Wednesday, October 11, 2006

Ten things, 2.1

One of the amazing things I have seen in writing this blog is that it's often the pieces you never suspect which generate huge interest. My previous Ten Things post got picked up yesterday by Brother Om, and then by CNN Money, as well as a lot of others. One thing I clearly observe is that the Om-derived traffic is a lot higher than that coming from CNN - ironic in light of the fact that Om used to work for a TimeWarner company... According to my traffic logs, I got dangerously close to 2,200 visits to the site yesterday (as opposed to the x-hundred people who subscribe to the RSS feeds), which is nearly six times my average daily traffic, and so far this morning I am already near the level of traffic I typically see in a day. So thanks to everyone for taking notice - I appreciate the interest.

However, I was a bit taken aback by the strength of the response and need to clarify a couple of points, just so I'm not misunderstood. I didn't write this as some sort of manifesto. It was really just intended, for those who weren't there, as a summary of my opening presentation at Telco 2.0, which itself was designed to take the audience out of their comfort zone, albeit in a humorous manner. The whole idea around the Telco 2.0 event was the theme of an "industry brainstorm," and I was trying to focus on issues which the industry needs to work through. As I made clear to the audience at the time, the list is a distillation of things I genuinely have heard investors complaining or worrying about (occasionally with a bit of help from me). I don't necessarily subscribe to every item in equal measure, nor did I intend to paint a picture of utter despair. Fundamentally, I guess the thing which surprised me most is that the reaction to the piece suggested that people somehow viewed this as something new. A lot of the issues have been stated in discreet and fragmented form by me and others for the past three years or so, i.e., the underlying message was there already, but maybe it was the fact that it was all synthesized together in one place that got people's attention. Not that I mind - there's no such thing as bad publicity.

Be that as it may, the other thing to make clear is that the "Ten Things" are not what I came away with from the event, they're what I took in. What I came away with was much more complex. I met some extremely bright and forward-looking people, many of whom seemed to be terribly frustrated by the constraints in which they work. So when I say that "telcos can't innovate," that's an investor perception based on what we see on the outside. Clearly there are innovative people on the inside, but they face challenges in being heard and getting buy-in from the organization as a whole. I can certainly relate. My own industry is being disrupted, and I have often tried to be heard internally on the issue of how we position ourselves to deal with it (for instance, suggesting that we sponsor Telco 2.0 - pigs will fly...), but the level of awareness in places where it matters is very low, and risk aversion is insurmountable. So if it looks like I am pointing the finger, it is partly from a similar position of personal frustration and organizational paralysis.

All that said, my final impressions of Telco 2.0 are as follows. It is clear that the industry as a whole, and the specific companies within it, seems to be polarizing into two camps (as Malcolm Matson cheekily illustrates here): one of which says, "We should stop fighting in the services arena, restructure ourselves around infrastructure and reappraise how we can derive value at the edge."; the other is intent on raising its game in services and genuinely believes there is value to be derived in doing so. I don't know how companies can be run coherently with such cognitive dissonance going on, probably even at the highest levels of management.

Then again, I guess this is just the sort of process which can generate change - the conflicting voices in the head of telecom will eventually have to lead to some sort of action. Alternatively, perhaps regulation (mandated structural separation) or investor demand (structural separation as a form of financial engineering to unlock value) will force the agenda to the surface. The "good news" in all of this, if you consider admitting yourself to rehab to be good news, is that the level of denial I picked up at Telco 2.0 was dramatically lower than what I have encountered in previous events. It genuinely seemed as if the attendees were striving for some sort of answer, attempting to grapple with some dilemmas which I'm sure they'd just as soon ignore. As proof of this, I note that, unlike many other events, the majority of speakers stayed around for the entire event, rather than taking the typical "Elvis has left the building" fast-track.

I had a meeting with a very smart client yesterday, who was fascinated by all the issues around industry transformation. His final question, a rhetorical one was: "In investing theory we should always be uncomfortable with the consensus view. The consensus view of telecom is that it is inexorably trapped by its own limitations and inability to change. I wonder what are we missing in this story?" That is the EuroTelco challenge, the EUR500bn question.

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