Innovating telecom

With its new mobile operating system, Microsoft has delivered a lesson in innovation telcos would be advised to learn.

The Windows Phone 7 platform, launched in Barcelona last month, erases a decade's work on Windows Mobile.   It's no secret why. Powerhouse that it might be in the PC world, Microsoft is roadkill in the mobile space.

Pre-iPhone, WinMo had as much as 23% of the smartphone market.  Its share fell three points last year to 8.7%, according to Gartner.

It's a lot easier to throw out the playbook when it doesn't work, but the wonder is why Microsoft, with its bottomless pits of cash and expertise, performed so poorly for so long.

A former Microsoft vice-president recently offered a revealing look at the company's inability develop successful new products; apart from the Xbox, it's hard to think of any winners outside its traditional desktop software.  In a New York Times op-ed, Dick Brass noted that MS's huge profits - $6.7 billion for the past quarter - come almost entirely from Windows and Office.

He says Microsoft suffers from "a dysfunctional corporate culture in which the big established groups are allowed to prey upon emerging teams, belittle their efforts, compete unfairly against them for resources, and over time hector them out of existence."

Brass speaks from experience. When his team invented a product that made screen type much more readable, other parts of the company tried to throttle it by claiming falsely that it made the display go haywire or that it caused headaches. The vice president for pocket devices said he'd support it only if the whole program was transferred to his control.

Which recalls my own experience some years ago at the new multimedia division of a telco. The company went as far as declaring it was now an "information services" provider, and minted a new sign for the lobby.

But no one told the consumer division, which owned the network, the customers, most of the company's revenue and several battalions of marketers. Our carefully-crafted strategy only had a hope up to the point where it dovetailed with theirs. Looking back from today I'm surprised any of them even showed up for meetings. They agreed that our schemes were vital for the company's future, but there was no incentive for them to cooperate.

In a way the WinMo problem was the opposite. The existing product groups evidently dominated product development. It's all very well to seek synergies but not at the expense of the customer experience.  MS's business strategy became its product development strategy, which was all about shoehorning Office onto a small device.

Lessons learned

The mobile phone is a vastly different platform from the desktop, and the customer experience should be the starting point, not an afterthought. That's why the market never warmed to WinMo, and it's extraordinary that it took the company so long to recognize this.

The lesson for telcos is that competition between company divisions is healthy, but requires leadership to ensure it doesn't turn toxic.  If you're innovating, your CEO needs to give clear directions about where you want to go and how you're going to get there.

The evidence suggests that telcos just simply aren't innovating. At the Mobile World Congress last month we saw the usual fixation on new technologies and obsessing about flat-rate pricing and "dumb pipes". But as usual there was little sign of anyone solving these problems. Meanwhile, handset and internet firms are moving in on operators' turf and selling services directly to their customers.

Unlike Microsoft, operators don't need to build complex new products. They need to create new business and partnership models. They face the fate of Windows Mobile if they don't.