Some time back I did a strategy course as part of the Advanced Management Programme at the USGBS. After a few sessions of methodology and attendant whizzy diagrams, George Burt came in one morning and asked how many people had thought about customer value in the shower. Now, I have no intention of sharing my ablutionary thoughts, but up until then customer value had not been a bathroom preoccupation for me or, apparently, for my classmates. George’s point is, of course, that customer value lies at the heart of strategy.

As an example consider recent events surrounding Vodafone: The dropping of Carphone Warehouse and closing down of the Innovation unit, the full implications of which are discussed in Guy Kewney’s Register piece. The essential problem here is that there simply isn’t enough customer value around to support all the existing pond life. Back in 2000, (and some won’t want to remember this) MNOs were being valued in terms of the number of customers they “owned”. By some reckonings a customer was worth £2,500. The talk at Telecom 99 was of new technologies and services driving revenue. In any case crossover would deliver new customers as exemplified by South Korea. On this basis it made good business sense to dole out generous commissions and handsets subsidies. But times have changed; the market is saturated and connections have become a commodity. Operators still need to keep market share because economics happens at the margins, so commissions and handset subsidies still abound. The problem is that the numbers no longer add up. Consequently the whole telecoms edifice is creaking with the strain. It’s a situation that can’t go on for ever and the cracks are beginning to appear.

The emerging landscape presents clear, stark strategic choices: Innovate and create new customer value or cut costs. The full implication of a pure cost cutting strategy are spelt out in Guy Kewney’s Register article. To anyone with imagination or desire to build, it’s a decidedly unappealing scenario. Nevertheless, predicated on an ability to compete on cost alone, becoming the Ryanair of the telco world may be a viable option. The only viable alternative is a new agile approach to marketing and technical innovation focused on delivery to the customer. This is where Calico Jack has nailed its colours to the mast. Postings over the next few weeks will explore these issues in more depth.