The Changing Nature of Being a Service Provider

Black phoneIn the last four months I have talked to few companies about helping them look into the future and develop a strategic plan for getting ready for that future. And each of these companies said the same thing to me. They are each triple play providers and they all know that they are losing and will continue to lose telephone and cable customers. And each one said, “I will hire you if you can tell me what the next big killer product is that will replace what I am losing”.

And that is exactly the wrong question to ask, because there is no killer new product. We have been spoiled in the industry because we have had benefitted by having three products that have such a wide appeal that most of customers bought them, often in bundles. But there is nothing on the horizon that is going to have that same wide-spread appeal to customers.

It is time to acknowledge that customers have changed. One of the major lessons people have learned from using the Internet is that they have choices. If you don’t want to pay $80 – $120 for a traditional cable TV package of channels there is an alternative. If you don’t want to have a landline telephone there are a ton of options. Ten years ago nobody would ever have believed that people could be happy watching television on a tiny hand-held screen, and yet millions of people are happy doing that.

There are no killer products on the horizon because there is just not any product that over half of your customer base is going to want any more. Because the second big lesson the Internet has taught people is that they can get exactly what they want and don’t have to settle for something generic that only fits part of their need. They are being taught that somewhere there is an app for everything. So customers are far pickier than they used to be and will not sign up for a product that doesn’t satisfy a need in their life.

So what is a service provider to do? If there is no new killer product on the horizon, then the only alternative I see is to have a suite of products that satisfy niches in the market. If you are not going to find that one new product that gets a 60% market penetration, then you are going to need six products that each can get a 10% market penetration.

And frankly, many service providers don’t want to hear this message because it scares the hell out of them. They know how hard it is for their organization to develop even one new product and so they panic when they hear that the future is probably going to require them to constantly be rolling out new products.

And this is not even the end game. Some of my clients have been in the telephone business for over a century. And so they have done very well selling telephone lines to successive generations of households in the community. But many new products are going to have a much shorter shelf life. You may roll out a home automation product that is obsolete five years later and will have to be replaced with something else. Service providers are never again going to be able to rest easy that they have the perfect product mix going into the future. Instead they are going to have to continuously reinvent themselves.

The companies that survive and thrive in this new market are going to have to be nimble. They are going to have to keep their eyes out for things that some of their customers will be willing to pay for. And more importantly they are going to have to get way better at sales. They are going to have to hit the market hard every time they get a new product in order to make a profit.

To many this is a daunting future. If this scares you it might be time to think about selling your business. The status quo is quickly dying and the ways we have survived by selling the triple-play networks will no longer suffice. But the need to be constantly innovative is not foreign to much of the rest of the business world. There are many businesses that have to reinvent themselves over and over to stay relevant in the marketplace. It’s going to take a different kind of ownership to thrive in this new world, a more entrepreneurial mindset, and those that have that should do fine. But anybody who thinks they can just keep happily selling the same old thing had better prepare for the day when their company becomes irrelevant and insolvent.

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