What makes a mobile operator successful? There has been a widely held view in the market that operators are struggling to generate growth as they move into a smartphone and data-centric world. However, some operators around the world are proving this to be false. They are prospering thanks to large amounts of data and the usage of new services – not in spite of them.
We have identified what makes a frontrunner: operators with superior service revenue growth and a high share of non-voice revenues. We have found the common components and significant differences in their strategies for profitable and sustainable growth. Our key finding was that there are six common traits that are shared by frontrunners – we call these Growth Codes. #growthcodes
2. 2 ERICSSON GROWTH CODES REPORT MAY 2015
Introduction
There has been a widely held view in the market that
operators are struggling to generate growth as they
move into a smartphone and data-centric world.
However, some operators around the world are proving
this to be false. They are prospering thanks to large
amounts of data and the usage of new services –
not in spite of them.
We have identified what makes a frontrunner:
operators with superior service revenue growth
and a high share of non-voice revenues. We have
found the common components and significant
differences in their strategies for profitable and
sustainable growth. Our key finding was that
there are six common traits that are shared by
frontrunners – we call these Growth Codes.
GROWTH
CODES
Market your
performance
leadership
Measure and manage
user experience
Create
innovative
offerings
Create strategic
partnership for
innovation
Embrace innovation
Create performance
gap to competitors
Gap
Minding
Streetwise
Metrics
Showcasing
Unboxing
Eco-Systematic
Co-Partnering
DRIVE USAGE MONETIZE USAGE
The Growth Codes
Rather than specify a single recipe for success,
Growth Codes represent a consistent approach
taken by frontrunners to generate profitable
revenue growth in their own markets.
IDENTIFYING FRONTRUNNERS 3
A MINDSET FOR SUCCESS 5
STRATEGIES TO PROFITABLE GROWTH 7
BEHIND FRONTRUNNER EMERGENCE 10
LINKING STRATEGIES TO CODES 11
contents
3. ERICSSON GROWTH CODES REPORT MAY 2015 3
IDENTIFYING
FRONTRUNNERS
Frontrunners were identified using three criteria:
> Achieving a healthy annual revenue growth
signified by 5 percent or higher
Maturity in respect to capturing business
through a higher proportion of non-voice
revenue, beyond 25 percent
Remaining profitable through positive EBITDA
These operators have market-leading revenue
growth and leverage on their strong performance
in non-voice revenue segments. We also looked
at how these frontrunners were able to maintain
stability and sometimes grow their voice revenue.
From just 12 frontrunners in 2013, to around 20 in 2014,
it is forecast that by the end of 2015 there will be 30.
This study sheds light on how the six different codes
are used in conjunction with strategies deployed in
unique market conditions.
Frontrunner performance
These operators have succeeded through a combined
focus on technology and a go-to-market strategy
across the six Growth Codes, monetizing on the
increased data and services usage. As Figure 1 shows,
these operators were able to achieve an average
12.4 percent CAGR in revenue 2010–2014, compared
to their peers on the same market at 7.3 percent.
These frontrunner operators have not only been able to
drive top-line revenue, they have done so profitably.
Frontrunner dynamics
The criteria used to identify frontrunners is
formulated based on the entire results of a given
year. Dependent on the maturity of the market
and the dynamics of growth, some frontrunners
that previously satisfied the criteria might drop
out. The frontrunners that drop out due to not
entirely fulfilling the criteria do not contribute to
the total number of frontrunners in the drop-out
year. That being said, an operator that stops
being a frontrunner may still
exhibit the traits of Growth Codes,
in light of unique market growth
activity and relative performance.
Figure 1: Average CAGR of included operators
80%
100%
120%
140%
160%
180%
Q4
2014
Q3
2014
Q2
2013
Q1
2013
Q4
2012
Q3
2012
Q2
2012
Q1
2012
Q4
2011
Q3
2011
Q2
2011
Q1
2011
Q4
2010
Q3
2010
Q2
2010
Q1
2010
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Peer
Frontrunner
Source: Ericsson analysis based on data from Strategy Analytics
Peers
achieved
Frontrunners
achieved
7.3%
12.4%
CAGR
CAGR
4. Rest of
the market
achieved
-1.4%CAGR
Figure 2: CAGR of total revenue per group
An increasing share of reported revenue comes from
data. These frontrunners each have quite different
starting points; they may be leaders or challengers in
their own markets, or active in markets with different
levels of maturity.
Interestingly, it was noted that the presence of a
frontrunner in a market could be a passive driver for
their peers to achieve a stronger performance. When
looking at the entire industry, through the summation
of revenues (Figure 2), we note that frontrunners’
CAGR is at 9.6 percent, their peers are at 2.7 percent
and the rest of the market is at -1.4 percent.
4 ERICSSON GROWTH CODES REPORT MAY 2015
80%
100%
120%
140%
2010 2011 2012 2013 2014
The rest
Peer
Frontrunner
Source: Ericsson analysis based on data from Strategy Analytics
Peer group
achieved
Frontrunner
group achieved
2.7%
9.6%
CAGR
CAGR
5. A MINDSET
FOR SUCCESS
ERICSSON GROWTH CODES REPORT MAY 2015 5
Quality of service is the foundation of growth
Independent of the market role that a frontrunner
takes, we have found a clear pattern in growth
strategies; there is huge emphasis on the quality
of service as the foundation of growth. Network
performance also has a prominent position in the
growth strategy of all frontrunners and remains a
constant focus. We have found that frontrunners
leverage this in two different ways.
Some frontrunners use network performance as
a differentiator. They constantly strive for superior
performance compared with their competitors.
The frontrunner approach to growth
Frontrunners are characterized by a mindset that
challenges conventions to make connectivity more
available to people, businesses and society. They seek
new ways of doing business, leading the transformation
of their customers’ lifestyles. In order to achieve this,
frontrunners deploy growth strategies with a dual focus,
enhancing their core business while at the same time
exploring new markets and capabilities to secure
future revenues.
In this report, we are focusing on the strategies for
current growth, in order to understand what has made
this particular group of operators so successful.
Others emphasize the importance of network
performance in order to meet customer expectations.
They typically have not had a leading position in the
market and have realized the need to avoid a head-on
collision in direct competition. Rather they diversify
their focus into both the understanding of users and
incorporating that into their Quality of Service. They
are usually motivated by a competitor with superior
network performance driving the average customer
expectation higher.
You need to have a credible
network, it’s a must have.”
CSO, Frontrunner North America
Frontrunners seek new ways
of doing business, leading the
of their customers’ lifestyles
transformation
6. 6 ERICSSON GROWTH CODES REPORT MAY 2015
Through investigating frontrunners’ differentiation, market, customers and
product scope, as well as their approaches to technology and operations,
we identified three different strategies that frontrunners adopt:
Each of the three strategies has five components,
as displayed in Figure 3. These five categories are
made up of the following:
Figure 3: Investigating the three strategies
DIFFERENTIATION
MARKET SCOPE
CUSTOMER SCOPE
PRODUCT SCOPE
TECHNOLOGY AND OPERATIONS
3 STRATEGIES
Quality-led
progression
Market-led
adaptation
Offering-led
transformation
Differentiation
What’s the main differentiation in the way they conduct
their business, how do they see themselves in respect
to the market, and how does the user see them?
Market scope
How do they market their offerings to the user and
what channels/tactics do they utilize?
Customer scope
What customer elements do they focus on and
how do they deliver on these?
Product scope
What products do they offer and how does their
portfolio variety play into their strategy?
Technology and operations
What kind of partnerships do they utilize and how
do they become more than a simple connectivity and
communications platform provider? Is there a focus
on internal efficiency?
7. STRATEGIES TO
PROFITABLE GROWTH
ERICSSON GROWTH CODES REPORT MAY 2015 7
The framework used to structure this study is from the
Colin Campbell-Hunt, Strategic Management journal
titled ‘What have we learned from generic competitive
strategies?’. This framework is based on 17 generic
competitive strategies covering more than 6,000 firms,
in which strategy classifications are reflected back to
the ones that correlate with financial return and growth.
Frontrunners that take a quality-led progression
strategy differentiate themselves due to their
high-performing networks and services,
as well as strong brand preference.
Differentiation
Invest in a high-performing network
and high brand preference
Focus on core products and services
Project the brand image of a high-performing
network to consumers using simple messaging
Diversify the business growth strategy
Market scope
High brand preference through sales
and service quality
Aim to be close to a broad customer base
through distribution channels
Customer scope
Address all major segments,
consumers and enterprises
A consistent customer experience
and focus on gap filling
Product scope
Rarely first to market, and rely on an
extensive high-quality service portfolio,
converged offerings and customized solutions
Few strategic partnerships
Technology and operations
Fully-fledged variety of support platforms
and processes
Relatively low focus on efficiency
QUALITY-LED PROGRESSION
CUSTOMER
NETWORK
MOBILE
DATA
BUSINESS
The study’s research included analyzing financial
statements and interviews with frontrunners’
C-Suites, across a variety of countries.
The result was the identification of the three
different strategies adopted by frontrunners:
Quality-led progression
Market-led adaptation
Offering-led transformation
36% Revenue growth over 5 years
CASE STUDY
Frontrunners in practice
American operator
Significant lead in data coverage
Showcasing extent of coverage
visually against the competitors
8. 8 ERICSSON GROWTH CODES REPORT MAY 2015
Frontrunners that adopt a market-led adaptation
strategy are differentiated thanks to their quick
adaptation to market conditions.
Differentiation
Quick adaption to market conditions
Market scope
Generally more selective distribution,
for example, some channels, fewer resellers,
more online
Often utilize sub-brands to target
certain segments
Customer scope
Focus on providing a superior end-to-end
experience for the selected target segments
through being close to the user and
understanding their needs
Product scope
Fast followers of new products and services
Medium-sized portfolio with some degree
of customized solutions
Some strategic partnerships
Technology and operations
Medium focus on operational efficiency
Agile business support systems and
processes in key areas
We think from a customer
point of view, putting the
customers at the center
of everything we do.”
COO, Frontrunner Asia Pacific
28% Year-on-year subscriber growth
in targeted segment
CUSTOMER
NETWORK
MOBILE
DATA
GROWTH
MARKET-LED ADAPTATION
CASE STUDY
Frontrunners in practice
Global operator
Fast follower
Tailored bundling for targeted segments
– Targeted service for a vertical segment
Innovative billing
Reuse strategy in other markets
9. ERICSSON GROWTH CODES REPORT MAY 2015 9
As it is a highly competitive
market, we continuously
create new offerings.”
CSO, Frontrunner North America
An offering-led transformation strategy sets
frontrunners apart from rivals with its uniquely
designed offerings that redefine customer value.
Differentiation
Uniquely designed offerings and first to market
Market scope
Sales and marketing efforts rely on their
unique offering
Often relying on growth from certain segments
High focus on market innovation
Customer scope
Continuously renewing offerings to promote
customer interest and loyalty
Focus on customer satisfaction and brand
Product scope
Many strategic partnerships with attractive,
leading companies
Technology and operations
High focus on operational efficiency
State-of-the art business support systems
and related processes
13% Year-on-year growth
in total revenue
CUSTOMER
NETWORK
MOBILE
DATA
LTE
OFFERING-LED TRANSFORMATION
CASE STUDY
Frontrunners in practice
Asian operator
Open-ended innovation
Improved brand sentiment and NPS
through strategic partnering and improved
network performance
Attractive plans targeting pre-paid users
10. BEHIND FRONTRUNNER
EMERGENCE
10 ERICSSON GROWTH CODES REPORT MAY 2015
Crowning an operator as a frontrunner does not come
with any requirements in terms of size or position in the
market. The diverse elements of the three strategies
show that there is a fine balance between the focus on
the superior technological network performance and
knowing exactly what the customer wants.
This balance is achieved through a combination of
methods, ensuring that an operator’s strategy fits
the technology evolution strategy and aligns with
consumer readiness, willingness to pay and the
go-to-market dynamics.
Between 2012 and 2015, we have seen a diverse set of
strategies deployed by each frontrunner. In 2012, the
majority were leveraging their size and assets to deliver
superior quality and thereby achieve profitable growth.
With time, we have seen that operators applying other
types of strategies are also emerging as frontrunners,
indicating that profitable growth can be achieved
through different strategic directions.
As the markets evolved, other strategies started shining
and gaining more momentum. It is likely that these
strategies were applied by the challengers to capture
some market share, without a head-on collision that
would create a price war. Figure 4 highlights each
strategy adopted by frontrunners between 2013 and
2015. As time progresses, it has become clear that all
three strategies can garner success.
Size doesn’t matter
By observing frontrunners over the same timeframe
and focusing on their market position, we see that
they are found in both market leader and challenger
positions. In fact, in 2013 the majority of frontrunners
were positioned third in their respective markets.
We have found no direct correlation between being a
frontrunner and the size of an operator’s subscriber
base. The frontrunners in the study have between a
few million and hundreds of millions of subscribers.
This indicates that profitable growth can be achieved
regardless of market size or position, and that smaller
markets with fewer subscribers pose no hindrance to
becoming a frontrunner.
Figure 4: Frontrunner emergence through varying strategies
Figure 5: Market share distribution
NumberoffrontrunnersNumberoffrontrunners
2013
2013
12
12
2014
20
2014
20
2015
30
2015
30
Offering-led transformation
Market-led adaptation
Quality-led progression
Market share position 1
Market share position 2
Market share position 3
Source: Ericsson analysis
Source: Ericsson analysis
11. LINKING STRATEGIES
TO CODES
ERICSSON GROWTH CODES REPORT MAY 2015 11
Quality-led progression
Differentiate on high-performing network and brand preference
A network performance gap is created between competitors in
the market through the Gap Minding code. This is coupled with
the ability to showcase this gap in a simple and understandable
manner. There also needs to be a focus on creating innovative
offerings that capture customer value effectively, which is known
as Unboxing. Frontrunners using this strategy will partner with
organizations that share a similar innovative mindset, which refers
to Co-Partnering.
Offering-led transformation
Differentiate on being first to market with uniquely designed offerings
This approach understands the need for Gap Minding in terms
of network performance, and operators target the segments that
their innovative offerings are directly impacting. Their Unboxing
considerations are very strong, they are Eco-Systematic and do not regard
OTT players as threats, but instead generally leverage their offerings.
Market-led adaptation
Differentiate on quick adaptation to market conditions
Frontrunners look to understand, measure and manage
user experience through Streetwise Metrics. This strategy
quickly adapts to market conditions and the need for
targeted segments, so frontrunners showcase their user
experience to a select set of segments. These frontrunners
mirror other successful offerings from competitors, but add
value by capturing more customer needs.
Streetwise Metrics
Streetwise Metrics
Streetwise Metrics
Eco-Systematic
Eco-Systematic
Eco-Systematic
Gap Minding
Gap Minding
Gap Minding
Co-Partnering
Co-Partnering
Co-Partnering
Showcasing
Showcasing
Showcasing
Unboxing
Unboxing
Unboxing
The use of Growth Codes varies for each strategy. Frontrunners
will place higher importance on some codes, but will also
complement them with others.