Wednesday, February 22, 2012

Anything not moving forward is moving backwards

As this Lexus commercial clearly states, if you are not moving forward, you are moving backwards in relation to everybody else. This is especially true in technology intense industries such as IT and Telecommunications but is true in every industry.

If the industry you are in, let alone the company you work for, is not innovating at the proper pace, be prepared for surprises and worst case scenario, extinction. Unfortunately for you, the pace of innovation may not be set by one of your closest competitors or yourself but a completely different industry.

Today, and for the past twenty years, that industry has been the software and IT industry. Ignoring what happens here can come at a very high price. The tradition of trial and error, pivoting and iterating until something sticks has made innovation here move faster than ever before.

A recently published report by OVUM states that the global Telecommunications industry lose about $14Bn annually because subscribers use “over the top” (OTT) applications for messaging such as WhatsApp Messenger, Facebook etc. Another great example of this is how the international long-distance market has evaporated and been taken over by Skype.

From where I’m standing this is pretty symptomatic for the Telecommunications industry. Even though the industry is incredibly exposed to innovative pressure from the IT and software industries the carriers are still run like utilities. Look at the leadership in the Telecommunications industry today. Many CEOs are former CFOs, basically accountants, are being asked to run global companies in an extremely competitive industry that is also facing enormous innovative pressure from other industries. There is no way that will end well.

One of the most characteristic traits of somebody with an accounting background is to try and eke out as much profit as possible from old investments. Because they are already depreciated they produce artificially large profits. I say artificially since depreciation is a tax and an accounting tool that has no connection to real value.

This basically is the same thing as saying that a former CFO is uniquely ill qualified to “kill your darlings”, especially “profitable” ones. In an extremely competitive industry with enormous innovative pressure, being able to kill off profitable services through innovation, before someone else does it for you is critical. Not to mention fostering innovation instead of focusing on disastrous mergers and financial transactions.

If the wireless carriers do not want to be viewed as utilities for connectivity, stop running the companies as utilities and appoint true leaders instead of accountants to run them! The telecommunications industry need to start moving forward to avoid extinction.

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