Services Enable Solution

For the past 30 years the Telecommunication market has being through a complete transformation. This major evolution was driven mainly by innovation and competition. The Tier one Equipment Manufacturers (TEMs) customers and the Service Provider (SP), have shift from buying point products engineered by their large R&D to low cost services enable solutions, meeting their customer requirements.

Today our customers the European (TEM's) such as Ericsson, Alcatel-Lucent and Nokia Siemens Network are losing market share to the Chinese (TEM's) Huawei and ZTE. Our firm which is a midsize ODM/OEM equipment vendor in Israel with a turnaround of $80M in the telecommunication business needs to change its business model, by focusing on selling service enabled solutions rather than ODM/OEM point products to the (TEM's). It shall be much more efficient to maximize the revenue and profit by taking the benefit of our strong technology, innovation and recognized quality. Moving towards new services offering is an innovative way to promote solutions for businesses. It requires increasing and emphasizing our marketing activity, therefore writing a marketing plan becomes critical. With identified growth of the Mobile infrastructure and Electricity grid by senior market analysts, the major challenge for us, is what does it take to sale directly to mobile backhaul SP and open a new segment in utility market (i.e.: Nuclear Plant, Motor Way, Railway…) ? I would like to introduce you my plan:

• Introduction : historical market offering of our firm

• Why Innovate?

• Competitive strategy evolution

• Initialization of services enabled solution adoption with an Ecosystem

• Conclusion : ingredient for a good marketing plan

Since its foundation in 1992, the company has excelled in the design and manufacture of innovative component and equipment for the IT and telecommunications industry. Initially our focus was IBM, with devices such as building cable impedance, matching 3270 terminals and AS400 networking, targeting midsize enterprise data center in order to provide fully integrated platforms, operating system, database and middleware. We then developed Token Ring networking equipment meeting IBM strategy to grow its enterprise business. The Market segmentation, identifying the needs of end customers and segment the market to develop profile has enabled us to keep meeting IBM fast demand in a growing market. Marketing target, positioning and planning was done by IBM in order to a keep a number one position in the integrated enterprise solution market including the application, the server and the network.

Starting in 1995 John Chambers CEO of Cisco, Santa Clara, CA, managed a fundamental transformation of the company in order to move from an enterprise data networking only firm to grow its market in the Telecommunication sector. The first impact of this segmentation change has been to shift its competitive landscape from being 3Com, Santa Clara, CA and Bay Network, Santa Clara, CA (merger of SynOptics Communications, Santa Clara, CA and Wellfleet Communications, Billerica, MA) to be Nortel Networks Ottawa, Canada, Alcatel in Paris, France, and Lucent in Murray Hill, New Jersey. With strong leadership in IP (Internet Protocol), to exchange data files, Cisco initially targeted customers in the R&D (Research and Development) segment, large organization such as the NASA (National Aeronautics and Space Administration) and universities. Cisco modified its strategy from focusing on data networking only and included voice service which represented 80% of the SP revenue. Therefore Cisco addressed not only the R&D and enterprise market but also focus on the Telecommunication industry changing the traditional analog voice to VoIP (Voice over IP).

When Cisco signed a strategic partnership with IBM in 1998, our company shifted its focus from being an IT OEM/ODM to IBM to build Ethernet Switching equipment targeting the Telecommunication market. We acquired an US company at $320M in order to accelerate our presence in the U.S. market and with a direct touch sales force towards large carrier such as AT&T, Verizon, Comcast, Level3…

Figure 1: Adopter category in the diffusion Process

Our strong flexibility and versatility to match the ongoing evolution of the Voice and Data networking has allowed our OEM TEM's customers in Europe to meet their customers' demand, the SP, in creating new services, in order to bring technology break through and benefit from early adopters to create new market in competition with the Chinese low cost and high quality solution.

With today's high pressure in our market, we are bound to innovate in order to survive the environment change driven by new standards allowing customer to build more competitive new infrastructure, i.e. in 2002 France Telecom Enterprise services were built over SDH and ATM technologies provided by Alcatel, Lucent, Nortel and SAGEM. A small company Atrica with $210M investment of Venture Capital (VC) such as Benchmark, Accel in the valley or Innovacom in France and Gemini in Israel was able to define a new Orange Business Service "MAN Ethernet" providing Large Enterprise an extension of their Local Area Network (LAN) through thousands of km.

Why Innovate? Innovation is to develop and deliver products, solutions or services that offer benefits that customers perceive as new and superior.

In their research, Abernathy & Clark defined innovation as the initial market introduction of a new product or process whose design departs radically from the past practice. The competitive significance of an innovation depends only on: what it does to add value; its applicability to the firm's existing core competences.

Without diminishing the importance of cost as a competitive factor, Abernathy & Clark considered the competitive position of a firm in terms of a variety of dimensions. They assumed that products are not homogeneous, and that firms compete by offering products that may differ in many aspects: performance, reliability, availability, ease of use, aesthetic appearance, and image (among others), as well as initial cost. A firm gains a competitive advantage when it achieves a position in one of these featured dimensions, or a combination of them that is both valued by customers and is superior to its competitors. Abernathy & Clark (1985) divided innovations into two dimensions and drew a matrix of four cells they called the transilience map, a combination of the words transient and resilience to illustrate how different product innovations affect the competitive situation in a certain industry.

Figure 2: the transilience map, a combination of the words transient and resilience

The "niche creation" is opening new market opportunities through the use of existing technology, but here the effect on production and technical systems is to conserve and strengthen established designs. The important point is that these changes build on established technical competence and improve its applicability in the emerging segments.

The "regular innovation" involves change that builds on established technical and production competence and is applied to existing markets and customers. "Regular innovation" is often almost invisible, yet can have a dramatic cumulative effect on product cost and performance.

The "revolutionary innovation" disrupts and renders established technical and production competence obsolete, yet is still applied to existing markets and customers. Not all innovations that fall in the revolutionary quadrant have profound competitive impact. Some fail to meet market needs while others encounter production problems.

The "architectural innovation" consists in the usage of new concepts in technology to forge new market linkages forms. New technology that departs from established systems of production and, in turn, opens up new linkages to markets and users, is characteristic of the creation of new industries as well as the reformation of old ones. Innovation of this sort defines the basic configuration of product and process, and establishes the technical and marketing agendas that will guide subsequent development. In effect, it lays down the architecture of the industry, the broad framework within which competition will occur and develop.

The authors did not introduce a hierarchy between these different situations. They also showed that a company could launch radically innovative "architectural innovation" category, such as our Carrier Ethernet services enabled solution, while retaining the essential basic components used as an OEM/ODM vendor.

Competitive strategy evolution:

Figure 3: Competitive strategy evolution

Manufacturing strategies depend on both product and process technologies, including materials, components, design, equipment, process type, operator skills, and economies of scale. Strategies also depend on the type of manufacturer: Contract Manufacturer (CM), Original Design Manufacturer (ODM), or Original Equipment Manufacturer (OEM). In the telecommunication technology sector the three types coexist increasing the B2B market, some evolving from CM to ODM/OEM to services enable solution and rarely to global