Blue Ocean Strategy applied to Telco’s in the Networked Society

Blue Ocean Strategy applied to Telco’s in the Networked Society

I recently wondered why we shouldn’t apply Blue Ocean Strategy to Telco’s within the Networked Society; it is obviously about transforming, rebuilding and creating new market space. So I have decided to give it a try and I must confess that it is a tedious task; a challenge I should say, to do it outside my working time. In this first post I will set the scene and lay down my assumptions. In the coming posts I will elaborate more in details on the results.

Which operator did I choose? It did not take me too long to make a choice. I thought I should better select interesting Telco’s, operating in dynamic and challenging markets. I have decided to take two mobile operators from different part of the world; because the market requirements are different, the competitive factors are different, the competitive forces are different, the consumers and their behaviors are different. Their strategy should be different too. I have selected one Asian and one European (could very well be North American) mobile operator.

Before I start with setting the stage, I would like to briefly tell something about Blue Ocean Strategy. Professors W. Chan Kim and Renée Mauborgne have written one of the best-selling business strategy book of all time: Blue Ocean Strategy. Both teach business strategy & Management at the Blue Ocean Strategy Institute at INSEAD. Blue Ocean Strategies have been applied to Circus (Cirque du Soleil), Wine (Yellow tail), Gaming (Nintendo Wii), Airline (Southwest) and other industries.

The reader is required to have some basic knowledge of Blue Ocean Strategy.

Let’s set the scene now!

The Networked Society

What are the main characteristics of the Networked Society?
      i.        A highly performing Mobile Broadband network with LTE, heterogeneous network
and Wi-Fi. Radio coverage everywhere you go.
     ii.        A variety of connected devices with a variety of services and products serving a variety of industries.
    iii.        A cloud ecosystem providing a multitude of services easy and ready to use, to manage and to configure.

Blue Ocean Strategy approach

Due to time constraints I will not pursue the full blown Blue Ocean Strategy steps and will not use all of its available tools. I will limit this exercise only to two tools, the Strategy Canvas and the ERRC grid.

Let’s start defining the Red Ocean of the selected Asian operator.

Market background

My Asian operator operates in a very large and saturated telecom market, with highly competing operators; providing telephony services, Internet and broadband services. Operators compete fiercely on price; value-cost tradeoff means a lot in this market. A price war added to a declining ARPU makes the market extremely competitive and my operator situation relatively vulnerable. It is clearly a Red Ocean market.

The Strategy Canvas
Let have 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.

1.    Price: Due to a highly competitive market the price is very low.

2.    Services portfolio:  Voice & Video calls, SMS, MMS and ringtones are the main revenue stream. Video calls are not widely used because of high price and bad QoS.

3.    Network Performance: The Quality of service is not good due to ongoing 3G network deployment.

4.    Coverage:  The mobile infrastructure is still not fully operational, and this affects coverage.

5.    Broadband services: All competitors are offering this service but the quality is still not good enough.

6.    Pay as you go: is offered by all operators.

7.    Roaming: Roaming charges are still relatively high.

8.    Different tariff plans: Many different tariff plans for pre/post paid subscribers

9.    Value added services: different supplementary services are offered in bundles or charged for separately.

10.  Media & 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 my Asian operator is competing in.

In the next post, we will see how the application of Blue Ocean Strategy will define the Blue Ocean Strategy Canvas and create the Eliminate/Reduce/Raise/Create grid within the Networked Society.