The dilemma of being a market maker or a fast follower

One of the cultural considerations for any business is its relationship with innovation. Communications service providers (CSPs) often remark that they want to be fast followers, quickly imitating successful ideas, rather than market makers, coming up with the new ideas and bringing them to market. This reflects the generally conservative nature of most or carriers and CSPs.

This isn’t to say there aren’t any successful market makers. In the telecommunications industry, successful innovative ideas that changed the industry business model include Vonage in the USA, Free in France, AT&T’s exclusive deal with Apple when the iPhone first debuted and Apple’s App Store concept. CSPs struggle to be good innovators and market makers because they are afraid of failing and damaging their brand. It is very hard for a CSP to adopt a ‘fail fast’ mentality when they are used to releasing mature, well-planned products in a very orderly way.

Fast follower approach lies in speed of product development

Given the difficulty with being highly innovative, many CSPs would rather focus on being quick to replicate an idea once it has proven itself. CSPs have tried to be fast followers of Apple by debuting their own app stores that sell everything from custom applications, music, ring tones, devices, accessories, new plans and plan changes, but none have been particularly successful.

Some examples of successful fast followers include CSPs selling ringtones, all-you-can-eat data plans and family plans. The key to becoming a successful fast follower lies in the speed of a CSP’s product development process. Once the decision is made to follow a market maker, CSPs must quickly and efficiently deliver the equivalent solution. This can be difficult for many operators, who often have slow and complex product development cycles with multiple gating steps and approvals required. The fast follower strategy has also resulted in CSPs being slow to adopt transformational technologies and ideas.

For example, consider the implementation of SDN (software-defined networking) and NFV (network functions virtualization) services. For NFV, the fast follower strategy has yielded mixed results. Though many CSPs have done trials, there are very few documented production services that use the technology. This is because most are waiting to see the results of production implementations by the few CSPs leading the way. The fast follower strategy that most traditional service providers adopt is a stark culture contrast with disruptors such as Facebook, Netflix, Amazon and Google -- companies that are very comfortable testing new ideas and quickly moving them into production, irrespective of what others are doing.

As an example of how fast followers develop solutions, consider the history of ‘pay for priority’ services. A pay for priority service is one when an application provider can pay a CSP to prioritize their traffic on the operator’s network. Under the Obama administration pay for priority deals, such as the one that had been struck between Comcast and Netflix to prioritize Netflix traffic over Comcast’s network, were banned on the grounds of net neutrality. The incoming Trump administration, however, has signaled a new attitude towards net neutrality, meaning that there may again be an opportunity for fast followers to reintroduce these services in the light of this changing attitude towards.

T-Mobile as a successful market maker

An example of the market maker approach being used can be seen at T-Mobile USA, an aggressive operator that is introducing new services and packages regularly. While not the largest operator, T-Mobile USA is forcing the larger players to follow and match their packages and offerings. T-Mobile has found a successful solution in its low resolution unlimited video product ‘Binge On’, and it has been reported that they are starting to see enquiries from fast followers around the world on how to duplicate this idea. Some operators have mentioned that they sometimes use both strategies at once. They are trying to innovate new services but will react and duplicate successful services they see at other operators. The key to doing this well appears to be adopting an agile service development approach and having a tolerance for failure. For many CSPs accustomed to providing a five nines service levels, tolerance for failure is a difficult thing. Many of these same service providers have a ‘no customer left behind’ culture which means killing off rarely used, old or failed services is difficult.

What to do?

The dilemma of being a market maker or fast follower is germane to many CSPs facing the question of how to innovate new services for their business. At its heart, the decision depends upon the value of a market that can be captured by utilizing the first mover advantage, as well as speed of execution. Risk-taking enables market leadership for the specific segment where the innovation occurs. To be a successful market maker, CSPs must take risks, try things and quickly kill ideas that are not working. In somewhat simplistic terms, fast followers try to find an idea that they believe will be successful in their environment and copy it. Innovative market makers don’t fall in love with any specific idea, they love the process and approach of quickly building and trialing ideas to see what works.

The author would like to thank Rebecca Mettler, Jessica Ding and Sarah Dudley from IBM for their thoughts, suggestions and comments in producing this material.