“If you aren’t meaningfully different in how you do things you will eventually fail.”
I have only ever been to one “power breakfast” – it was in New York many years ago when I worked in the chaotic excess of a telecoms industry being opened up to competition for the first time. I had the real privilege of sitting opposite one of the most famous professors of marketing in the world. Looking up from my hash browns and past him, as he thought about my question, the glassy skyscrapers surrounding us reflected a dull lead-grey sky.
“The management of connectivity”. This was his answer to my simple question about what he thought the core competence of a telecoms company was. Actually, it was a longer answer than that. “All aspects of the management of connectivity, technical, regulatory, commercial and social”. I think that is what he said.
I was working for Mercury Communications at the time and whilst it had a good deal of competence in those things it wasn’t why it got business. It got business because it wasn’t BT. As the first fixed line competitor to BT it had a duopoly license for the first years of its existence to allow it something of a head start. Hard as it is to imagine now, at the time BT had a pretty negative brand and Mercury took advantage of it. Oh, and it charged less too.
His answer got me thinking about the difference between a business’ core competence and its competitive advantage. Didn’t you have an advantage because of your competence? In telecoms then it seemed that the former was something you needed to compete but it wasn’t enough to provide you with an advantage over your competitors. In fact, at the time, advantage primarily came from monopoly, or duopoly in Mercury’s case, access to network assets. Mercury was in the telecoms business because it had been allowed access to the network but people bought from it because it wasn’t BT and it was cheaper.
Well, today connectivity is still the core competence of a telecoms company but globally mobile networks now dominate and fixed line businesses are struggling to understand their role anymore in an increasingly wireless world. The current CEO of Cable and Wireless Worldwide (CWW), which looks set to be sold to Vodafone for £1bn, has recently admitted to risks in its medium term business plan. CWW has had several profit warnings over the last two years, struggling with a weak competitive position in the corporate market and poorly integrated networks from past acquisitions.
You don’t need much of a fixed line network anymore to bring communications to the people, but it helps over longer distances and there is some value left in the outposts of empire that CWW still serve. Apart from the obvious advantages of doubling its UK corporate customer base and using its own backbone infrastructure, rather than paying BT, Vodafone has the global reach, financial muscle and wireless rich connectivity competences to make far more of CWW’s fixed assets, licenses and customers than it has. In many ways I think Vodafone has got a bargain, as Orbis, one of its shareholders recognises but, unable to do much about it, is going along with the deal anyway.
Although still relying on a degree of protection from competition, that mobile operating licenses provide, Vodafone normally has other licensees to deal with too. Because of this it has developed finely honed competitive competences that BT has learnt but arguably CWW never did. Vodafone’s core competences really do contribute to its competitive advantage because, more often than not, customers have a choice of network and operator to use.
Core competences always contribute to competitive advantage in competitive markets, which telecom now is. Without ones that are meaningful to customers, you will not survive, as CWW has, eventually, found out.