Orbit Change Conversations

I have felt this for some time but haven’t articulated it until recently. I think mobile operators have become an impediment to innovation. They are reactive, risk averse, and unable to develop markets for new services. If things continue down the current path, mobile operators will be seen in the same unsympathetic light as the big music labels.

SMS and ringtones – the two big success stories of the last 5 years have landed in the lap of mobile operators. Unfortunately this has helped preserve the traditional model of running their services groups as cost centers rather than as profit centers. This arrangement makes it virtually impossible for startups to orchestrate a whole value chain – services, mobile operators and handset vendors – before launching a new service. The result is that the new services are poorly implemented and don’t get any traction. 

Entrepreneurs are caught up in the middle – they are neither able to enroll the operators in their plans nor can they bypass them. The result is lots of talk but mostly market stagnation. Look at m-commerce as the poster boy for this kind of failure.

I was sharing my pessimism about mobile operators with a Bangalore based VC recently and he had a look of skepticism in his eyes. I could read his mind. Most likely he was thinking about how the mobile operators are rolling in money (on the back of high subscriber growth in India) and so how could they be evil? Luckily I am not alone in seeing the mobile operators as an embodiment of indolence. I came across a good post by Rodrigo Dauster through Carl Long’s blog The Experience Curve.

In fact the genesis of the whole problem lies in the burst of subscriber growth that takes place in each country during the early years. This requires mass marketing and excellence in servicing demand. At some point in time the subscriber growth tails off – as it has done in Europe 3-4 years back and in US more recently. Then you need to shift gears from mass marketing to niche marketing; from servicing demand to creating demand; and, from doing it all yourself to building value chains with other services providers, content providers, handset vendors and the like. This is an orbit change.

Any orbit change is hard. Companies need a disruptive force to get moving. SouthWest did that for the airline industry. More recently Vonage is doing that for old telcos selling plain old telephone service. This disrupting force is absent in the mobile industry. Perhaps WiMax would shake things up? That will be subject for a future post.