Management of Technology and Acquisition - Femtocells

Femtocells is a boon to the telecom industry. It is a technology by which inside a close premises where Mobile signals are weak, the mobile operates on the internet as a backbone. Hence customers can use the mobile phones and the telecom operators can earn good revenue.

Do check out the presentation that was prepared for one of the subjects of Technology Management.(click on the title)

The presentation takes you through the variuos methods in which mobile communication can take place, what is femtocells and the key technology related issues that this technology faces with respect to India.

Do feel free to contact me in case of any suggestion and queries.

A Research in the field of Mobile Phones and the defects that occur in them with repect to the Indian Context

This a research study that i had done along with one of my colleagues to find out the relationship between the number of defects that occur in a cell phone with respect to the overall number of handsets in the market.

You can see the complete research in the form of presentation at the above link.

Or write to me for the complete study at aliasgaryn@gmail.com or jai.awatramani@gmail.com

Hi Technology Marketing Part 1

What is a high-tech product?

The term “high technology” is a catchall category that includes any product manufactured with some type of an advanced technology, from razor blades or athletic shoes, to sports cars, to long-range missiles. Furthermore, high technology can also apply to many categories of services. In any case, technology is not the only characteristic and discriminating feature of these products. When asked about the main characteristics of high-tech products, marketing managers are mostly concerned with some distinctive characteristics that pertain specifically to high-tech products.

When we talk of high technology in telecommunications we are not only talking about the products but also about the services offered by the technology providers. Viz. Relaince may provide a data card to access the internet but what is the use if the customers are unable to access the internet i.e. they are deprived of the basic service that the data card is meant for.

Hence high technology services are also very essential for telecom companies becasue

They are intangible.

Their ownership is not transferred at the time of the purchasing.

Customers are associated with them.

They are location independent but time dependent.

They are relatively homogeneous so they can quality controlled.

They cannot be easily demonstrated before purchasing.

A cell phone is a high technology product because it contains different parts:

A tiny microphone

A speaker

An LCD or plasma display

A keyboard

An antenna

A battery

A circuit board

The circuit board itself—the central part of the system—includes various components:

The analog-to-digital and digital-to-analog conversion chips.

The Digital Signal Processor (DSP)—a highly customized processor— which handles all the signal compression and decompression at about 40 MIPS (millions of instructions per second).

The microprocessor (Ericsson phones use an ASIC version of the Z-80) and memory handle all of the housekeeping chores for the keyboard and display, deal with command and control signaling with the base station, and also coordinate the rest of the functions on the board.

The radio frequency (RF) amplifiers handle signals in and out of the antenna.

The RF and power section handles power management and recharging, and also deals with the hundreds of FM channels.

Thirty years ago, all of that technology would have filled the entire floor of an office building. Today it fits into a compact device that fits in the palm of the person using it. That’s the power of technology in the telecommunication sector.

Moore’s Law does not seem to apply exactly to telecommunication technology, since speeds are doubling on optical fibers every 12 months, and are now approaching 1 terabyte per second

One of the characteristic of a high-tech product is its innovative quality. It should bring a (usually) radical change to a market where one new product will drive away others. E.g. IPTV and Satellite TV is changing the way TV was being viewed by the people through the cable operators. This was possible because the radical innovation in the evolution of the technology for television over the internet protocol and the interactivity controlled features in Satellite Television.

Hi Technology Marketing Part 2

Product Life Cycle in the Telecommunication Sector

Every need is satisfied by a technology that has a “life cycle,” characterized by introduction, growth, maturity, and decline. But later with the advent of the 2G networks the pagers saw a steep downfall and finally vanished away from the industry.

The product life cycle can be explained using the cell phone market very well. On an average every 3 months a new cell phone is seen being launched by the manufacturer. What’s the reason?? With the growing needs of the customers and every improving technology, cell phones have become a fad statement. Everyone or rather most people would want a cell phone which has the best of the application (GPS) and the best support system, but who really uses these applications? Hence the mobile handsets have a very small product life cycle. For many years PDH and later SDH were dominating in the technology that used to connect Optical Fibre Mux Center’s across cities. These systems had a range of speeds from 2Mbps to 40Gbps.

Some improvements often achieved with only minor modifications have produced order-of-magnitude gains that have effectively, postponed the introduction of a new generation of transmission technology. Time-division multiplexing, for instance, now allows a pair of wires to carry 24 voice channels instead of just one; consequently, this made fiber optics and cable more expensive and less attractive as a solution for local and low-volume connection.

Combined with fiber optics the laser has revolutionized telecommunications. In the 1960s,the best transatlantic phone cable could carry only 140 conversations concurrently. In 1988, the first fiber-optic cable could convey 40,000 conversations concurrently, and in1997, CNET, the research and development laboratory of France Telecom, the French telecommunication carrier, failed to saturate the transmission capacity of the last generation of fiber-optic cable, meaning that the transmission capacity is almost limitless.Despite this achievement, the patent lawyers at Bell did not apply for a patent to the laser, believing it could not attract interest in the telephone industry.

The other reason why it is difficult to beat the uncertainties associated with new technology is that, frequently, the impact of an innovation relies on complementary inventions, which contribute to a full system solution that will add to its performance and, consequently, its demand. For instance, the telephone has existed for more than 100 years, but only recently has its performance been improved by facsimile transmission, voice mail, conference calls, data transfer, and on-line services. In the telecommunications industry, the laser was useless on its own. Associated with fiber optics, however, lasers are revolutionizing telephone transmissions.

Though optical fiber was available in a primitive form in the 1960s when the first lasers were developed, it took many years to discover that fiberoptic technology allow a tremendous augmentation in bandwidth, because the light spectrum is a thousand times wider than the radio spectrum. In addition, fiber-optic technology provides a better quality of transmission because of its lack of electromagnetic interference.

Standardization usually appears during the growth phase, when a technology starts to reach its peak and new competitors want to offer solutions or products to a growing number of customers. E.g. 2.5 G technology was introduced by Orange in India followed by many other players. Contrary to what a lot of technologists think, the “best” technology does not always manage to become the de facto standard. There are many firms that developed a superior technology but which failed to establish their technology as a standard. Today, Microsoft is fighting hard with Nokia to impose its operating software as the standard of the new generation Web-friendly phones.

Traditional theory states that industries are inclined to diminishing returns as a result of firms competing for scarce resources. However, according to the law of increasing returns, returns from marginal investments go up rather than down. E.g. Airtel started with phone manufacturing and later entered in to the GSM market. As some firms continue investing, their profitability grows, and eventually one or two firms end up dominating the market, because the other firms are unable to match their level of investment. For instance Vodafone and Airtel are dominating the GSM market in Mumbai while MTNL is not able to match their level of investment.

High Technology Marketing Part 3

High investments in research and development

Percentage of spend on R&D by telecom service providers is 2% in 2001 and on telecom equipment manufacturers is 9%.

Market specificity

In the telecom sector or rather any technology sector one can indicate that when dealing with an advanced technology product, specific markets should be approached first, particularly, markets that consider performance to be the most important criterion when purchasing a product. E.g. when Nokia introduced its E series handsets it was targeting only the business users who could leverage on the various features of the phone including the easy to email application and a real internet browser. Similarly the N gage was made especially for the particular gaming segments of the students who were hooked on to gaming.

A key success factor on this market is to use marketing strategy actively to leverage their intellectual properties and patents.e.g. Qualcommm. Qualcomm was the company that developed the CDMA technology. And now any where in the world, when this technology is to being used by any operators they have to pay a huge sum as royalty to Qualcomm. Hence Qualcomm has made the huge profits by not only developing the technology but also protecting the patent and making money out of it as well.

Product Diversity in Telecommunication Sector

The DWDM system used in the exchanges is used to connect two cities and the instrument that are used to connect two people is the telephone. Hence marketing of the DWDM would be an industrial marketing subject while that of the telephone would be consumer marketing subject. Telephone can also be called as a high technology product because more and more innovations and new features are being added to the telephone and is being compact day by day e.g. TATA Indicom WLL phones are having features like sms, ringtones, internet etc. this TATA phone connects to the nearest exchange to the DWDM systems for connecting to different cities. Also the phones developed by Siemens have the capacity of connecting the entire office with a single phone using PBX.

High Technology Marketing Part 4

Articulating marketing strategies with corporate strategies

Automation and standardization make for an inexpensive and commoditized product, which is emphasized by a vision of the founder M. Dell to have a “low-cost leadership” and to keep every cost, not only R&D but overhead, too, down. Finally, within the organization, a “single point of accountability” makes quality control easier and provides customers with a sense of reliability.

Example of low cost handsets by reliance and zte of releaince

To focus on markets and not technology has a very important strategic consequence regarding the entry market strategy. Some companies will try to push radical technology to reap the profit of innovation and market leadership. For instance, Nokia’s strategic intent was to “take a leading, brand-recognized role in creating the Mobile Information Society by combining Mobility and the Internet while stimulating the creation of new services.”

Furthermore, because of the quick evolution of technology and the environment in the high-tech sector, the time frame for the definition of a strategic intent, and sometimes for staying at the top of a firm, is always much shorter than in more traditional businesses. This point is confirmed by S. Tchuruk, CEO of Alcatel, the giant European telecom equipment maker, who joined Alcatel in 1995, after more than 30 years in the oil and chemical industry: “When I was in the oil industry, it was much easier. You knew what demand was and could easily predict your output.” Still S. Tchuruk is one of the great survivors of the telecom equipment industry. From 1995 to 2004, there have been six chief executives at Ericsson, four at Nortel, and three at Lucent.

Be compatible to generate increasing returns

The value to a customer of many high-tech solutions is a function of the availability of complementary solutions, like the coverage of the telephone network for a cellular handset. In order for all those complementary solutions to work well together, compatibility is essential. In the cellular telecommunication market, compatibility demands a common set of technological standards for the design of cellular base stations, digital switches, and handsets, to ensure maximum geographical coverage for users. The larger the coverage, the greater the value for customers and the bigger the future demand, leading more customers to invest in the expansion of the network.

Increasing returns explain why the cellular phone caught on more quickly in Europe than in the United States in the 1990s. In Europe, more than 900 telecom vendors and operators backed only one technology, the Global System for Mobile Communications (GSM), while there were four different and noncompatible technologies in the United States. The value for the cellular phone users clearly was much bigger in Europe than in the United States. The value of increasing returns varies according to the different categories of networks.

The simplest communication networks are the “one-to-many” broadcast networks like television. Their value is proportional to N, the size of the audience: the more the audience, the greater the value of the network (and the more you can charge advertisers). This is sometimes known as Sarnoff’s law, named after one pioneer of the broadcast industry. A second type of network is the “many-to-many” telephone network, where everyone can communicate with everyone else. AT&T’s long distance network, Yahoo or AOL provide good examples of this second category. In this case, the total value of a communications network grows with the square of the number of devices or people it connects (N2), as pointed out by Bob Metcalfe, inventor of the Ethernet.

A third category of networks provides the ability to interconnect independent networks, such as Group Forming Networks (GFNs) on the Internet, whose conferencing capabilities allow more than just two-way conversations. Chat rooms, discussion groups, auction hosts such as eBay, user groups buddy lists, trading rooms, and marketplaces allow groups of network users to combine and communicate around a common interest, topic, or purpose. In that case, David Reed, a former research scientist at Lotus, proved that the value of the network scales exponentially with N. On the Internet, standards have emerged around basic foundation technologies (but not yet for sound, graphic, video, and animation software) as connectivity protocols like TCP/IP offer more flexibility at far lower cost than equivalent nonstandard technologies. Soon TCP/IP won over Open System Integration (OSI), which likewise is a technical standard but too costly to introduce widely.

Requirement of Base Technology

From the above article it can be seen that to have a good IPTV service you require to have a very good broadband connection. i.e. one technology is useless without the other. Hence if we want to market IPTV as a service you need to have a very good backbone of broadband services. For instance IOL Broadband is the first company to introduce IPTV services(content provider) in Mumbai using the MTNL backbone. But the problem that the cmpnay is facing is that it cannot market its services in full throttle because MTNL backbone of broadband is not very reliable and the customers don’t have faith in the service provider. No doubt IOL may be providing excellent content, but whats the use if the backbone itself malfunctions.Also if IPTV markets itself very well, then the broadband penetration will also increase in the various parts of the city.

Go global

In our global economy, increasing returns on investment follow the firms that penetrate one large geographical market after another. In telecommunication, Nokia was a Finnish company in the 1980s; it was a European company in the early 1990s and by the late 1990s it was truly global. In 1997, Nokia shipped just over 20 million units; in 2001 Nokia shipped 140 million units, about one out of every three cell phones in the world and less than 3% of Nokia’s revenues come from Finland.

Companies like Ericsson, IBM, Motorola, Nokia, Philips, 3Com, Toshiba and hundreds of smaller companies have agreed to back and promote a new communication standard, Bluetooth. This is an evolving short-range networking protocol for connecting different types of digital devices by wireless signals within a 35-foot range. The goal of the standard is to overcome the difficulty of getting different devices “to talk to each other.” With Bluetooth as a common standard, users will be able to connect a mobile phone with a computer, or access the Internet via their mobile phone.

What is high-tech Telecom marketing?

Outside of its strong technical content, its sometimes hectic life cycle (cell phones), and its innovative aspects(easy email, GPS etc.) , a high-tech product is first and above all a product that can satisfy a need or a want of a customer(Businessman) or an organization(Corporate). The “high-technology” dimension comes only as an extra layer (better speeds and newer applications) that is added to a product, which is actually defined by its tangible or service aspect and the nature of its consumer or industrial market.

As a consequence, the marketing of high-technology telecom products is no more than a subset of marketing consumer goods (cell phones); of industrial marketing (networking hardware); or of services marketing (Selling talk time), whichever the case may be .

First, technology generally has a tendency to worry many customers—some are intimidated by the task of learning how to use a high-tech product (IPTV), some are risk-averse to any novelty, and others are afraid that the current technology available will become obsolete quickly; all are always postponing their decision.What is true for consumers is also true for organizations. Many managers fret about innovative solutions and use various strategies to reduce risks in purchasing high-technology products. They try to assess the balance on the risk/return relationship of such investment much more than considering the novelty of a technology. The role of marketing is to educate consumers to innovation, to make them more comfortable with technology and to help them to figure out precisely the return on their investment.

Second, the short product life cycle requires efficient time management (development of schedules, marketing time limits). Today, the average life cycle of a personal computer, a mobile phone, and many consumer electronics, is under 1 year while the number of models are increasing dramatically. In a way the consumer high-tech business is similar to the fashion business, where more than 90% of models change every 6 months. Consequently operational excellence and agility becomes a priority, not only in development and manufacturing, but also in marketing. Missing a sale means dropping a contribution margin from 25% to 30% of the producer’s sale price in the mobile phones industry.

Industrial products in the telecommunication sector don’t necessarily have a short-term life cycle. If a company is investing 30000crore in developing the infrastructure to set up a telecommunication company he cannot change the technology on which he is operationg until and an unless he has break even.

Third, product innovation requires direct cooperation between research and development and other services. Numerous studies by academics and practitioners have explored the R&D-marketing interface and its role in the new product development (NPD) process. Their main conclusion is that the integration of R&D and marketing have a significant impact on the success or failure of NPD projects, both at the project and the company levels. In case of LMDS and UBR, R&D needs to collaborate with the marketing and servicing efforts because every customer(corporate) has different needs and wants. But this close collaboration is not limited to the development of new products. It is also of primary importance in all the different stages of product management, from the launch to its exit from the market, as well as in the management of the different components of operational marketing. Actually, some academics and practitioners believe that the most important driver of a high-tech firm’s performance is the interaction of marketing and R&D capabilities.

Interestingly, one has to notice, that the marketing of high tech products crosses the boundaries of B2B and B2C. Some people tend to believe that the marketing of technology is essentially important for market organizations. The truth is that technology is penetrating the consumer markets extremely rapidly, as well, mostly through the adoption of information technologies, such as the personal computer, the cellular phone, and the Internet. This is also apparent in the strategic moves of the largest high-tech firms. Companies such as HP, IBM, Microsoft, and Nokia are marketing solutions both for business customers and consumers. Some B2B companies have managed to enter the consumer market very successfully, like ZTE who is the leading manufacturer of DWDM systems, which is today the leading low cost producer of cell phone handset.