Transcript Information Society

TMitTI 1
Timetable
16.9. Introduction, Sakari Luukkainen
23.9. Technology Marketing, Jari Haggren
30.9. Market Dynamics of Telecom Industry, Sakari Luukkainen
7.10. Standardization, Sakari Luukkainen
14.10. Case GSM, Sakari Luukkainen
21.10. Product Strategy, Eino Kivisaari
28.10. Product Strategy, Eino Kivisaari
4.11. R & D Management, Sakari Luukkainen
11.11. R & D Management, Case TeliaSonera, Jyrki Härkki
18.11. Corporate Venturing, Case Nokia, Taina Tukiainen
25.11 Technology Foresight, Sakari Luukkainen
9.12. Examination
© Sakari Luukkainen
TMitTI 2
Content
• Cooperation and Compatibility (Varian chapter 8)
• Waging a Standards War (Varian chapter 9)
• Information policy (Varian chapter 10)
• Case ERMES paging system standardization
© Sakari Luukkainen
TMitTI 3
Generic Network Strategies
Control
Openness
Compatibility
Controlled
migration
Open
migration
Performance
Performance
play
Discontinuity
© Sakari Luukkainen
TMitTI 4
Cooperation and Compatibility
• Expanded network externalities
• Reduced uncertainty
• Reduced consumer lock-in
• Competition for the market vs in the market
• Competition on price vs features
• Competition to offer proprietary extensions
• Component vs systems competition
© Sakari Luukkainen
Who wins and who loses from
standards?
• Consumers
• Complementors
• Incumbents
• Innovators
© Sakari Luukkainen
TMitTI 5
TMitTI 6
Standard setting organizations
• International Telecommunications Union (ITU)
• Instititute of Electric and Electronic Engineers (IEEE)
• Telecommunications Industry Association (TIA)
• European Telecommunications Standards Institute (ETSI)
• The Internet Engineering Task Force (IETF)
• 3rd Generation Partnership Project (3GPP)
• Open Mobile Alliance (OMA)
• Liberty Alliance
• World Wide Web Consortium (W3C)
© Sakari Luukkainen
TMitTI 7
Tactics in standard setting
• Do not automatically participate
• Keep up your momentum
• Look for logrolling opprtunities
• Be creative about cutting deals
• Beware of vague promises
• Search carefully for blocking patents
• Consider building an installed base preemptively
© Sakari Luukkainen
TMitTI 8
Building alliances – relative advantage
• time-to-market
• manufacturing cost
• brand
• edge in development
© Sakari Luukkainen
TMitTI 9
Building alliances
• Assembling allies
• Interconnection among allies
• Negotiating a truce
• Cases of Ethernet, Postscirpt, PDF, ActiveX
© Sakari Luukkainen
TMitTI 10
Standard war
• When two incompatible technologies struggle to
become a de facto standard
• These wars may end in
- truce (56 k modems)
- duopoly (video games)
- fight to death (VCRs)
© Sakari Luukkainen
TMitTI 11
Classification of standard wars
Rival Technology
Your Technology Compatible Incompatible
Compatible
Rival evolutions
Evolutions vs revolution
(DVD vs Divx,
(Lotus vs Excel, dBaseIV
56k modem, Unix) vs Paradox)
Incompatible
Revolution vs evol Rival evolutions
(Nintendo 64 vs PS,
Netscape vs Explorer)
© Sakari Luukkainen
TMitTI 12
Key Assets in Standards War
• Control over installed base of customers
• IPR
• Ability to innovate
• First mover advantage
• Manufacturing abilities
• Complementary products
• Brand
© Sakari Luukkainen
TMitTI 13
Tactics in standard wars
• Preemption
• Expectations management
© Sakari Luukkainen
TMitTI 14
After winning
• Staying on your guard
• Commoditizing complementary products
• Competing with your own installed base
• Protecting your position
• Leveraging installed base
• Staying ahead
© Sakari Luukkainen
TMitTI 15
After losing
• Adapters and interconnection
• Survival pricing
• Legal approaches
© Sakari Luukkainen
TMitTI 16
Competition policy
• Priciples
• Implications for strategy
• Mergers and joint ventures
• Co-operative standard setting
• Single-firm conduct
© Sakari Luukkainen
TMitTI 17
Direct government intervention
• Achieving critical mass
• Universal service
© Sakari Luukkainen
Case ERMES (Enhanced Radio
Message System)
TMitTI 18
• ETSI standard for high-speed paging (6250 bit/s) was
introduced in the beginning of 1990´s
• Legacy systems based on Pocsag radio interface
• ITU recommended global status
• Open, coordinated and consensus-based technical
standardisation driven first by big operators (BT, FT,
Telefonica…), no licence, 7 open interfaces
• From manufactures participated early Tecnomen, Motorola
and Ericsson, later Glenayre
• VHF band in 169 MHZ, increased capacity per channel,
roaming, type approval, many access methods, value added
services e.g. group message
© Sakari Luukkainen
TMitTI 19
Case ERMES
• after de-facto standard FLEX was introduced cooperation
changed quickly to standard war
• using FLEX required licence payment
• two way FLEX and ERMES
• US companies had large paging domestic market and
succeeded also in FLEX promotion in Asia
• ERMES was also promoted in Asia, success only in the
middle east
• European PTT´s started to invest in small ERMES pilot
networks by running parallel Pocsag, larger networks by
new operators
• Tecnomen was market leader in ERMES infrastructure
© Sakari Luukkainen
TMitTI 20
Case ERMES
• Motorola was market leader of paging terminals, ERMES
terminals were more expensive and larger than in Pocsag,
no economies of scale
• Introduction of CPP (Calling Party Pays, no fixed subscriber
fee) service in mid 90´s increased subscriber base parallel
with massive marketing campaigns, but did not create long
term traffic and revenue for operators
• SMS started to influence as a substitute service
• no critical mass reached, no further investments in
infrastructure expansion or pager R&D
• currently most european operators have discontinued their
paging service
© Sakari Luukkainen
TMitTI 21
Conclusions
• Market and committee based mechanisms – strong
standardization culture differences between USA and
Europe
• Success requires economies of scale and network
externalities - early setting of global objectives
• Market aspects for new services have to be considered
early in the standardization process: enduser real needs,
threat of substitutes, service / terminal pricing and
availability, system life cycle, network roll-out strategy
• Modular open system architecture, scalability, open
service platforms
• The role of governments in the creation of global
standards
© Sakari Luukkainen