Blue Ocean Strategy in the Networked Society
I recently wondered why we shouldn't apply Blue Ocean Strategy to telco’s within the Networked Society. The award winning book about the requirements for strategic success is also about transforming, rebuilding and creating new markets. I decided to give it a try and I must confess it has been a tedious task, or rather a challenge to try and do outside my regular working hours. In this first post, I will set the scene and present a few assumptions. Then in the coming posts, I will elaborate more on the details as well as the results.
First, what characterizes a Networked Society?
- A high-performance mobile broadband network with LTE, heterogeneous network and Wi-Fi. Radio coverage everywhere.
- A variety of connected devices with a variety of services and products serving a variety of industries.
- A cloud ecosystem providing a multitude of services that are easy to use, manage and configure.
Next, it is helpful to have some basic knowledge about the Blue Ocean Strategy. The book, written by professors W. Chan Kim and Renée Mauborgne, is one of the best-selling business strategy books of all time. It’s authors teach business strategy and management at the Blue Ocean Strategy Institute at INSEAD and Blue Ocean Strategies have been applied to a wide range of industries including circus (Cirque du Soleil), wine (Yellow tail), gaming (Nintendo Wii) and airline (Southwest).
For this exercise, I wanted to select interesting telcos operating in dynamic and challenging markets so I decided upon two mobile operators from different parts of the world – one Asian and one European. This is important because their market requirements are different, their competitive factors are different, the competitive forces they face are different and their consumers along with their behaviors are also different. Therefore, their strategies should be different as well.
The Asian telco operates in a very large and saturated telecom market with highly competitive operators that provide telephony, internet and broadband services. Operators there compete fiercely on price and value-cost tradeoff means a lot in this market. A price war added to a declining ARPU makes the market extremely competitive and the situation relatively vulnerable. This is what is called a Red Ocean market.
The Strategy Canvas
Due to time constraints I will limit this exercise to the following tools in the Blue Ocean Strategy: the Strategy Canvas and the ERRC grid. Let’s start by having a look at the competitive factors in order to create the diagnosis for the as-is market situation and plot them into the Strategy Canvas.
- Price: Due to a highly competitive market the price is very low.
- Services portfolio: Voice and video calls, SMS, MMS and ringtones are the main revenue stream. Video calls are not widely used because of high prices and bad QoS.
- Network performance: The quality of service is not good due to ongoing 3G network deployment.
- Coverage: The mobile infrastructure is still not fully operational, and this affects coverage.
- Broadband services: All competitors are offering this service but the quality is still not good enough.
- Pay as you go is offered by all operators.
- Roaming charges are still relatively high.
- Different tariff plans for pre and post-paid subscribers
- Value-added services: Different supplementary services are offered in bundles or charged for separately.
- Media and music downloads: low penetration due to high price.
And here is the Red Ocean Strategy Canvas. It provides a weighted snapshot of the competitive factors and a high-level diagnostic of the market where the Asian operator is competing in.