Nov 2, 2009

Why Verizon is Down 30%

Verizon’s FiOS strategy of taking super-fast fiber optic internet access to consumers' homes held great promise when it was unveiled. Internally at the company it was held up as the path to renewed marketplace dominance. It was going to be the platform Verizon would use to fight back AT&T and T-Mobile (remember them?) on the old carrier war front, and Apple, Nokia, Samsung, Dell, HP, Microsoft, and others on the new mobility solutions front. The company’s top-most executives, including its CEO, unabashedly trumpeted the super-fast, broadband service as savior of the old guard's future.
Things don’t seem to be playing out, and the question on the minds of next-gen Leaders at Verizon, as well as interested on-lookers, is why and what can be done about it. They might want to start by digging in with a more critical eye to that distant image, their end consumers.

Only a few short years ago I sat amazed as the head of corporate strategy at a top wireless player wagged a finger and exclaimed: “I sense you have a handset bias, but our data shows conclusively that consumers care first and foremost about their choice of telecommunications service provider, and only then about different hardware options”. As quaint and nostalgic as that view may sound, It illustrates well a pandemic problem in many of today’s long-established businesses.

It is extremely hard for died-in-the-wool veterans in any industry to give up out-dated notions of how their customers think and how well-suited their companies’ old business models are to today’s world. Certainly AT&T’s near total dependence on Apple’s innovative products must rub salt on the wound, even as it generates the core fear that drives such resistance to hearing important new truth.

In a world where customers are influenced most by exciting, innovative, often expensive, downstream hardware, applications, and retail channels, won’t the telecommunications carriers become more and more commoditized back-end providers? For Verizon, can they really build a sustainable, margin-rich growth platform by simply wiring consumers' homes with faster and faster broadband? What really sits behind Apple's, and AT&T's through coat tails, success? [Hint: think about how the iphone creates - relative to other companies' offerings in the field - actual, tangible, demonstrable shifts in end consumers' lives and mobility experiences. What used to be called "value" added before value became equated with lowest price].

At the end of the day, lost legacy players will always encounter forks on the road to reinvention, growth, differentiation, and profitability. But unless they have the luxury of monopoly, taking the path that refuses to acknowledge the voice of the customer is never the best decision.

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