Everyone loves going on a metaphorical journey these days. From reality TV stars to telecom equipment providers, it seems no one can get by without an emotional or organisational transformation.
Ericsson is halfway through its own 10-year journey from being your common or garden telecoms vendor to an all-singing, all-dancing ICT company, CEO Hans Vestberg told attendees at the company’s annual Business Innovation Forum last week.
So how is it progressing, will it reach its destination and what does it mean for Ericsson’s traditional customer base of network operators?
Asked to define the Sweden-based company’s strategy in a couple of sentences without using the phrase “networked society”, Chief Strategy Officer and Head of M&A Rima Qureshi failed on both counts.
But she did tell European Communications: “If everything is being transformed, if everything and everyone will be connected then the question for us is how we can produce the products, services and ecosystem to enable that.
“The other part of the transformation, which is a bigger part for us, is how we can learn to work more the IT way… how to be quicker and more innovative. We’re looking to fail fast and move onto the next thing – our recent exit from modems is good example of this.”
New areas that Ericsson is focusing on include TV and media, M2M and the enterprise space.
It’s a lot to take on, but the CSO has a strong message to employees and the wider industry: “I don’t believe there's an option to go any slower. It’s the way we have to be. Yes, it's extremely challenging but we have to do it.”
The company’s most recent financial results show that the vendor is in rude health. As promised, revenues started to grow in the third quarter with sales up in all its major businesses.
Vestberg said Ericsson’s vast scale – it is present 180 countries – gives it the scale and strength to manage regional variations.
During the event, which took place in the company’s home city of Stockholm, Ericsson announced a 4G network deal with dtac in Thailand, an IT transformation with Taiwan's Far EasTone and a seven-year managed services deal with Montenegrin operator M:tel.
But herein lies the problem. As Qureshi admits: “We need to look beyond operators to address new customers.”
TV and media is the big white hope. Following acquisitions of Microsoft’s platform Mediaroom, media management company Red Bee, “TV Anywhere” deliver provider Azuki Systems and cloud storage company Fabrix, Ericsson is launching its cloud-based TV platform in Q2 next year.
Given the amount of capex invested, it will be a big moment for the company.
Another key area is M2M. In Stockholm, Ericsson showcased work it is doing with car manufacturer Volvo, which launched an infotainment service at CES in February, and shipping company Moller Maersk to track containers and reduce fuel consumption of its vessels.
Transforming Ericsson could be viewed as something akin to turning round one of the latter’s ships.
Qureshi says her most pressing challenge is capital and resource allocation.
“Making the difficult decisions on where you make your investments is extremely challenging,” she explains. “If you have a business that is generating money but you know that it will be disrupted or transformed, how do you decide when is the right time to move money to new areas?”
CEO Vestberg said it was a subject much debated within the company. “We don’t want to transform too quickly but we don’t want to transform too slowly,” he said in his keynote address in Stockholm.
M&A will remain a big part of the transformation. Qureshi says: “Anything that is core [ie, radio] we will do ourselves, any new areas we will look at M&A, partnerships and strategic investments.”
The CSO revealed she has a group based in California and New York with an objective to look at the new technologies that are potentially going to be disruptive.
“When we decide to invest we take a VC approach and sit on their boards to evaluate how things go.”
While such investments will hopefully pay off in the future, where does this leave Ericsson’s large base of operator customers?
According to Qureshi, their role is becoming differentiated depending on where their core strength is.
She says: “For some it is the best network, for some it is opening up their networks to developers to deliver online services. For others it is quad-play and developing their own content.”
But she refutes the notion that Ericsson is transforming because operators are just not innovative enough: “Operators are not becoming less relevant, they're trying to figure out where they can offer the best value.
“They have to have a clear idea of where they want to position themselves and how they can be competitive.”
Ultimately, Ericsson is desperate to move on from its traditional operator customer base but will be reliant on them for some time yet.