I’m getting ADSL2 put in my house this week and I’m pretty excited about it. Not only will it be much faster than my old service offered by one of the dominant telcos, but it also saves me the cost of line rental and national calls because I can use VoiP. It’s yet another way that the old streams of revenue are being eroded for the major players in the industry. Apart from stopping the ADSL2 company getting into my local exchange, there is no way that the bigger telcos can stop this change in the industry.
It might be possible to say that the larger telcos have resisted the change to ADSL2 because of the technological uncertainty around its introduction. However, I remember doing strategy seminars with managers from a large telco in 2004 and they could see what ADSL2 and VOiP were going to do to the industry. The rivers of money in line rental and timed calls were going to dry up. Uncertainty wasn’t the problem, understanding what the technology meant for the business and then making the difficult commitments to adapt and change was the real problem.
I don’t think there was a lot of uncertainty about the effect that the internet was going to have on traditional media like newspapers and television either, and yet many media companies have been caught with redundant business models. Some are still persisting with the old models in the hope that the cycle will eventually turn, which is a little bit like giving CPR to a corpse.
My first job as a business researcher, over 10 years ago, was to write a case study of the titanium dioxide industry. Titanium dioxide is a vital industrial chemical that makes paint opaque. Prior to the invention of the process to produce titanium dioxide, paint manufactures used lead oxide. This is really toxic stuff and has been linked to brain damage in children. The Tioxide company who developed the process became global product leaders in the early part of the 20th century. The only problem was that the process produced acid waste, which was dumped into the sea and turned it a rust red color. By the 1980s DuPont had developed an acid recycling process and as environmental concerns grew, Tioxide was fined or closed down in several countries. The most amazing thing was that, when faced with the option to develop their own recycling process, they simply moved the old technology to a developing country.
Sticking with the old technology shocked commentators in the industry and it didn’t stack up financially either. The only way to explain the decision was in terms of culture and psychology. Careers had been made on the old technology. The sunk investments weren’t just financial, they were also personal.
Think about changes affecting your business. Are you not responding because you think that there is too much uncertainty to act now, or is something else going on?