensure the maximum return on every pound spent. A new business venture may need resources and funding from the same portfolio used for the core business and that will create a tension as people are vying for resources from the same pot.  Justifying new business investments against bigger and more immediate returns from core business investments can be hard. Most modern companies almost never have enough people working on projects and if some of those available resources are diverted away into non-core activities then it can be hard sell.

The other challenge faced is that portfolio structure and mechanics maybe more suited for investments in the core business. New business ventures that are very different from the core may struggle to fit into the portfolio. However if the portfolio is structured to take account of new business ventures with the right investment criteria then this is easily overcome.

Setting the wrong KPI measures and targets

All companies like to have targets. It’s a good way of measuring how well you are doing and off course psychologically it gives comfort you’re doing the right things. Having the wrong measures for your new business ideas however can be fatal. Again this is where the core business thinking can creep in. I won’t dwell on this much more other than to say do your homework on the measures for new business ventures. An example of a good measure used by companies include looking at the % of revenue coming from new business ventures. Such measures will drive the company in the right direction because they encourage the right behaviours.

Summary

Hopefully some of the brief review of the key challenges demonstrates that just because you’re a big business doesn’t mean its easier to execute a new business venture. All of the challenges are surmountable, but you need to be aware of them up front so you can put in place a strategy for dealing with them.

The bigger you the harder it can be………

Where did the silos come from and who cares anyway?

Ever been in a large corporate organisation and wonder why there are silos between different departments and business units? Silos are barriers that restrict collaboration, the flow of information and worst of all they can destroy the company if left unchecked for too long. How many times have you heard of examples where one part of the company has absolutely no idea about what another part of the company is doing or someone complaining that a new product or service failed because department X didn’t get their act together?

Why does this happen? Most large companies are full of very clever people who have the right motivation and want to do right by the company. Most large companies grew out of smaller companies and when they were smaller the status quo couldn’t have existed so what changed?

There are lots of reasons for silos, some of them being:

  • Organisational culture and internal politics
  • Overloaded people just focusing on the smaller picture to get their immediate jobs done
  • Weak leadership
  • Inwardly looking departments and business units
  • The sheer size of the company – the bigger it is the more effort it requires to prevent silos
  • Different geographical locations and time-zones
  • Nature of the work doesn’t require lots of inter-departmental interaction

However, I’m going to pick on one cause of silos for this article, which isn’t in the list above and is not immediately obvious. It’s the one cause that I think is not spoken about that often but is actually one of the most important reasons for silos existing. So what is it……?

As a company grows from its scrappy roots it seeks to find a stable business model that is repeatable and profitable. The processes in the company are crafted to underpin the business model and when that happens the changes reduce in frequency until you reach a point of equilibrium. Sure tweaks happen here and there every once in a while, but the core of the business model and processes gets defined in the early phases of the company and they tend to stick. People then get very good at their jobs, understanding what needs to be done and the whole machinery starts to move to autopilot. It’s like driving a car, when you first start driving, remembering to do the right sequence of moves to get the car going seem very difficult and awkward. As you practise it all becomes second nature and soon enough you stop consciously thinking about how to drive a car, it just happens. Companies are no different, they learn a way to do things and that’s how it then happens henceforth with people rarely going back to take a wholesale view of the business model or processes that underpin it. The business model and processes embed themselves into the social fabric and DNA of the company. Is that a bad thing? It can be, in fact it can be a very bad thing.

When companies operate the same business model for a long enough time, people think that’s how you do business for everything. The company starts to view the world through the lens of their current business model and this is dangerous for companies in two cases. The first is that fundamental changes can occur in the industry that are extremely disruptive to your business model and the value chain. The world has changed but the company keeps approaching the problem the way its done before. This is probably one of the root causes of why many companies don’t last more than 40 to 50 years.

The second challenge for the company is when it tries to enter a new market or try a new business venture that requires a very different business model and processes, but guess what…..the company will apply the same rules it uses in its current business model to the new challenge or new market opportunity. That’s ok if the existing business model and processes can be applied to the new thing, but its a recipe for disaster if they can’t. Our dear friend Clayton Christensen has documented this in the three books he’s written on innovation so if you’ve not read then, I’d really suggest you do.

In the case that some people in the company do recognise the need to change the business model and processes, the silos make it extremely difficult to do so. There limited collaboration outside the BAU way of working and that’s when the silos are the companies worst enemy. When its time for a change, it requires multiple departments to club together and co-ordinate the changes.

Silos also prevent inter-department innovation. Any company has to serve and satisfy its customers and there are multiple departments that need work together. If silos exist those companies will find it harder to innovate across the entire customer life cycle.

So if one of the reasons for silos is because the business model has stabilised and the rules don’t change often then how do you get over this? Actually thinking about business models and processes as being static and not evolving is a very out-dated way of looking at things and harks back to a bygone pre-internet and communications era when things moved more slowly. In this world of instant communication things constantly evolve and change often very quickly. Changes that may have taken decades in the old world can happen in months and weeks today and only those adaptable and agile enough survive in today’s world. Companies have to take fundamentally different view to the way they manage and review their business models and associated processes. They have to view them as constantly evolving entities that if cultivated properly will provide the competitive edge over competitors and protect against threats. But whenever changes to the business model are required many people walk away from it because it requires large scale change across multiple departments and IT systems – the social and technical architecture make it a daunting task.

Avoiding silos across the organisation is achieved by fostering cross business working on a regular basis and not just for special projects that happen once in a blue moon. It should be ingrained in the companies culture that projects require people from all disciplines to be involved. This doesn’t happen naturally so there needs to be a concerted and concious effort to make it happen. People should be moved around between departments as a matter of course to extend their loyalties beyond their old departments. Regular communication channels across functions should be set up and this is where social media tools can help greatly so that people can see what’s going on in other parts of the company. I’m not a fan of the artificial corporate events where people from across the company meet – they do have limited impact and are fun but there needs to be common purpose and binding activity that allows people to work together across departments to deliver a common set of objectives.

Another important thing in my mind is that with today’s speed of evolution someone in the company needs to have responsibilities for monitoring and adapting the business model and processes. It can’t be left to individual departments. I personally see it as being the role of senior members of the organisation to break down the silos and ensure a free flow of people, knowledge and communication across the interfaces. These senior members are either board members or their direct reports. Junior people can’t make this happen.

Who in your company looks after the business models and processes? Who’s there making sure the company’s relevant in 20, 40 or 100 years time?

Simplicity – The art of good design

I was looking at the TV offerings from both Google and Apple (amongst others) the other day and it just struck me the difference in design philosophy of both companies and why I think Apple has a chance of success whereas Google doesn’t in this area.

Google has products made by engineers for engineers. Apple makes products for everyone else. Now I’m being a bit harsh on Google but if you want to see an example of difference in the design philosophy then look at the images below. In the image on the left is the Google TV remote control and on the right is the Apple TV remote control.

Which one do you think your mum and dad would find easier to use? No disrespect to Sony and Google, but did you guys think it was OK to launch with something akin to a laptop to control the telly? What was going through your heads?

By contrast, the Apple remote, in keeping the company’s design philosophy, only puts only the most essential things onto the remote. Apple focus on experiences and Google focuses on product and that’s the big difference. Apple understands the people who will use its product better than they understand themselves sometimes and it looks at the essence of what you are trying to achieve and it’ll keep removing features until there is literally nothing of value left to remove.

It’s the same design ethos that was applied to the iPod. MP3 players just before the iPod appeared were competing on features and functionality and they were getting increasingly complex. Apple came along and cut functionality back to the absolute basics of what it needed to be. The iPod itself wasn’t a great innovation in 2002 because others had already developed MP3 players, but what came along two years later completely transformed the music listening experience and accelerated iPod sales – what came along was iTunes. iTunes suddenly made it easy to find and download music to your device all at an affordable price. Apple changed the music listening experience, that until then was complex and fragmented, for the average consumer into an end to end customer experience. The graph below (from Wikipedia) shows the ramp up of iPod sales in 2005 when iTunes was launched.

Apple signed deals with all the major record labels and did what others had failed to do before, namely legally monetise music.

Another great example of innovation is the flip camcorder. Now most camcorders on the market require either a PHD in computing (or the mandatory 5 year old) to use them. They’re crammed with all sorts of features. Now I’m a photographer and consider myself pretty adept at using consumer electronics and photography stuff, but even I don’t use all the stuff they cram onto camcorders so what chance has the average person got?! So along comes Pure Digital Technologies, who release a flip cam that has just a couple of buttons on it. When Pure Digital were pitching the flip cam they used a slide with two images, one was a normal camcorder and another was the flip. The text underneath the normal camcorder said “Use this for special occasions”. Under the picture of the Flip the words were “Use this for everything else.” Brilliant! Simple and to the point.

Take note, innovation is more than just about more features and functionality, its about creating experiences and doing things simply. Think about your customers and give them what they want – no more!

Now for the record, I am NOT an Apple Fanboy……I am a fan of Google however, so I hope they learn the lessons of making things accessible and creating an experience for everyone and not just the engineers.

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Becoming a Telco 2.0

Unless you live on planet Mars there is no escaping the fact that the way people communicate has evolved significantly in the past 7 years. 15 to 25 year olds are spending a majority of their time communicating via social media sites rather than the “traditional” modes of communication such as voice, text and email. In fact some of the younger kids don’t even use voice. Even though data from operators shows that SMS is continuing to grow, its unclear what proportion of these texts are simply to send data to social networking sites rather than peer to peer communication.

These changes in communication habits have serious implications for operators because it could just turn them into bit pipes – carrying bits and bytes for communication applications. Lot’s of people argue that this inevitable. I’m inclined to agree that the risk of operators being relegated to bit pipes is high, but I’m also an optimist and think that operators can have a bigger and better role than just being the pipes. However, achieving this will require a significant effort on behalf of the operators to rise to this challenge.

Developers, developers and developers (and platforms too!)

So I’m guessing many of you will have heard the Steve Ballmer pitch to developers and gushing about how important they all are. Ok he may have been slightly over enthusiastic about the way he expressed it but he had a very good point. Microsoft knows it needs developers to innovate and create new products and services; operators need to come to the same realisation and fast.

There are two things that I think operators need to be mindful off when considering their execution strategies. The first is that historically operators haven’t been very successful in creating products and services beyond their core offerings. History is littered with the failures of operator initiatives to create new products and services, especially in the internet space. These failures have occurred for a host reasons but essentially developing products and services that customers want, particularly in a web centric world, require a completely different execution strategy and mindset to the one operators are used to.

The second key thing is that world is changing in terms of the way people buy and sell both goods and services, or put another way, the value chain is changing. This was really nice summed up  by Sam Ramji in his presentation entitled Darwin’s Finches on why APIs are important. Increasingly things are being patched together and sold in different ways and what you are selling may well be a component of someone else’s customer value proposition rather than being the customer value proposition. As an example of what I mean is customers may want to purchase an app that uses SMS capabilities to send the bits and bytes back and forth. The app provider may do a deal with an operator to provide the SMS bearer (i.e wholesale SMS) and its the app provider who delivers the customer value proposition, charges the customer and has the primary relationship with the customer. The SMS capability is in this case  just a component in delivering the overall customer value proposition. The permutations of this in a Web mash up world are endless so what operators need to do in this example is ensure that it’s their SMS capability that’s used and not some other operators. This means exposing your SMS capability through an API in a really simple and frictionless way. This is all about remaining relevant in an internet centric world. That’s why developers are so important. Developer are the people who use APIs from different providers to create customer value propositions and they’re the people who will increasingly be selling directly to customers. But attracting developers isn’t easy and requires significant effort. It requires a company to:

  • Adopt a new engagement model with developers. It requires nurturing a community that can have a two way dialogue with the operator.
  • Offer important and valuable capabilities via the APIs – it has to be compelling.
  • Adopt technologies and standards that are used by developers such as RESTful APIs and JSON – simpler more lightweight technologies. Sorry but SOAP isn’t going to cut it:-)
  • Have the right business model and revenue sharing agreements in place.

So let’s take this one stage further. Exposing capabilities is great, but if operators really want to be successful they need to embrace platforms from which they expose the capabilities via APIs. One of the best definitions I’ve seen on the web for a platform is:

A “platform” is a system that can be programmed and therefore customized by outside developers — users — and in that way, adapted to countless needs and niches that the platform’s original developers could not have possibly contemplated, much less had time to accommodate. This can be all done without the platform owner having to do anything at all.

(Apologies to whoever came up with this definition but I can’t find the reference to it right now so if you email me I’ll be sure to include your name.) Examples of platforms that we know and love are Facebook, Twitter and Jajah. The important thing is that by using Platforms, APIs and the developer community operators can ensure that the remain relevant in the new communications paradigm and leverage innovation from beyond their own organisations.

A lot of this value creation today emanates directly from software. Telcos have got to learn to master software and not be overly reliant on others to do this for them. Delivering new products and services means they can’t just be picked up off-the-shelf and creating them requires in-house teams working in close collaboration with all parts of the organisation. (Please note that I said a lot of the value comes from software, not all of the value).

It’s not over just yet

Even though operators haven’t been entirely successful creating new products and services to date, that doesn’t mean its over just yet and being the optimist that I am, I think operators can still execute in way that not only uses platforms and exposes capabilities via APIs, but also sees them directly using the same capabilities to create customer value propositions to reduce time to market and cost, as well as bringing new innovations to the market. The execution strategy has to outline how you:

  • Attract the right talent and people into the company – lots of the creative people you need don’t naturally gravitate to large corporates. People need to “get” the new world of the internet and embrace it, seeing it as an opportunity. Just because someone works in IT doesn’t mean they “get it” – sorry but all techies aren’t equal.
  • Allow people the freedom to create – creativity can’t just be planned or switched on, it has to be nurtured. Freedom to create also means using different approaches and breaking some of the old rules that exist. People have to be allowed to try new things and the organisation has to ensure that constraints are not placed on things because it doesn’t fit for example with the “brand” or it might be risky. People also need to be given time to do things beyond their day job. A big killer for creativity is not having time or feeling pressured.
  • Allow people to work outside of the old culture and processes – the culture and processes in most operators is finely honed for their existing business models not the new world that operators need to embrace. Operators need to figure out how they retain the old culture and practises for the core business, but then create a ring fenced capability to help build out the new world that isn’t constrained or compromised by the core business.
  • Set aside money – Of course all of this effort requires cash. O and by the way you need to take a punt and stop the urge to carry out long range planning activities for everything.

Easier said that done right? Well unfortunately these are very significant challenge and they’re not easy to overcome. It will require people in the boardroom to champion some of these changes. It’s worth noting that these challenges aren’t unique to the telecommunications industry. Many industries face (and have faced) the same dilemma as the world around them changes and  innovators enter their industry to eat their lunch. Tackling these challenges is an imperative or operators could end up watching a car crash….in slow motion.

Changing preferences from 15-25 year olds