Ericsson's Vestberg talks competition, new customers and where innovation will happen next



with Hans Vestberg, president and CEO of Ericsson

Ericsson (NASDAQ:ERIC) President and CEO Hans Vestberg is considered a transformative leader for how he helped this once staid infrastructure company innovate despite the rapidly declining telecom equipment market. Under Vestberg's leadership, Ericsson expanded its portfolio and moved into new areas by acquiring BSS/OSS firm Telcordia in 2012 and by purchasing Microsoft's (NASDAQ:MSFT) MediaRoom, a media platform company, in 2013.

Recently, the dynamic CEO has been rumored to be in the running to lead Microsoft, which is searching for a new CEO after Steve Ballmer announced his impending retirement. Neither Ericsson nor Vestberg have commented on that rumor.

Vestberg recently sat down with FierceWirelessTech Editor in Chief Sue Marek at the 2014 Consumer Electronics Show, where he talked about his vision of the networked society, his views on competition and where he thinks the next big wireless innovations will occur. Here's an excerpt of that interview.

FierceWirelessTech: You recently said on a panel at the Consumer Electronics Show that your customers are changing. Can you elaborate on how and why they are changing? And also, what does that mean for Ericsson as an organization? 

Vestberg: Yes, I believe we are in Phase 2 of the networked society. Phase 1 was building the networks and now we are enabling the networks. The winners in Phase 1 will not necessarily be the winners in Phase 2.

What I'm seeing right now is three different types of operators. First there is the network developer. Second there is the service enabler and third there is the service creator.

The network developer is letting things happen on top of the network. They will have a fixed price for broadband, but they are not going to get into other industries. 

The other is service creator. These network operators are spending a lot on the network. It needs to be smarter for what they do. They are changing all their platforms that they have for voice--for example, they are changing their billing systems and their OSS systems. They are going into new industries with new services. They are in healthcare, home security; they have their own devices and software. 

In the middle, you have the service enabler. This is the carrier with the network and they will charge differently for different types of users, but they will not get into other industries. They may have the ability to charge differently for different network latency so they set up platforms to show the latency.

These are the three different types of operators that we are seeing now. I can map all operators in the world into this scenario.

But this is why I'm getting into the OSS/BSS--and this is why I bought Telcordia. You have to be able to help the ones that are doing new innovations to get new revenue streams. That's why Ericsson is doing IPTV, M2M and developing other platforms.

FierceWirelessTech: But this takes a lot of investment--in people and technology.

Vestberg: You can go the other way also. This is not exclusive for operators. There are some companies that are, for example, Internet companies that then become wireless operators. 

This also requires change and investment. You have to transform constantly and quickly. And as a global company, that's difficult to do.

FierceWirelessTech: How do you accommodate for all this change? You have to make acquisitions but how do you get all these different parts that you need? You have to acquire or expand or partner.   

Vestberg: I usually say if I have $1 million to spend, I typically prefer to spend on my own R&D rather than buying companies. Because my profitability on my own R&D is much higher. But sometimes that takes too long, so then I acquire.

In a market that changes, you see the inflection point. If you go back in time, you will see Motorola, Siemens, Nortel, Nokia, Ericsson, Alcatel-Lucent--and we all had the same portfolio of products.

Today, you can't do that. I can't find a company with the same assets as us. You have to pick where you think you will succeed.

FierceWirelessTech: And you hope you pick the right things.

Vestberg: Damn sure.

It's even more important that management believes in what you are doing. We are investing in networks and OSS/BSS, IPTV and all that so we can work with our customers. And these solutions also help other types of companies. That's why I'm working with transport companies. These same service delivery platforms can work for transport companies.

FierceWirelessTech: You are growing your customer base even as your core customers--the operators--are shrinking.

Vestberg: I'm in transport, utilities and TV/media companies. They are using the same platforms as operators.

Mobility, broadband and the cloud--all types of companies need this. They need to be more efficient.

I need to figure out how we create much more aware networks. That's the next level. The networked society has so far impacted mostly consumers. The next step is businesses... You are going to transform the traditional way of delivering things.

FierceWirelessTech: Isn't it difficult to sell into businesses? Isn't that a harder market to reach?

Vestberg: I don't think we will have a solution for every vertical. We will be aware of what the network will need in these different verticals. The network will need to be aware. You need to know the latency of the network. 

For example, for cars with 4G--the latency is good. You can touch the brake and the car behind you will know automatically that you are braking. That means you have to guarantee the latency in the network.

FierceWirelessTech: You said guaranteed latency. That's scary for operators. How do you guarantee latency for situations like healthcare and critical care?

Vestberg: I have subscribed to a certain speed and latency and if it drops below that, I will get notification from my customer experience center. That's what we need to have. That's why I need to build the networks that can be aware of that.

FierceWirelessTech: Are you seeing innovation across the industry? In big companies like Ericsson and small companies, like startups?

Vestberg: We are seeing startups--extremely small companies that are innovating because the barriers are low. You don't need a big investment now. Because of the way the networks are... We are creating that possibility.

FierceWirelessTech: You said earlier that you can't find a company with a similar product portfolio as Ericsson. But you face competition? 

Vestberg: If you ask our employees, you will get different answers depending upon who you ask. It depends upon where they are working. Are they working in services, IPTV, M2M? We have built a company that we think will thrive in a networked society and we have different competitors.

FierceWirelessTech: And some of those competitors are also partners, depending upon what you are working on.

Vestberg: Yes, and that's the new word you have to be clear on now. We aren't here to have the same strategy as others. We have our own strategy and our own assets. We build our assets on that. That is our strategy.