Managing a shrinking company

Ericsson are the latest company to face the reality of needed to shrink as their industry is being disrupted.

It isn’t just software companies and telcos that are facing a changing, less profitable, world. As margins decline for their enterprise customers, equipment vendors are facing the squeeze.

A good example of this is Sweden’s Ericsson which last week announced declining sales as China’s Huawei displaces them in market and their enterprise and telco customers tighten budgets in the face of declining margins.

For Ericcson this means finding new opportunities but for them, like Cisco and Microsoft, most of the promising markets offer nowhere near the profits they have been used to in their traditional businesses.

Managers in these industries face a difficult dilemma in explaining to shareholders their company needs to be smaller and less profitable than previously which is something few want to hear.

Not to admit that painful reality risks killing the company as margins continue to shrinks, sales shrivel and desperate managers engage in increasingly desperate stunts in the hope on stumbling on another river of gold.

It’s an ugly place to be for staff at these companies but it shows that fat profits can never be considered to be given in any industry.

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Television in an age of context and the mobile internet

Ericsson’s head of broadcast, Thosten Sauer, sees context as key to using mobile video as telcos struggle with exploding internet traffic

One of the great changes to the telecommunications industry is the rise of video. As part of the Decoding the New Economy video series we had an opportunity to grab a quick chat with Torsten Sauer, Ericsson’s Vice President of Broadcast services.

Video is the great challenge for telecommunications company, broadcasters and consumers with Cisco Systems predicting by 2018 over 50% of internet traffic will be videos.

As designer Gadi Amit told this website a few weeks ago, the problem is compounded as the broadcast world evolves from a three or four screen environment to an almost infinite range of screen sizes and devices.

With most of that traffic being over mobile devices, Sweden’s Ericsson has been adapting to the the industry’s change to mobile video with a series of acquisitions in the broadcast production space. Sauer explained some of the motivations and strategies behind Ericsson’s moves in the industry.

Red Bee Media

Ericsson’s acquisition of British content house Red Bee Media earlier this year is one of the areas where the company is looking at growing its services.

“Consumer behaviour is changing and that represents a huge transformation for the industry,” Sauer says. “We want to be a catalyst for that transformation through providing the right services.”

Along with more traditional fields like basic production services, Sauer sees the company’s opportunity in building the metadata into videos making them more accessible over the very crowded internet.

A multitude of screens

The other key opportunity Sauer sees is that by creating richer content, it becomes easier for creators, broadcasters and advertisers to serve appropriate content to viewers depending upon both their interests and the devices they are using.

“It’s a great opportunity for broadcasters to address new opportunities and revenue streams on different devices and in different locations.”

Sauer’s view ties in with Gadi Amit’s in that the proliferation of ways to watch videos is going to create great opportunities for broadcasters to find different ways to show their work.

The innovation race

With the proliferation of channels, the field isn’t just left to the incumbents with Suaer seeing the entry of new broadcasters as one of the great opportunities.

“There will be a lot of opportunities for a lot of new players, that will create a healthy innovation base. It’s a very exciting time to be in this industry.”

With video marketing exploding, Sauer sees it’s important for non-broadcast businesses to experiment with video; “It’s now the time, business models are not all set and technology models are not all set.”

Just as businesses have to deal with a more mobile marketplace and workforce, we’re also seeing video becoming more important. It’s a great opportunity for businesses to develop new channels.

 

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