News for februar 2011

New entry in Italian telecom – The emperor is not wearing anything

If an outsider observes the Italian mobile telecommunications industry, they might be tempted to think that it is an industry that has seen significant changes in its competitive dynamics due to much more competition for customers’ money.
After all, from having to pick an operator between the 4 incumbent MNOs 5 years ago, an Italian consumer today can choose his operator from more than 15 different operators.

However, in reality very little has changed and although Italian consumers have more operators to choose from, they still pay some of the highest prices in Europe. There are multiple reasons for why no new entrants have been successful and they vary from poor strategy to poor distribution to poor marketing. However, on a more overall level new mobile operators must offer a clear value proposition to customers relative to the incumbents. After all, why should you buy your SIM in your supermarket, bank or post office if these operators don’t offer any advantages over the incumbents? And in addition to that, they don’t have the same level of service that you get when you walk into the stores of 3/Vodafone/TIM/WIND.

There are several strategic problems and reasons for why the situation is like this but the most important one lies in the relationship between the MNOs and the MVNOs. You should only launch an MVNO if you feel you have an edge over the existing operators, and MVNOs should negotiate contract terms that allows them to execute on whatever value proposition they offer to customers (e.g. distribution, service, pricing). Observing all the Italian MVNOs reveals a similar an un-creative approach: “We have a brand, distribution and a popular website, we’ll leverage that by launching an MVNO”

Italy has the highest mobile penetration in the world. 1 in 2 Italians have two mobil phones but from an operator’s perspective you want to sell them the primary SIM because that’s where the money is. What you wont hear from any of the MVNOs is that almost all of them only have second SIM customers and their numbers look terrible. As it is today, most MVNOs are part of large parent companies which can afford to bank roll their failed strategies. Negotiating with MNOs in Italy is difficult and full of secrecy so it is time consuming and difficult to find the best deal for an MVNO and they can only succeed if MNOs see them as an effective way to acquire customers. The current regulation, favours the incumbents and makes it impossible for MVNOs who can challenge the status quo to enter and that’s why despite 15 operators, they are all remarkably similar while Italian consumers continue to pay some of the highest prices in Europe. As much as I would like MVNOs to challenge the stale MNOs, consumers simply don’t have any good reason to pick an MVNO as their provider.

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Posted: februar 21st, 2011
Categories: Italy, telecom
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Comments: 1 Comment.

Nokia should have known about OODA Loops

If it wasn’t already clear, Nokia is in crisis. While, sales and shipements of smartphones are growing in absolute numbers, they are losing market share fast. Nokia is paying a high price for not paying enough attention to smart phones and the US market which is know the center of the mobile industry.

Nokia’s strategy of producing simple and solid hand sets and being big in Europe and emerging markets, is based on a flawed assumption of adoption curves. It seems to reveal a very linear way of thinking: If we get to be people’s first phone, we will eventually be able to sell them smart phones. However, phone sales are very much driven by carriers and which phones they choose to subsidize and additionally consumers are not particularly brand loyal. This part of Nokia’s business is extremely high volumes and low margins and as their new CEO mentioned in the famous memo, Nokia still haven’t responded successfully to neither Apple or Android products.

Many observers have already called out microsoft as the big winner of the partnership and it remain to be seen whether Microsoft/Nokia can butt heads with Apple, Android and RIM. Nokia has made a very big bet in partnering with Microsoft and essentially letting them control what might be the core to their future competitive advantage.

However, before it ever got so bad for Nokia, they should have known about OODA Loops. I have written about OODA Loops before, and what is puzzling is how Nokia has failed to go through their OODA Loops at a pace anywhere close to their competitors. As the mobile industry increasingly centres on eco-systems of developers and apps and software, Nokia should have realised that making developers happy and giving them and opportunity to succeed should be their first priority. This is a significant shift from being a “hardware-first” company, and clearly Nokia has so far not been able to reorient their strategy according to their customers who are flocking to their competitors.

As Scandinavian and for the sake of the European tech industry I really hope Nokia pulls it off. But their struggles are  an illustrative example of how a lack of agility is deadly to companies, regardless of their size.

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Posted: februar 17th, 2011
Categories: Europe, telecom
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forget about the nerds – think about women

One of the big news about media and tech startups the past days has been AOL buying Huffington Post for 315 million USD. As part of the acquisition the most interesting part of the acquisition was the strategic fit with AOL’s 80:80:80 focus.

“80% of domestic spending is done by women, 80% of commerce happens locally and 80% of considered purchases are driven by influencers. The influencer part of the strategy is important and will be potent.”

This is well known about fast moving consumer goods, which appeal to women who traditionally take care of grocery shopping. However, the quote reminded me of an old statement from management thinker Tom Peters who said that the two largest and underserved segments are women and old people. I heard the quote 5-10 years ago and I still think it holds. Often tech startups are praised for solving their own problems and that’s why they’re so focused on building great products which appeal to a lot of tech-savvy people. The problem is that the problems software engineers, who are all but few young geeky males, are trying to solve are very different from the problems that e.g most women have.

Lots of opportunities to think differently exist because most new products and applications all compete for the same small group of early adopters. Instead of sitting around and waiting for every part of the population to discover the wonders of augmented reality, geolocation etc. more etrepreneurs should try to figure out which problems women and old people have. In the startup world an example of this is some of all the interesting startups being created around fashion such as polyvore as well as the more obvious example of group buying sites such as Groupon who have a majority of female customers. In Denmark, trendsales is doing extremely well and have little competition with a customer base that is also mostly made up of younger females.

Regardsless of the sector or idea, the motivation to focus more on women is very simple. Apart from becoming better educated than men, they are also in charge of a lot of the spending.

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Posted: februar 8th, 2011
Categories: startups
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Comments: 2 Comments.

What I like about Quora

Ever since I first signed up on Quora I have been a big fan of the site. My reasons are the same that seems to hold for most people: The community is interesting, knowledgable and helpful and the quality of the questions and answers is far beyond what I have seen on any other Q & A sites.

Another interesting thing about Quora is the repository of high-quality knowledge and advice that is quickly being built around a lot of topics. For now those topics seem to mostly revolve around Silicon Valley and startups. This means that there is little to be learned about e.g. Italian or Danish startups but that could change. However in a country like Italy where few people speak English, I am sceptical that a solid knowledge base will be built, and in any case the answers will not necessarily be the best ones but the ones answered by the minority who speaks English.

Keeping Quora in English might make sense for the Silicon Valley-centric community but I think it could be more powerful if they chose to allow other languages as well. As an example of all the excellent content related to Italian startups, the facebook group Italian Startup Scene has a wealth of knowledge but organized in a very different, and much less structured way than Quora threads.

Finally, an excellent advantage of Quora has been discovery. Since joining Quora I have been exposed to a whole new group of brilliant people whose answers and opinions are very interesting. Since Quora is somewhat a hybrid between a blog and a place to get answers to specific questions lots of people I hadn’t previously heard of have proven to give excellent advice and answers. (blame my 5 years in business school for my veneration for bullet points)

If you are not on Quora and want to check it out feel free to send me an email and I can invite you.

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Posted: februar 2nd, 2011
Categories: uncategorized
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Comments: 2 Comments.