Core Competencies and the Reshaping of an Industry

July 24th, 2009 by · 8 Comments

This is a guest post by Sprint-Nextel's Steven Parrott who also blogs regularly on The Seamless Enterprise, the company's corporate blog. Steve leads Sprint's IP convergence Product Development team in the areas of MPLS VPN, managed service and Unified Communications.  Anyone else who might be interested in a guest post may contact the webmaster.

How do you define a “real” carrier?

That question arose recently after my company, Sprint Nextel (NYSE:S, news, filings), announced a seven-year deal to partner with Ericsson to run many of its day-to-day network operations. Before anyone could say the word “partner”, questions were being asked such as: Why was Sprint turning over management of its core assets to a third party? Doesn’t a “real” wireless carrier (or for that matter, a carrier that runs a global IP / MPLS network and is a Tier 1 ISP) also have to manage all parts of its network? And if not, does this deal signal that Sprint no longer cares about its wireless or wireline networks?

Look at this arrangement carefully. The service agreement is in fact, an important new commitment to our network and portends interesting future trends for the U.S. telecommunications industry.

To understand why this action provides a glimpse of the future, ask yourself:

  • What is a carrier’s (wireless or wireline) main business mission?
  • What is the core competency that a carrier must have to fulfill this mission?

Is it a carriers’ mission to run a flawless network and hope that it translates into great customer service? Or is it a carrier’s goal to offer the best customer experience by using all of its available tools and techniques? The best answer would be “both”…but frankly, these two concepts are often in direct conflict with each other. In fact, it is also possible that trying to do everything as a carrier might even backfire, resulting in a poorer customer experience!

Regarding the second question, I would argue that the definition of carrier core competencies may also be changing. Historically, a carrier’s core competency was measured first by owning and running its network and second by the products that network supported. This model resulted in lots of well-run networks … that everyone hated using. This could be why carriers are often compared to the airlines as entities consumers and businesses hate to deal with.

A strong force that led to partnering with Ericsson was realizing our core competency is simply not defined by our hard assets—the network. Core competency is developing solid go-to-market strategies, a superior customer experience, innovative enabling products and a technology and vision that meets today’s needs and prepares you for tomorrow. These are areas that impact the customer, and where we can build a compelling marketing position and brand differentiation.

By teaming with a global leader like Ericsson to partner with our employees to service our network, Sprint can focus on the critical areas that it does best, while gaining the skills and knowledge of one of the very best in operating networks. And of course, we’re not only keeping strategic control of the network, we’ve even gone so far as to  maintain thousands of Sprint employees as customer-facing staff to directly support the needs of business customers globally.

Sprint isn’t the first to realize the plusses of this partnership: we’re following other global companies that have been partnering in other industries for decades, often for the same reasons we’re partnering – to focus on core business strengths.

Some of the first were the energy giants like Chevron and Exxon, who teamed with smaller exploration and production companies across the globe. Other examples are hardware providers who haven’t built a box on their own in years and instead rely on OEMs for all production (does anyone think that Cisco is a bad equipment supplier because routers are built by a third party?). Furthermore, Fortune 500 companies have partnered with system integrators to operate the very foundation of their enterprise… all with great success.

The list of companies who partner reads like a Who’s Who of American business, from technology mainstays (HP, IBM and Cisco) to consumer product companies (P&G) to pharmaceutical companies (Eli Lilly). If companies larger than Sprint are engaging with others, why wouldn’t Sprint consider similar benefits?

And the benefits are compelling: companies can cut the cost of production--in some cases dramatically. In other cases, they can unite to help solve complex customer problems quicker, or provide a wider range of services/products. They can lean on the knowledge, systems, and support of a specialist, while maintaining strategic control around marketing and investments. By partnering, companies can even compete in new markets and business areas, while also limiting the risk,and focus challenges that come with moving beyond day-to-day network management.

In the telecom industry, consumers and enterprises want to personalize services and applications from any location on the fly. This trend is powerful; it will reshape the telecommunications industry. We’re already seeing the trend outside the U.S., where a wireless operator running their own network is more the exception than the rule.

In Europe, physical network assets rank a distant third in strategic importance compared to service management and brand, according to the recent Yankee Group/TEN 2009 Telecoms Barometer Survey of European telecom executives.

According to a Yankee Group report, carriers are being forced to rethink their business models: “Network assets still matter, but delivering compelling services matters more…”

I predict carriers will continue turning to partners for the back-end operations so they can focus on technology development, customer service, marketing — whatever it takes to best serve the customer.

For some in the telecom world, that may mean becoming a new type of MVNO (not exactly a new concept either) for others, it means more of your own employees badged for your work while relying on partners for those things that they can do better or more efficiently.

Regardless, the measure of success won’t be a count of your employees and badges, but the ability to grow revenue, meet customer needs, address problems, and above all, the ability to execute, execute, execute.

In a couple of years, a carrier “going it alone” may seem outdated, passé, or even inefficient. Instead, it’ll all be about ensuring that your company has carved out their little place in the world.

With the world becoming more complex, flatter and more competitive, partnerships, alliances and joint ventures--and other new ways of doing business--will continue to rise. The world has changed and we must change with it.

Categories: Guest Posts · Industry Viewpoint · Internet Backbones

Join the Discussion!

8 Comments So Far


  • Profile photo of Rob Powell Rob Powell says:

    Thanks for the guest post Steven! I know I have been one of the doubters about the outsourcing strategy, I’ll see if I can come up with a response over the weekend.

    Meanwhile, any thoughts from readers? What does core competency mean these days in networking?

  • carlk says:

    Other than the initial dissension that those 6K employees who are being transferred under Ericsson’s control, this sounds great!

    I would expect the “sharing” of information by skill sets on both sides would be met with strong resistance, as one side fears the other side, to be the ones who will be taking the others’ job in the final analysis. That is, of course, until some business “owner” can find a way to run profits without any employees at all! 🙂

    God forbid if some business executive isn’t politically correct in describing what’s truly at stake in the form of human capital “expenses.” Heck, then he or she might even lose their jobs in this “complex world,” truly a more “Global Order,” especially as respects business and consumer “communications.”

  • Alfred J. Beljan says:

    “Regardless, the measure of success won’t be a count of your employees and badges, but the ability to grow revenue, meet customer needs, address problems, and above all, the ability to execute, execute, execute.”

    So what he is telling us is that, except for the hardware, nothing is going to change..

  • Bill says:

    Steve makes a plausible case that carriers today need to chose whether to focus on retail or wholesale customer markets. Sprint has made the choice to concentrate on their retail customers – handset options, distribution methods and service plan pricing and contract terms. Steve’s justification that Sprint is better off using “partners” to run its network would apply equally to its selling the network to a “wholesale” oriented carrier ( and plowing the capital received back into its retail operations). Following this logic, Sprint and Qwest should sell their networks to Level 3, who is focused on the wholesale sector not the retail.

  • Fast Busy says:

    It’s hard to imagine a restaurant outsourcing the “kitchen function” as a way to improve the dinning experience.

  • Steve P says:

    Thank you all for your inputs. A lot of great comments here…and some very good questions. If it is alright by the group, I am going to let this blog (and Rob’s follow-up posted today) and then respond to all of them later this week.

    In the interim…please keep up the insight and comments.

    Steve

  • I applaud Sprint’s move to outsource their network operations. It is a bold move for a U.S. mobile operator but one that is working well for European operators. Wireless companies often market themselves as have the biggest or best network which is impossible with the current infrastructure which can and does lead to disenchanted customers. Sprint has taken a step towards being a service provider rather a network provider. They should just be careful how they market themselves.

  • link budget says:

    We needed a bit of humor, and Fast Busy really did a great job. Good analogy

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