A recent column in The Financial Times (April 18) had the snappy title, “Mum, what was a mobile operator?” The idea was that an industry we take for granted – mobile network operators, including the likes of Orange, Vodafone, T-Mobile, and others – is now in danger of extinction. Why? Because of the dynamics of competition and the advent of disruptive technologies. Writes the FT: “Just as Skype undermined the landline, alternative forms of mobile voice communication are going to become available.” Network operators are vulnerable because consumers really don’t care who provides the network connectivity. They may care about content or the handset itself, but they don’t give a hoot about the network operators – they just want a quality connection upon demand. If a better technology comes along, network operators are toast. No amount of brand building or efforts at differentiation are likely to help much.
What's the relevance for clear thinking about management? The current pressure on network operators points up, once again, the basic power of industry dynamics as a driver of firm performance. Try as they might, network operators are up against an array of tough forces, and many of them are facing declining margins. But of course, when these companies show disappointing returns and stagnant stock prices, we tend to make attributions about the its leadership, its culture, its people, and more. Witness the pressure from shareholders last summer on Arun Sarin, Vodafone's CEO, a solid and smart executive who has been left to carry the company forward in very difficult times -- and has limited options given the nature of industry forces.
If the FT is correct – and I suspect it is, based on what we’ve seen these past few years, with growth slowing in many countries and margins plunging, due both to competition and the actions of regulators – it follows that no CEO, regardless of his or her vision or brilliance, stands much of a chance in this industry.
Not that this will stop industry analysts and shareholders and journalists from blasting a CEO for slowing performance. The lure of quick and easy attributions – bestowing praise and laying blame – is just too easy. But in mobile networks, as in many industries, what drives company performance is to a great extent industry dynamics, which leads us to make inferences that may not be warranted.
