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Published: February 22, 2011
 / Spring 2011 / Issue 62

 
 

The Thought Leader Interview: Didier Lombard

In 2002, when Thierry Breton was appointed CEO of France Télécom, he asked me to help him build the strategy of the company. So after a 20-year absence, I returned to the company where I had started my career. When Thierry Breton left the company to become the French minister of finance, in 2005, I succeeded him as CEO of France Télécom for the next four years.

S+B: What did you try to accomplish during that time?
LOMBARD:
It was a fascinating period because I understood how much our business was changing. Previously, we had separate businesses for fixed lines, mobile phones, and the Internet. I had to persuade our managers to integrate them. We also set out to increase the number of subscribers for France Télécom, and they went up by 50 million. Then, in 2010, we separated the functions of CEO and chairman. Stéphane Richard is now the CEO and, as chairman, I am no longer involved in day-to-day operations but can focus on the company’s major strategic issues.

S+B: As head of industrial affairs, you must have learned a great deal about the role of the state in governing the private sector. Does that influence your views on regulation and digitization now?
LOMBARD:
Yes. Even in France, there is always a debate about the interference of the state with the economy. My own view is that the government can make many legitimate moves to help the economy, but it cannot substitute its planning for market choices.

When government works with entrepreneurs who have skills, ability, and a reasonable goal, but who need some help, it works. A good example is what the French government did with STMicroelectronics [a French–Italian semiconductor and computer component manufacturer headquartered in Geneva]. In the 1990s, I was persuaded that if we didn’t help this company, it would disappear, and there would be no more microelectronics industry in Europe.

Therefore we decided to recapitalize STM, to help it fund R&D and so forth, and the company survived. Today, it is the fifth-largest microelectronics company worldwide. Not every case worked as well, but this showed us that intervention can be effective, as long as it is in line with the market.

In the telecommunications sector, the best model of industrial policy is China. China has systematically covered the steps for establishing a new economy, including subsidizing R&D and universities. Now it is subsidizing large companies to win market share in Africa and Europe. In the past, China produced low-cost products. Now, the best equipment available on the market — not always, but most of the time — is Chinese. That type of systematic industrial policy is the way to approach a changing infrastructure technology.

S+B: What would be the optimal form of regulation for the telecom and media industries?
LOMBARD:
It would be oriented to global competition and rapid adaptation. Most regulation, by its nature, is old-fashioned, because it takes years to move from the initial discussions to defining the rules to hiring the commissioners who will enforce it. Then, when major changes like digitization and convergence occur, the regulations don’t take them into account.

For example, in Europe we have 27 national regulators, plus one for the European Union, and the rules have been established by, let’s say, old-world thinking. Regulations governing television, publishing, and copyright are often designed to protect the local media players. In general, they’re focused on separate markets. But the new digital system has no national borders; the Internet is worldwide. No country can protect its media from global change and competition. Google, Apple, and Facebook will all be global media players. Facebook has 500 million subscribers, which is much larger than our subscriber base. Regulators have not incorporated this reality into the design of their regime. I sometimes think that if we had had our current regulatory regime at the beginning of the world, we would have a perfect market in flint. But we’d never have gotten to the Bronze Age, because it would have been forbidden to merge different types of metals.

 
 
 
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