Following the recent announcement of the introduction of a new tax that would be targeting voice calls made using Voice over IP services such as facebook and Whatsapp calling, we felt it prudent to view the industry through the lenses of Michael Porter and Theordore Levitt.
Michael E Potter published the book and article “Competitive advantage” in his attempt to teach management teams on how to create and sustain superior performance. From our understanding, there are a number of players in the Zambian telcom industry (Zamtel, Airtel, MTN, Vodafone, the 4th Mobile operator whose hails from Angola’s Unitel).
Now each of these companies chose to enter the market Zambia with their own strategy. To do that, their management teams had to make a choice. Either enter the market Zambia with a Cost Leadership strategy or a Differentiation Strategy or a Focus Strategy.
Cost leadership as the name implies means that the company can enter the game Telcom playing the price game. We saw at the epilogue of 2017 and how Airtel caused the tumbling of data prices when it engaged in a price war in the sector that sent prices heading south for the summer.
Differentiation entails a company deciding to seek blue oceans in an otherwise saturated product offering market. In this case a company seeks to be unique in its industry alone some dimension that is widely valued by its buyers.
Focus strategy is quite different from the others because it rests on the choice of a player in a game deciding to seek a narrow competitive scope within an industry. We saw Vodafone do this when they entered with only a Data only License into the sector.
Needless to say, the aforementioned strategies if applied in the Telcoms Sector in Zambia are not without their risks. For example if one company chooses Cost Leadership strategy it runs the risk of not being able to sustain it as competitors easily imitate and technology changes. Should a company adopt Differentiation strategy it runs the risk competitors also imitating as well as the basis of differentiation being less important to buyers (the so what? I don’t care about bells and whistles). With a Focus strategy the risk of imitation can decimate a business and worse still the target segment can become structurally unattractive over time.
Harvard Business Review describes “Marketing Myopia” as a quintessential big hit HBR piece. We agree because although written in 1960, it correctly captures what is happening in modern day Telcom’s industry in Zambia. According to Levitt’s article, he believed that there were no such things as growth industries. There are only companies organized and operated to create and capitalize on growth opportunities and for companies that assume themselves to be riding some kind of automatic growth escalator invariably descend into stagnation. We believe stagnation has been reached in the Zambia Telcom sector as the growth that the two big players enjoyed until recently eroded and imploded into a price war that reduced margins in the industry.
Legacy voice businesses that considered themselves monopolies of old soon found themselves not only competing for customers but also thirsting for survival. Technology being the biggest disrupted answered the question that many players failed to answer. What business are we in? If the answer from the management team was that they were in the voice telephone industry, then Theo was right. These are the same management teams that are seem to throw everything and the kitchen sink on legacy technological strategies that are so narrow in their approach that it makes it easy of extant players that have evolved to walk into their markets and take their prized customers.
The unfortunate part is that should such management teams seek out legislative measures to compete or save their businesses, this only serves to reaffirm that they are bounded rational and refuse to deal with the elephant in the room.
Advice to legacy players would be to conduct a self-audit of all available infrastructure in answering the question, “What business should we be in?”. Such legacy players have a plethora of options. Taking a leaf out of Bill Gates’ playbook may be a start. In 1997, Microsoft announced a $1 Billion investment into Comcast Corporation to enhance the deployment of its network to better deliver broadband capabilities. Bill recognized the true potential of high speed data and video services.
In short, there is nothing stopping extant players in the Zambian Telcom industries from becoming Digital Media companies. With digital migration all but complete, any CEO with the infrastructure and reach that some possess should be sipping on a whiskey asking him or herself, “Why am I not in the Entertainment Delivery Business” like the likes of DSTV? There is nothing stopping them. Only myopia stands in their way.