Tag: disruption

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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You’re going to need a bigger app

Focusing on digital disruption while ignoring bigger social, economic and climatic changes is a folly for business and government leaders

“It has to be disruptive technology,” bleated the consulting firm facilitator at the Future Transport Summit in Sydney earlier this week.

The hapless, but well paid, consultant — a depressingly frequent feature of Australia’s current ‘ideas boom’ — was protesting when one of the participants at his ‘ideation session’ had raised topics such as integrated timetables and changing commuting habits.

Mr Consultant’s running orders for his ‘ideation session’ were to focus on ‘digital disruption’ and his employer;s cluelessness illustrates a danger for business leaders and policy makers.

Selling the snake oil

Digital disruption is real however it’s not just the only factor facing governments and industries. Demographics, economics, politics and climate change will have greater influences on business and society.

Uber, the favourite lovechild of those spruiking digital disruption snake oil, is a very good case in point. While the service certainly has disrupted the taxi and motor vehicle industries, these sectors were facing major challenges as governments enacted policies to reduce carbon emissions, voters became tired of cartel like taxi companies and the Western world’s young and wealthy moved back to the cities and away from owning motor vehicles.

If anything, Uber was the result of GenY entrepreneurs like Travis Kalanick finding existing services didn’t meet their needs rather than the result of technology desperately looking for a problem to solve finding a niche.

Complex changes

While the smartphone was critical in Uber’s success in disrupting the global taxi industry, technology was only one facet of a much more complex set of changes.

The motor industry is a good example of the complexity of change. A hundred years ago it was clear the transport industry was about to be disrupted by the automobile, it was by no means obvious access to affordable personal transport would allow urban sprawl and the suburbanisation of western society.

Coupled with the motor car and truck, the availabilty of mains electricity meant refrigeration also became accessible which lead to the rise of supermarkets after World War II. This disrupted the local corner store in ways shopkeepers could never have foreseen in the interwar years.

Shifting demographics

Now, the opposite is happening as the young and affluent reject long commuting times from distant suburbs and city densities start increasing.

The social and economic factors that drove Uber are affecting public transport usage patterns and it’s no coincidence that the cities where ride sharing services have most successful, such as Sydney, also have underfunded public transport systems that are struggling to meet their population’s demands.

Which brings us back to the foolishness of discussing the future of transport only in relation to technology. Smartphones, apps, big data and the internet of things will all be critical parts of future transportation but the social and economic factors will shape how people use the networks.

Focusing on technology while ignoring the other big influences is a folly that will cost businesses and government dearly. Although one suspects the management consultancies will do well regardless of how well change is managed.

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London’s black cabs fight back against Uber

Can London’s black cabs fight back against Uber

Like many cities’ incumbent taxi industries, London’s iconic black cabs are suffering from the ris of Uber.

Now a consortium of operators, drivers groups and the manufacturer of black cabs have devised an action plan to attract Londoners back to their services.

The proposals include fast Wi-Fi, better integration with tube and bus services, access to bus lanes and – depressingly – tighter restrictions on more lightly regulated minicabs.

London’s black cabs are unique in having high standards for both driver and vehicles which results in them being ludicrously expensive, the reason why many locals use minicabs.

Those high standards though should be an advantage against Uber, however some of the tight regulation and the industry’s culture put the black cabs at a disadvantage.

Uber’s supporter and advocates of the gig economy would, correctly, cite the black cabs raising their game as the main benefit of disrupting the market although the advantage of ignoring many of the rules that apply to the incumbents is a big advantage as well.

Londoners will be happy with the improved services, but for the black cabs this is a fight for protecting their industry against a worldwide disruption. Regulations will probably not be enough to protect them.

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Telecommunication’s lost tribes

In a changing world, telecommunications executives are struggling to find a clear and profitable vision for their businesses.

This week saw Australia’s telecommunications industry gather for the annual Comms Day Summit at Sydney’s Westin Hotel.

A constant in the telco industry is change and new technology – few industries have had to reinvent themselves in the same telephone companies have had to over the last 30 years.

For telcos, that period of change has been immensely profitable as the switch to mobile networks proved to be a river of gold for the industry as consumers enthusiastically moved away from fixed line networks and into lucrative products like SMS services.

Missing the passion

So it was notable how the Comms Day summit was missing a sense of excitement or vision about the approaching opportunities such as 5G networks, the Internet of Things and other new markets. Much of the conversations were mainly focused on the dysfunctional Australian industry and the flawed regulations that got it to where it is.

As an Australian event it’s not surprising that much of the focus would be on domestic failings – thirty years of misguided policy, political opportunism and schoolboy ideologies have left the nation facing the prospect of the “world’s most expensive broadband”  in the words of Megaport founder Bevan Slattery – however the stasis in the telecoms sector betrays a far deeper uncertainty in the global industry.

That uncertainty was on show at this year’s Mobile World Congress in Barcelona where most of the conference’s buzz was around virtual reality headsets and connected cars, areas where telecommunications providers are, at best, a ‘dumb pipe’.

We are not a utility

Being relegated to being a ‘mere utility’ is the fear of every telecommunications executive, which is why they spend so much on abortive Pay-TV, online and sports rights acquisitions. In the Australian context, Telstra’s acquisition of PacNet and Slattery’s own East Asian ventures are possibly the most interesting developments in the local industry yet they were barely mentioned at the Comms Day event.

While the Comms Day Summit told us much about the insular nature of modern Australian business – and the depressing mess three decades of poor regulation has left the local telecommunication industry – the bigger message is the global communications industry is struggling in a world of commoditised bandwidth where the opportunities to make huge profits is not immediately obvious.

It’s hard to see how telcos can be completely disrupted in the way media companies have been given how regulated their markets are – although the same was being said of the taxi industry five years ago – but it is clear their managements are struggling to find new business models.

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Transforming a dysfunctional company

Once dominant IBM is facing another major market transition, do they have the management skills the navigate that change?

Once dominant IBM is facing another major market transition, do they have the management skills the navigate that change?

Robert X. Cringely writes a depressing account of the company’s tactics in cutting its head count but the main thrust is how IBM are cobbling together a bunch of disparate products under umbrella brand names as a bloated, bureaucratic management puzzles with a marketplace change.

At the heart of everything is the question of what IBM’s customers really want, as Cringely points out.

The lesson in all this — a lesson certainly lost on Ginni Rometty and on Sam Palmisano before her — is that companies exist for customers, not Wall Street.  The customer buys products and services, not Wall Street.

While investors are important, businesses only exist if customers want to pay for their wares. If a company can’t convince people to buy their products, or find a way to subsidise it like the media industry did for most of the Twentieth Century, then there is no reason for the venture, or its industry, to exist.

For many technology companies this is the situation they are facing right now, many other industries aren’t far behind.

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The state of Australian technology – and journalism

Australia’s Tech Leaders conference brings together three industries that are being greatly disrupted.

Today I’m heading to the Blue Mountains just outside Sydney for the annual Tech Leaders conference.

With the conference bringing together tech industry vendors, public relations representatives and journalists, it’s an interesting snapshot of an industry in transition.

Technology vendors are dealing with the shift to cloud computing which destroys what were very comfortable and profitable business models.

Needless to say the journalists are the most disrupted group of all with most of the dwindling number now being freelancers and the few remaining staff reporters working under tough deadlines with few resources.

This leaves the Public Relations folk in the middle, as the traditional media channels decline they are having to work harder in getting their clients’ stories into the public domain. At the same time, the compressed margins for cloud affected vendors are cutting into PR budgets.

So Tech Leaders is interesting to see how three very different groups are dealing with their changing industries. I might also get to hear about some new technologies as well.

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When software ate the network

Software is eating the IT hardware industry which is a lesson for other businesses

I’m attending the Asia Pacific Cisco Live in Melbourne Australia this week which is starkley illustrating the shift in communications technologies and the business models around them.

To kick off the press program Cisco made a joint announcement with Australian incumbent telco Telstra on the rollout of a smart software defined networking product.

Software Defined Networking uses basic computer hardware, basically glorified personal computers, to do the jobs of the expensive routers, switches and network appliances that were insanely profitable for companies like Cisco a few years ago.

It wasn’t so long ago when Cisco executives were taking technology journalists out to earnestly explain how Software Defined Networking (SDN) was feasible.

Today, SDN is defining both the telco and communications industries as companies like Telstra look at bundling IT networking and software services into their offerings to prop up their falling margins. India’s Reliance Communications are a good example of how providers are trying to shift into new marketplaces.

For telcos, communications vendors  and IT hardware sellers the changing technologies illustrate what Silicon Valley entrepreneur Marc Andreesen meant when he described how “software will eat the world.’

Software is eating the IT hardware industry and telcos are seeing – hoping – it’s another lucrative opportunity. Businesses in other sectors should be thinking about how software is going to change their world.

Paul travelled to Melbourne for Cisco Live as a guest of Cisco

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