Time for MTN and Vodacom to 'innovate or die'

2016-01-18 12:03 - *Dewaldt van Wyk
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I HAVE three words for MTN and Vodacom. Innovate, innovate, innovate. The trick to playing excellent poker is to inspire confidence, even when the odds are against you.

The revelation of a bad hand precedes loss in the game of poker. However, unlike a game of poker, a technology company is not dealt a hand – they get to cherry-pick greenfield technologies. 

When you have been selecting the same stack of cards as a business strategy, that so happens to be the de facto communication method of the 90s – motivated by historic success and subsequent happy shareholders, you have failed to understand the very nature of a technology company.

If you consider yourself foremost a communication company, you have already failed at strategy. The moment you define yourself, you are lost in the modern marketplace that favours constant innovation and strategy adjustments.

Yahoo was successful in the early days as a web portal. When the web changed, they failed to redefine their identity and they saw dwindling market-share, whilst Google kept on growing, constantly redefining strategy through innovation and peripheral services. Now Google are refining technology for self-driving cars. How impressed were we with Google Earth and Street View when it launched? It changed our beliefs of what is possible with technology.

Mteto Nyati (MTN South Africa CEO) inadvertently admits to MTN's lack of innovation – explaining why a zero-rated SMS cannot compete: “My view is that those services have been designed in such a way so they are so customer friendly. The fact that they end up being zero-rated is a different matter, but if you look at the uptake of WhatsApp, it’s so easy for the customer.”

READ: WhatsApp faces possible regulation in South Africa

Years ago, Mxit launched as solution to overpriced SMS. Instead of reinventing messaging, mobile operators pushed consumers into the hands of services such as Mxit and WhatsApp. Mxit was the early warning, indicating that mobile strategy was wrong; it could have been used as roadmap for innovative future communication, yet MTN and Vodacom continued to conduct business the same way they did in the 90s.

Tell us your thoughts: Should MTN and Vodacom being doing more to innovate?

The taxi industry never saw itself as a technology industry and little changed for many years – it too was the subject of disruptive technology Uber.

If MTN and Vodacom's chief strategy is to hold on to the historic label of “communication company”, they too will suffer losses at the hand of disruptive technologies.

The accusation of “unfair advantage” is a rather tedious response to their failure to innovate and dominate their own industry.

At a combined market-share of nearly 60 million (2014), MTN and Vodacom appear to have a very limited understanding of their millions of subscribers.

By using WhatsApp, subscribers have already indicated that Vodacom and MTN's offerings are inadequate.

READ: Vodacom calls for OTT regulation & MTN targets 'free loading' WhatsApp

Instead of building a product and ecosystem that can transcend the founding principles of mobile communication, MTN and Vodacom are complaining about unfairness in the marketplace and calling for the regulation of OTT (over-the-top) content providers such as WhatsApp.

Messaging service WhatsApp is in mobile networks' cross-hairs. (Supplied)

What should have been an engineering and new business opportunity, has been dealt with as a legal problem that requires lobbying and government protection.

MTN and Vodacom's short-sighted solution should worry both investors and consumers.

Will investors start to see MTN and Vodacom as technology companies that are failing to innovate and dominate their markets in a free market system?

2016 will be a challenging year for consumers, with a credit crunch and general inflation likely to persuade many consumers to cut costs where possible – mobile providers like Cell C have promoted WhatsApp by creating WhatsApp data incentives and Cell C subscribers have certainly benefited from these models.

READ: Cell C: Regulating OTTs could hurt industry

The heyday of traditional communication services have passed and no amount of legislation can save technology companies that fail to innovate and have a blatant disregard for the requirements of their subscribers.

This should hopefully be a lesson MTN CEO Mteto Nyati and Vodacom CEO Shameel Joosub learn, sooner, rather than later.

*This guest post is by Dewaldt van Wyk who is the technology columnist for the monthly legal publication Without Prejudice and a contributor to DealMakers, a corporate finance magazine. He is also the software development lead at Pathcare and says he passionate about technology and markets.

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