Not all companies will be able to leverage these four growth opportunities effectively. The key to success will be coherence. As our own research shows, the most sustainable, superior returns accrue to companies that know what they are best at (their key three to six capabilities) and grow by aligning brands, products, and services that match. In both shareholder returns and profits, companies with well-integrated business models, capabilities systems, and product portfolios — such as Alberto Culver, Tupperware, and Kellogg — outperform larger, more diversified competitors.
What capabilities will be most important for generating consumer value? The answer depends on how a company chooses to meet the challenges of the four main trends. For example, playing in the new health and wellness categories might require companies to develop “scientifically advantaged” products, practice claims-based marketing (stating health benefits for key products), and comply with regulations while influencing government policy and professional communities. In contrast, building a leading position in emerging markets requires a business model tailored to those countries — and often requires big investments, virtually guaranteeing low profitability in the early phases of expansion. The leading companies in this sector will turn these trends to their advantage — pursuing opportunities consistent with what they do well, and developing the capabilities system they need to preserve their right to win in the marketplace.
The most significant development of the past year for telecom operators all over the world has been the explosion of digital traffic on their networks. Driven by Internet voice and video, by significantly increased use of mobile applications in smartphones, and by accelerating levels of person-to-person communication, this represents a “data tsunami”: a paradigm-shifting increase in usage and volume. The “digital generation” — people younger than 25, who have lived most or all of their lives with the Internet — continues to demand ever more enhanced communications, richer content, and more powerful social networking anytime, anywhere.
Leaders in nearly every industry and government sector now recognize the value of advances in information and communication technology — for reaching customers and constituents, understanding their needs, and devising products and services accordingly. These new industry-specific offerings will also contribute to accelerating traffic. In 2011, the telecom industry will be greatly affected by the ongoing digitization not just of its own and adjacent industries, including technology and media, but of other industries such as healthcare, electric power, telematics, and finance.
This development affords huge new opportunities to telecom operators, but it also presents major challenges. Many operators will struggle to handle the explosion of traffic on their networks while keeping at bay players from outside the industry intent on penetrating the telecom ecosystem. The data tsunami and related phenomena will affect, in one way or another, the primary trends we see for telecom in 2011.
- Increased competition. Telecom operators recognize that their customer relationships are at risk because of new competitors with innovative, value-added services. Apple and Google have already made real inroads into the telecom ecosystem. This year will bring more competition from companies even further afield, as big-box retailers become mobile virtual network operators, PC makers up the ante in smartphones, and online retailers such as Amazon Wireless leapfrog into online services. These players will likely continue to take market share in devices, while creating new markets in digital telecom and media.
The year 2011 will likely also bring an increasing shift toward “over-the-top” services that travel over operators’ networks but provide them no additional revenues. Google, Skype, Yahoo, and even Facebook will take an increasing share of the industry’s revenues.