Friday, August 29, 2008

Celebrating Che

Che in his kingdom

This time last week we had to put our cat Che down - only 3 and a half years old and he was debilitated with cancer of the colon and lower intestine. Couldn't hold down food and was slowly starving - we had little choice.

We were fortunate enough to have him around at home for a couple of days in front of the fire after the exploratory surgery confirmed the worst. Thanks to everyone for their sympathy and kind thoughts and deeds. It's meant a lot.

Ella knows her buddy has gone away but keeps asking when we can pick him up - breaks our hearts.

We chose the name Che as Arlene and I had recently seen Motorcycle Diaries when we were looking for a cat. We went to a crazy cat breeder who bred Abyssinians. This little guy caught our eye when only a few weeks old - playing with a scrap of paper and growling at his litter mates when they got too close. Sounded just like a little motorbike - hence the name Che. I guess he could have been called Ernesto.

That growl was always around - especially when he heard strange noises (he would growl like a dog), if you tried to take one of his victims from him (rats, birds, mice, lizards) or if Ella pulled his tail too hard.

He also met everyone in our neighbourhood well before we had - we were invited around for Christmas drinks and pretty much everyone in our street had visits from Che where he would just jump on the bench and take over and it still amazes me that he never caught a Tui or Wood Pigeon even though he spent the hours longingly staring at them.

He was a little cat with a big personality - Abysinnians are described as 'Attention Seeking Athletes' and I don't think I have seen a cat try to be the centre of *everything* as much as Che. To the point where he would jump in the parcel tray of Ella's buggy when we would go out for a walk. Or just follow me down the street like a little dog (except he was smarter!).

We miss him heaps - he leaves a big hole.

Che as a kitten - first week at home

Standard Saturday morning (I wish)

Cleaning up the local vermin

Che giving Ella some love

Che and Ella getting a bed-time story from Arlene

Standard position

Telecom, Kevin Roberts and Brand

I noticed with interest the appointment of Kevin Roberts to the Board of Telecom. Looks like I am not the only one as well.

I have had some limited contact with Kevin during my time at Telecom - the most interesting being a 2 day workshop where we tried to discover the key purpose of Telecom. Fascinating and inspirational. I've also worked with a lot of Saatchi's people, most recently Saatchi X who are (in my opinion) world-class Retail designers - they get the whole notion of designing Retail for customers. This is to the extent where they went around a bunch on NZ stores and just watched what customers did before leaping into any design work. Much better than what you would expect from a normal ad agency. So I have a lot of respect for the work that Saatchi can do to communicate a brand.

A few things I noted from yesterday

1. Governance - Kevin says that he is privileged to contribute to the governance of Telecom. I was very pleased to see this. Kevin has spent a lot of time through Saatchi and Saatchi advising Telecom directly on Brand Communications. Saatchi's has been Telecom's key agency as long as I was there (15 years). This Board role has to be separate from that - good to see he gets that. I do wonder how Telecom can get the full benefit of his brand expertise as both a director and its number 1 supplier , surely this starts to become a conflict of interest? Will be interesting to see how it is managed.

2. Comments about the lack of marketing and brand expertise on the Telecom Board. Wayne Boyd himself says that Kevin will bring Brand and Marketing expertise, as well as customer satisfaction skills. There is already significant brand and marketing expertise on the Telecom board with Rod McGeogh (anyone who can lead a successful bid for the Sydney Olympics knows how to execute a marketing strategy) and Ron Spithill (global marketing manager Alcatel). This may signal even more of a marketing focus for Telecom. However, given Kevin (through Saatchi and Saatchi) is already providing Telecom's brand execution, how much more can he offer than this? And is this really the problem?

3. The Telecom brand - the Radio NZ interview with Wayne Boyd yesterday included some commentary along the lines of 'if Telecom got its Brand and Marketing right then shareholder benefits will follow'. This is not a Wayne Boyd quote but a reporter's quote. This is mostly right but not completely.

In my opinion, Brand is the promise that you make explicitly and implicitly to your customers. Everything they see, touch, hear and feel when they interact with you defines the Brand. It's not that complex a concept (although it is difficult to tell a good story in a short period of time and keep your business in sync with it) and Telecom has been really good at making these promises and communicating them through its marketing and PR efforts supported by Saatchi. It invests a lot into this, wins global awards and therefore this is not where it falls over. 

Where it needs the most effort is in the delivery of the promise. In my mind this is where Telecom really needs to look in terms of its leadership. Telecom needs to make promises that it keeps - its recent brand damage has been caused by saying one thing and doing another. This is the long hard road to rebuilding brand equity.  Where is that leadership coming from?

I have been thinking about brand, marketing and customers for a while now and have a small series of posts that I think will help explain this further. Kevin talks about the whole notion of Lovemarks superceding brands - my view is that is a bit glib. Love is damned easy to talk about but really hard to build. 30 second ads and stories don't cut it in my mind - but more for a later post.

There - I've made a promise, time to deliver on it.

Disclaimer: I hold Telecom shares and have spent a lot of time trying to build a view and product set in Telecom that says if you do right by customers, then you'll get great results. I really want to see Telecom become a loved brand in NZ again.

Thursday, August 21, 2008

Vodafone offers 'cheaper' iPhone data plans

After significantly reducing the trust of its customers, Vodafone has offered new data plans for the iPhone in NZ.

The Good

- Customers who bought iPhones under old plans can change 

The Bad

- It's a small incremental change at the margin - monthly fee reductions with corresponding voice minutes and txt quota reductions.
- Customers remain disappointed from the early promise and there is no apology for that disappointment. Possible that Vodafone think they have got away with this. Especially since plan changes can incur a penalty.
- There is no high end plan that offers good value. In fact no high-end plan at all above 1GB.

My thoughts
- My pick is that Apple have forced this change - this is only incremental and comments on stuff and Geekzone seem to represent the tone.
- Vodafone NZ is in the dogbox with Apple - supply is being drip-fed to them (confirmed from two separate sources)
- It is going to require a lot more changes along these lines to regain customer trust for Vodafone. Expect to see more incremental changes.
- An opportunity still exists for Telecom to shake up the mobile data market and take some seriously high ground.

Tuesday, August 19, 2008

iPod Touch + Remote + Airport Express = WIN

I posted a while back on how I thought the combination of iPod Touch, the Remote app and an Airport Express could end serve as a poor man's Sonos.

Finally got myself an Airport Express last week - and it is as good as I thought.

We have 2 macs at home - I can select either Mac as the source and can select a number of outputs to stream the song to.

How does it compete with the Sonos?

Cost - this is a hands down winner - $700 for a 32 G ipod Touch (you could pay less), $80 for a second hand 802.11 G airport express. Compared to $1500 + for a Sonos, this rocks. And you get an iPod.

Usability - Equivalent - compared to the Soundbridge I had earlier, Arlene can use this happily. That's a serious win.

Functionality - Sonos still on top with its ability to select different output zones, cue up songs (a very social feature) and a single database of tracks. Having said that, the volume control for the Remote app is a useful bonus.

It was the world's easiest sell to go in for another couple of Airport Express units. Next will be to file all the CDs away.

Funniest thing, Arlene spotting the flaw with not having a server capability in iTunes 'Even I think that's dumb'. Apple have to fix this soon. I'd probably pay for a version of the remote app that allowed streaming to different zones and the ability to cue up songs, even the Soundbridge had that.

And a nice touch - you can use the Remote app to enter in WiFi keys on Apple TV.

Friday, August 15, 2008

Start Up lessons and Agile Development

Really enjoying the DogMog blog at the moment - another thoughtful post today from Sarah on the process of selecting a developer, designer, methodology and requirements.

I posted about Agile Development a while back. Agile didn't work for that project IMHO- the lesson I learned from that is that both the business owner and the developer have to agree to and then commit to using Agile. From a business owners perspective that means ideally sitting with (if not working with) the actual developer (not their representative) daily. Without that its just waterfall under a different name. Enough said.

Thursday, August 14, 2008

Media is a long-game - Apple shows the way

Great to see movies available on iTunes in NZ today. I have a US account that I have been using for buying movies, music, TV shows and apps but have used it sporadically based on the hassle of getting credit into my account as I don't have a US credit card.

Today's announcement has reminded me of how important it is to have a long-term view if you are going to enter the media market.

I've been lucky enough to be involved in the majority of Telecom NZ's media offerings over the last 7 years. There will be a bunch of you who are disparaging about Telecom's efforts here - fair enough.

The one thing that frustrated me the most was the lack of a commitment to a long-term plan by Telecom to its media strategy. Basically, depending on the exec involved, it veered from one play to the next, driven by short term objectives. This is not just true of Telecom - other telcos and ISPs locally have had the same approach, and Vodafone globally and locally has been schizophrenic about its approach.

Apple's approach is driven by an appreciation about the fundamentals of the media industry.

1. It is not possible to make money in media over the short-term or even the medium-term. The margins are too slim - less than 10%. Over a long term - say 5 years - with a consistent approach, all those individual sales of low margin items add up, you build an audience and then you can monetise that in other ways (including advertising). Apple is starting to look more and more like a pay TV play the way it is going with apps and media sales. Check the graph - 5 billion songs in 5 years!

2. The media business is built on relationships - no relationships, no trust, no deal. I like dealing with media people if only for the fact you can legitimately talk for hours with them trying to find common ground and that is a legitimate business reason.

It's basically a long tail with people relationships. Today's announcement by Apple is about adding some more to that long tail.

This appreciation has meant that Apple has been able to work through the Universal issues, release DRM-free music and, its my pick, will be the first store to launch Beatles tracks - the Holy Grail for some at least.

Planning on a media play for your business ? Don't go there unless you have a 5 year plan and the support to go with it.

DogMog - coming soon

Sarah has been working hard on getting DogMog up and running. It's a Wellington based start-up, driven by Sarah who is a vet-nurse by training but also has a strong background in product development for Telecom. Did I mention she's engaged to my brother too? With that combination it should go well!

As Sarah says in her blog, this what DogMog is about...

DogMog gives members the ability to rate and review the products, services and parks they use, on a site dedicated to helping you make informed decisions about your pets care.

Site is up and running soon - looks like there have been some teething troubles with Silverstripe based on the last post on the blog - so in the meantime subscribe to the blog and check the site out when it goes live.

Wednesday, August 13, 2008

Telecom 850 WCDMA - more developments?

Juha posted on the rumours of a delay to the launch to Telecom's WCDMA network. I have no further detail but it's got me thinking some more.

I've been doing a lot more sniffing around on the handset situation for Telecom should they decide to move to 850 WCDMA as part of their UMTS roll-out.

Based on my last post suggesting it needs to be driven by coverage, handsets and pricing for customers, it's clear that there is a potential long-term coverage play for Telecom in all of this. However handsets are the key.

It's my opinion that, should Telecom go down this path, they should only look at one radio spec for their handsets. That is quad-band GSM and a least dual band WCDMA (850 / 2100). Throw in 1900 WCDMA if you can get it, but given that is primarily a US driven requirement and they have rolled 850 WCDMA there 1900 is not a mandatory requirement.

The reason behind choosing a single spec handset is that Telecom can then run a very simple and effective long-run campaign for its customers : 

Buy any Next Gen Mobile Telecom handset and you can roam anywhere around the world and have the best coverage for voice and data here or overseas. Period. 

Very strong coverage position to take and one that could put Vodafone on the backfoot for quite a period of time.

My reasoning for this spec, as opposed to a local spec for 850 only devices and 850 /2100 devices for 'Worldmode' is simple. 

1. Remove a confusing choice for customers about whether they might or might not want to travel somewhere in the world with their mobile. With this spec they can travel anywhere. The last thing you want a customer to have to check is what band their mobile is before they travel - there is usually too much to do anyway!

2. Take a position on coverage that Vodafone can't match - Fastest data here and around the world, where-ever you go.

Key driver for this is handsets. A couple of days of searching the 'net and this is a mixed picture.

On the positive side there is the number 1 handset vendor globally, Nokia, who have a range of 13 devices that meet this criteria. Not bad until you see that their overall range for GSM 900 / UMTS 2100 stands at 58. Still, much better than the days of TDMA and CDMA where the Nokia devices available were around 3-4 vs. 50 -60. The other positive is around iPhone. Will provide great coverage for the 3G iPhone. However this will probably neutralise Vodafone locally at best as they will have mopped up most of the early adopters, notwithstanding supply chain issues from Apple.

On the negative side - there just aren't very many other providers of this spec. A look at GSMArena shows Sony Ericsson has 6, Samsung has 1 and these are out of ranges of around 40 for Sony Ericsson and 70 for Samsung. HTC also has a few and then the numbers dwindle after that.

Overall the answer is that the range is good enough, however there is very little negotiating leverage for Telecom with such a small range of providers. That will probably drive up cost of sale temporarily. The temptation for Telecom will be to buy a cheap handset that reduces cost of sale. That is a short term game. 

Do. Not. Do. That. 

If there is one thing that I have learned from 15 years of deploying AMPS, D-AMPS, CDPD and CDMA it's that as soon as you bow to this short-term demand then you are forever trying to paper over the cracks.

Thinking long-term would mean the following

1. Build strong and deep relationships with 4-5 handset vendors. Don't nickle and dime them.

2. Don't launch until you have a nationwide NZ 850 WCDMA network - start with a superior local coverage position and hold it all the way through.

3. Buy a handset spec that gives best global roaming. And only one spec please!

4. Price data on a 10 year return on infrastructure, not 3.

The pain will be taking a hit on Mobile market share until this launches. Given how low the share-price is now, I think this is probably priced in already according to Valuecruncher.

Monday, August 11, 2008

I flew a 737 for the first time today

Well it felt that way.

I visited a good friend of mine, Bill Highet, who is the CEO of Pacific Simulators. Pacific Simulators make flight simulators based on Boeing 737s.  You sit inside a completely authentic cabin with the results of your skill (or lack thereof) projected in front of you. I had a quick 20 min tour and took off from Christchurch airport, did a lap around Lyttleton Harbour and managed to land it (mostly on my own) back at Christchurch. 

I was buzzing - the experience is very realistic, control response is immediate and I felt like I wanted to be a pilot all over again.

It's more amazing when you think that this company is completely NZ based - from the hardware to the software side (although it leans heavily on MS Flight Simulator for the visuals). Production line looked pretty busy - 3 sims currently in production for destinations such as Dubai and Hong Kong. Lots of other orders lined up as well.

Like most fledgling businesses, they are tight on cashflow - expect to see some capital raising later this year. They have great opportunities to execute on in terms of both Entertainment and Pilot Training. Their Entertainment offering is marketed by Flight Experience. Looks like the Wellington Franchise is up for sale if anyone is into this. Drop Bill a line at Pacific Simulators and he will sort you out!

Thursday, August 07, 2008

Why would Telecom NZ launch an 850 MHz UMTS network?

Mauricio posted this rumour earlier today that Telecom is looking at UMTS at 850 MHz on a nationwide basis. I have no idea if this is true or not but I thought I'd assess it in advance on the off-chance it is true.

In my experience over the last 15 years with Mobile network deployments there have been a bunch of hypotheses about what you can do to attract customers to your network. These have included products and services, video, social networking - all the 'next big things'. 

In the end, it does not matter about differentiating on features and services if you haven't got three basics at the same level as the rest of the market. In order, they are

1. Coverage (Where can I use it?)
2. Handsets / Devices (What devices are available?)
3. Price (How much does it cost? Can I afford it?)

This is what customers repeatedly have told me when I have asked them what is important. In fact, given the benefits of mobility customers surprisingly rate Price significantly lower than coverage or handsets.

Most of Telecom's strategic errors around mobile have been when they have forgotten about these 3 fundamental truths - in particular the first. I consider roaming as part of coverage - and Telecom has been on the back-foot here for about a decade. In particular, apart from a period recently when these elements were equal, most of Telecom's major losses in market share have occured when the people involved in setting strategy have been too worried about the economics and trying to engineer a short-term position. But I am off topic now.

Back to the rumour - Why would Telecom look at this particular path?

Marketing wise, they have been saying that they have the best nationwide data network (true - CDMA in NZ is still the best natiowide mobile data networ) and a global roaming proposition (true). The issue is that it's a very limited range of devices that can handle this and when it comes to data, a key part of mobile now, the global proposition is non-existent for UMTS. Worldmode phones, while great, only operate on GPRS as far as I know. And there is a very small selection - 3 at my count out of the portfolio of 24.

This position gets even worse with the current stated proposition for WCDMA. 3 urban cities at launch and  nationwide EDGE network. Not good enough. It reminds me of BellSouth's entry into the NZ market. Lots of marketing and a very inferior coverage proposition. Many years after Vodafone bought BellSouth and had pretty much equalised on coverage , I still had Telecom customers tell me they were still with Telecom because of the vastly superior coverage. Power of brand...

So a quick assessment of the speculated 850MHz nationwide network. Why would Telecom do this?

1. Coverage - given the current plan this would provide a massive boost for local data coverage, allowing Telecom to switch off its CDMA network earlier. It doesn't add anything significant for global roaming. The global roaming game is at 2100 MHz for WCDMA - end of story. Anyone trying to convince you of anything else is dreaming.

2. Handsets - This is the tough one to swallow. This strategy does not help the handset situation at all. It means a more specific spec for handsets which means less range to select from. My guess is that Telecom will be forced to run a reduced portfolio compared to Vodafone locally. All they can do is ensure they have a set of choices for each price-point . Shouldn't be an issue at the mid-range but I would anticipate issues at the low-end and the high-end. Telecom may try and offer low-end at CDMA. This would follow the same path tried for trying to maximise the value of the TDMA network. That didn't work. This won't either. Don't do it!!!

3. Price - Telecom will have a relatively empty WCDMA network. Where they could really do well is if they do what Vodafone didn't do when they launched their 3G network. Offer a really sharp data plan. 

So, if you are an investor in Telecom stocks consider the following

1. If Telecom announce an 850 MHz network AND can talk to a reasonable set of handsets tomorrow then this is very good news. Especially if the focus is coverage and handsets as opposed to video services etc. If CDMA closure is announced, even better. Means that the long-term picture for Telecom's mobile business is built on a reasonable foundation. 

2. If there is no word on 850 MHz network then it is too late for this to be available for launch - doesn't rule it out but means another year of pain in Mobile. Whether you hold or sell will depend on the commentary around mobile.

3. If the rumour is squashed and the focus is all on ecosytems of products and services then be very very worried. Those don't matter if you don't have coverage and handsets sorted. Value down the mobile component of the business and cash-out while you can.

If it was me, I'd do the following

1. Roll out 2100 UMTS as far as you can - aim to make this the core of the network. take the capital hit now and a long-term view on return

2. Backfill with 850 UMTS - necessary evil and provides a short-term coverage advantage if you go full nationwide. Or worst case equalises this position.

3. Aim to close down CDMA in 3 years. Most customers will swap out their handsets in this period anyway. Find ways to make this work without blowing cost of sale.

4. Introduce an all you can eat data plan that goes where Vodafone can't easily follow  - look for their profit pool and nuke it. Great for customers and great for the revenue line.