Growth codes presentation
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With the mobile business in a state of transformation - new players, operator and vendor mergers - Ericsson set out to answer the question: what makes a mobile operator successful? Working with EY, Ericsson has been able to identify and explain each of the 3 different strategy options that successful mobile operators, called Frontrunners, adopt.
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Growth codes presentation
- 1. Growth codes Extended Strategies Edition
- 2. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 2 More subscriptions, more traffic More Services Mobile subscriptions LTE HSPA 10 9 8 7 6 5 2 4 3 1 0 + 2.4 billion Monthly traffic (per application type) 0 15 000 5 000 20 000 10 000 25 000 30 000 Globalmobiletraffic (Petabytes/month) 2014 2020 Video (55%) Social networking (15%) Web browsing (5%) 8X Audio (2%) Source: Ericsson Mobility Report 2014
- 3. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 3 But who is making money ON IT?
- 4. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 4 An Extended group of frontrunners keeps growing › 20 Frontrunners show revenue growth of 9.6% CAGR* › Revenues of peers grows with 2.7% CAGR › The rest at -1.4% CAGR *) Yearly Revenue Growth Indexed, 2010 = 100 Reference Year 2010 Index 2010 = 100
- 5. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 5 The Study 270 operators Financial Analysis 20 Front Runners Strategic Analysis 30 operators Growth Codes Operator Strategies
- 6. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 6 Leading Revenue Growth Frontrunners identified Evaluated and identified based on 3 key parameters ~5% or higher Full Year Growth >25% non-voice revenues in last quarterPositive EBITDA Profitable Data centric
- 7. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 7 Different strategies in different markets Source: Ericsson EMEAAMERICAS APAC Quality led Market led Offering led
- 8. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 8 Different strategies in different markets Source: Ericsson Quality led Market led Offering led EMEAAMERICAS APAC
- 9. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 9 Interviews Information 20% 10% 40% 30% C-Suite Function CFO COO CSO CTO 30% 50% 20% Geographical Split North America Asia-Pacific Europe
- 10. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 10 What have they done to be that successful?
- 11. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 11 Innovating new revenues Connectivity and Services as differentiators Connectivity and Services as commodities Market & Tech Synergies Market & Tech Silos Maximizing old revenues Problem Focused Opportunity Focused Frontrunners think differently Shift of mindset
- 12. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 12 The Growth Codes
- 13. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 13 6 Growth CODES Create ways of showing superior performance in contexts that people can relate to, and show that the difference is worth paying for. Build direct feedback loops between user experience & network optimization. Move KPI’s closer to user experience to focus attention where it matters the most. Invest proactively to create demand, rather than reactively to meet the existing demand. Stay ahead of price wars by being hard to copy. Tear apart and re-figure to create cleverly segmented service offerings to increase loyalty and revenue. Build flexibility into systems and processes. Bundle offers with third-party brands to deliver synergistic experiences. Be an open platform for value creation, based on the customer relation asset. Form long-term collaborations, empowered by shared incentives, insights and roadmaps. Create “we’re in this together” mentality and minimize restarts. “Ecosystematic” “Unboxing”“Co-Partnering” “Streetwise Metrics” “Showcasing”“Gap Minding” Market your Performance Leadership Create Innovative OfferingsEmbrace Innovation Measure and Manage User ExperienceCreate Performance Gap to competitors Create Strategic Partnerships for Growth
- 14. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 14 The Value chain for investment
- 15. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 15 Is there a common strategy behind their success?
- 16. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 16 Frontrunners apply a dual approach to growth Strategies for current growth Existing Markets & Existing Capabilities New Markets and/or New Capabilities Strategies for future growth › IoT & Vertical solutions › Cloud & ICT services › Expand operations and footprint (e.g. through M&A, geographical expansion or alliance) › Explore new business models , partnerships and services › Traditional telecom products & services › Present markets & segments
- 17. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 17 Differentiation Market scope Customer scope Product scope Technology & Operations How do frontrunners think differently? Offering-led transformation Quality-led progression Market-led adaptation
- 18. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 18 three Strategies to profitable growth › End-to-end customer experience focus › Selective distribution & campaigns › Segmented approach – often utilize sub brands › Fast followers on new products & services › Selected strategic partnerships › High focus on market innovation › One-for-all offerings and targeted distribution › First to market with new offerings › Several strategic partnerships › High focus on operational efficiency Offering-led Transfomation › Selective customer experience efforts & simplification focus › Extensive campaigns & promotions › Vast distribution network › Rely on extensive high-quality service portfolio & converged offerings › Few strategic partnerships - extensive own VAS offering Quality-led Progression Market-led Adaptation Differentiate on high-performing networks and brand preference Differentiate on uniquely designed offerings redefining customer value Differentiate on quick adaptation to market conditions
- 19. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 19 The Strategies leverage the growth codes Differentiate on high- performing networks and strong brand preference
- 20. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 20 The Strategies leverage the growth codes Quality-led Progression This type of strategy is driven by the ability to create a Network Performance gap to competitors in the market through the Gap Minding Code. This is coupled with the ability to “Showcase” this gap through a simple and understandable manner to the end-user. The effect of coupling those two codes together creates a Brand Preference to attract high ARPU segment. Further, to be able to attract consumers there needs to be a focus on creating Innovative Offerings that captures Customer Value effectively. Finally because this strategy creates a solid base for value creation, frontrunners deploying this strategy would be looking out for partners that share a common mind-set to advance innovation and build upon their respective expertise.
- 21. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 21 Frontrunners in practice American Operator › Significant lead in data coverage › Showcasing extent of coverage visually against the competitors Quality led Progression 36%revenue growth over 5 years
- 22. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 22 The Strategies leverage the growth codes Differentiate on quick adaptation to market conditions
- 23. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 23 The Strategies leverage the growth codes Market-led Adaptation This type of strategy is driven by and understanding of market needs and end-user preferences. Frontrunners deploying such strategy will always look to understand, measure and manager User Experience through Streetwise Metrics. Because this type of strategy is quick to adapt to market conditions and the need of targeted segments, they need to showcase their User Experience to a selected set of segments. Their ability to mirror offerings that are successful as they are introduced by competitors but add value through further capturing some leftover customer need is vital to their success hence their application of the above codes in harmony.
- 24. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 24 Frontrunners in practice Global Operator › Fast follower › Tailored bundling for targetted segments › Innovative billing › Re-use strategy into other markets Market Led Adaptation 28%YoY subscriber growth in targetted segment
- 25. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 25 The Strategies leverage the growth codes Differentiate on being first to market with uniquely designed offerings
- 26. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 26 The Strategies leverage the growth codes Offering Led Transformation This type of strategy is driven by the ability to be internally capable of researching, understanding and mirroring customer needs in the offerings presented. They do understand the need of creating a gap in terms of network performance but targeted towards the segments that that innovative offering is directly impacting. Their unboxing considers very strongly who the end-user is and how to deliver on a perceived high quality of service. They also do not consider the OTT players as a threat but leverages their offerings in expanding bundle variety to cater for a specific segment with more options within.
- 27. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 27 Frontrunners in practice Asian Operator › Embracing innovation › Improved brand sentiment & NPS through strategic partnering and improved network performance › Attractive plans targetting pre-paid users Offering Led Transformation 13%YoY growth in total revenue
- 28. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 28 The Strategies put varying emphasis on the growth codes Offering-led Transformation Differentiate on being first to market with uniquely designed offerings Quality-led Progression Differentiate on high-performing networks and strong brand preference Market-led Adaptation Differentiate on quick adaptation to market conditions “Streetwise Metrics” Measure and Manager User Experience “Co-Partnering” Create Strategic Partnerships for innovation “Unboxing” Create Innovative Offerings “Showcasing” Market your Performance Leadership “Ecosystematic” Embrace Innovation “Gap Minding” Create Performance Gap to Competitors Drive Usage Monetize Usage
- 29. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 29 Frontrunners emerging Strategy Type No. of frontrunners Offering-led Transformation Quality-led Progression Market-led Adaptation 2014 2015 20 30 est. Market Share No. of frontrunners 2014 2015 20 30 est. Market share position: #3 Market share position: #1 Market share position: #2 2013 12 2013 12
- 30. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 30 Strategy type overview Total communications provider Quality of service Customer experience Core products & services Efficiency Offering-led Transformation Quality-led Progression Market-led Adaptation Ensure excellent network performance as the foundation for growth Offer great and consistent customer experience to foster loyalty and growth Leverage capabilities to grow from existing products & markets Ensure efficient operations to maximize value Expand to or utilize full range of services to capture a bigger share of the market
- 31. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 31 Quality of service is the foundation of growth Superior network performance as a differentiator Big investments, you have to be committed in outspending your rivals. - COO, Frontrunner Asia-Pacific Improve network performance to meet customer expectations You need to have a credible network, it’s a must have. - CSO, Frontrunner North America Frontrunners leverage network performance in one of two different ways
- 32. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 32 Successful Operators: Strategies & Growth codes UNDERSTANDING THE CUSTOMER ATTRACTIVE MARKET OFFERs › Frontrunners are outperforming their peers › ..and stimulating the market › Growth Codes 2.0 identifies clear strategies and tactics for success › The number of front runners is set to rise
- 33. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 33 About this study
- 34. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 34 framework Generic competitive strategies Distinctive emphasis No distinct emphasis Cost emphasis Mixed emphasis Cost economy Focused cost economy Sales Leadership Broad Quality & Sales Leadership Innovation & Operations Leadership Strongest correlation with return & growth Weakest correlation with return & growth May yield positive returns pending market conditions Broad scope Narrow scope Narrow scope Broad scope Broad scope Differentiation emphasis
- 35. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 35 Source: Frontrunners’ communicated strategies
- 36. Growth Codes 2.0 | Commercial in confidence | © Ericsson AB 2014 | 2015-04-27 | Page 36
Editor's Notes
- 2015-04-27
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- Analysis of frontrunner strategies has uncovered three different paths to achieve profitable growth. A more detailed description of the strategy types: Quality-led progression Differentiation - Invest in high-performing network & High brand preference Market scope – 1. Aim at high brand preference through quality in sales and service. 2. Aim at being close to the customers through broad distribution Customer scope – 1. All major segments addressed, often both consumers and enterprises 2. Aim for consistent customer experience, focus on filling gaps Product scope – 1. Rarely first to market, rely on portfolio breadth, converged offerings and customized solutions. 2. Few downstream strategic partnerships Technology & Operations – 1. Less focus on efficiency 2. Full-fledged variety of support platforms and related processes Market-led adaptation Differentiation - Quick adaption to market conditions Market scope – 1. Generally more selective distribution (e.g. some channels, fewer resellers, more online) 2. Often utilize sub brands to target certain segments Customer scope - Focus on providing superior end-to-end experience for the selected target segments Product scope – 1. Fast followers on new offerings 2. Medium-sized portfolio with some degree of customized solutions 3. Some downstream strategic partnerships Technology & Operations – 1. Some focus on operational efficiency 2. Agile business support systems and processes in key areas Offering-led transformation Differentiation – 1. Uniquely designed offerings 2. First to market with new offerings Market scope – 1. Sales and marketing efforts rely on unique offering 2. Often aim at growth from certain segments 3. High focus on market innovation Customer scope – 1. Continuously renew offerings to promote customer interest and loyalty 2. Focus on customer satisfaction and brand Product scope – 1. Simplified, one-for-all offerings 2. Many downstream strategic partnerships with attractive, leading companies Technology & Operations – 1. High focus on operational efficiency 2. State-of-the art business support systems and related processes NOTE (for presenter only) Operators applying a Quality-led progression strategy: Safaricom, Kenya Telkomsel, Indonesia Globe Telecom, The Phillipines True Move, Thailand Telstra, Australia Telus, Canada Verizon Wireless, USA DU, UAE Telenor*, Norway VIVO*, Brazil MTN*, Nigeria BCE*, Canada Vivacom*, Bulgaria Operators applying a Market-led adaptation strategy: LG Uplus, South Korea AVEA, Turkey China Unicom, China MTS, Russia Movistar, Argentina Vodafone, Turkey KDDI, Japan Softbank, Japan Korea Telecom*, South Korea Chunghwa Telecom, Taiwan Operators applying an Offering-led transformation strategy: China Telecom, China T-Mobile, USA Telecom Personal, Argentina XL Axiata, Indonesia Movistar, Colombia DIGI*, Malaysia FarEasTone*, Taiwan * Forecasted frontrunners for 2015
- As we know, we have identified a growing number of operators with superior service revenue growth and a high share of data revenues – the frontrunners. We define six common traits that these frontrunners share, six traits that we call the Growth Codes. Whilst the frontrunners make use of all growth codes they tend to place a larger focus on a subset of these depending on the growth strategy they apply. Frontrunners with a Quality-led progression strategy differentiate firstly on having a high-performing network which is supported by Gap Minding and Co-Partnering. Secondly they aim for brand preference among customers which is supported by the growth codes Showcasing and Unboxing. Frontrunners with a Market-led adaptation strategy need to quickly adapt to market conditions by understanding and delivering on customer expectations, and as such, the growth codes Streetwise Metrics, Showcasing and Unboxing are crucial to succeed in the marketplace. Frontrunners with an Offering-led transformation strategy differentiate on being first to market with unique offerings, often together with partners, which is why a large emphasis is placed on the growth codes Gap Minding, Ecosystematic and Unboxing. NOTE A more thorough description of the relation between each strategy type and the growth codes can be found in each deep dive
- As we know, we have identified a growing number of operators with superior service revenue growth and a high share of data revenues – the frontrunners. We define six common traits that these frontrunners share, six traits that we call the Growth Codes. Whilst the frontrunners make use of all growth codes they tend to place a larger focus on a subset of these depending on the growth strategy they apply. Frontrunners with a Quality-led progression strategy differentiate firstly on having a high-performing network which is supported by Gap Minding and Co-Partnering. Secondly they aim for brand preference among customers which is supported by the growth codes Showcasing and Unboxing. Frontrunners with a Market-led adaptation strategy need to quickly adapt to market conditions by understanding and delivering on customer expectations, and as such, the growth codes Streetwise Metrics, Showcasing and Unboxing are crucial to succeed in the marketplace. Frontrunners with an Offering-led transformation strategy differentiate on being first to market with unique offerings, often together with partners, which is why a large emphasis is placed on the growth codes Gap Minding, Ecosystematic and Unboxing. NOTE A more thorough description of the relation between each strategy type and the growth codes can be found in each deep dive
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