TMitTI 1 © Sakari Luukkainen Timetable Introduction, Sakari Luukkainen Technology Marketing, Jari Haggren Market Dynamics of Telecom Industry, Sakari Luukkainen Standardization, Sakari Luukkainen Case GSM, Sakari Luukkainen Product Strategy, Eino Kivisaari Product Strategy, Eino Kivisaari R & D Management, Sakari Luukkainen R & D Management, Case TeliaSonera, Jyrki Härkki Corporate Venturing, Case Nokia, Taina Tukiainen Technology Foresight, Sakari Luukkainen Examination

TMitTI 2 © Sakari Luukkainen Content Cooperation and Compatibility (Varian chapter 8) Waging a Standards War (Varian chapter 9) Information policy (Varian chapter 10) Case ERMES paging system standardization

TMitTI 3 © Sakari Luukkainen Generic Network Strategies ControlOpenness CompatibilityControlledOpenmigration PerformancePerformanceDiscontinuity play

TMitTI 4 © Sakari Luukkainen Cooperation and Compatibility Expanded network externalities Reduced uncertainty Reduced consumer lock-in Competition for the market vs in the market Competition on price vs features Competition to offer proprietary extensions Component vs systems competition

TMitTI 5 © Sakari Luukkainen Who wins and who loses from standards? Consumers Complementors Incumbents Innovators

TMitTI 6 © Sakari Luukkainen Standard setting organizations International Telecommunications Union (ITU) Instititute of Electric and Electronic Engineers (IEEE) Telecommunications Industry Association (TIA) European Telecommunications Standards Institute (ETSI) The Internet Engineering Task Force (IETF) 3rd Generation Partnership Project (3GPP) Open Mobile Alliance (OMA) Liberty Alliance World Wide Web Consortium (W3C)

TMitTI 7 © Sakari Luukkainen Tactics in standard setting Do not automatically participate Keep up your momentum Look for logrolling opprtunities Be creative about cutting deals Beware of vague promises Search carefully for blocking patents Consider building an installed base preemptively

TMitTI 8 © Sakari Luukkainen Building alliances – relative advantage time-to-market manufacturing cost brand edge in development

TMitTI 9 © Sakari Luukkainen Building alliances Assembling allies Interconnection among allies Negotiating a truce Cases of Ethernet, Postscirpt, PDF, ActiveX

TMitTI 10 © Sakari Luukkainen Standard war When two incompatible technologies struggle to become a de facto standard These wars may end in - truce (56 k modems) - duopoly (video games) - fight to death (VCRs)

TMitTI 11 © Sakari Luukkainen Classification of standard wars Rival Technology Your Technology CompatibleIncompatible Compatible Rival evolutionsEvolutions vs revolution (DVD vs Divx,(Lotus vs Excel, dBaseIV 56k modem, Unix) vs Paradox) Incompatible Revolution vs evolRival evolutions (Nintendo 64 vs PS, Netscape vs Explorer)

TMitTI 12 © Sakari Luukkainen Key Assets in Standards War Control over installed base of customers IPR Ability to innovate First mover advantage Manufacturing abilities Complementary products Brand

TMitTI 13 © Sakari Luukkainen Tactics in standard wars Preemption Expectations management

TMitTI 14 © Sakari Luukkainen After winning Staying on your guard Commoditizing complementary products Competing with your own installed base Protecting your position Leveraging installed base Staying ahead

TMitTI 15 © Sakari Luukkainen After losing Adapters and interconnection Survival pricing Legal approaches

TMitTI 16 © Sakari Luukkainen Competition policy Priciples Implications for strategy Mergers and joint ventures Co-operative standard setting Single-firm conduct

TMitTI 17 © Sakari Luukkainen Direct government intervention Achieving critical mass Universal service

TMitTI 18 © Sakari Luukkainen Case ERMES (Enhanced Radio Message System) ETSI standard for high-speed paging (6250 bit/s) was introduced in the beginning of 1990´s Legacy systems based on Pocsag radio interface ITU recommended global status Open, coordinated and consensus-based technical standardisation driven first by big operators (BT, FT, Telefonica…), no licence, 7 open interfaces From manufactures participated early Tecnomen, Motorola and Ericsson, later Glenayre VHF band in 169 MHZ, increased capacity per channel, roaming, type approval, many access methods, value added services e.g. group message

TMitTI 19 © Sakari Luukkainen after de-facto standard FLEX was introduced cooperation changed quickly to standard war using FLEX required licence payment two way FLEX and ERMES US companies had large paging domestic market and succeeded also in FLEX promotion in Asia ERMES was also promoted in Asia, success only in the middle east European PTT´s started to invest in small ERMES pilot networks by running parallel Pocsag, larger networks by new operators Tecnomen was market leader in ERMES infrastructure Case ERMES

TMitTI 20 © Sakari Luukkainen Motorola was market leader of paging terminals, ERMES terminals were more expensive and larger than in Pocsag, no economies of scale Introduction of CPP (Calling Party Pays, no fixed subscriber fee) service in mid 90´s increased subscriber base parallel with massive marketing campaigns, but did not create long term traffic and revenue for operators SMS started to influence as a substitute service no critical mass reached, no further investments in infrastructure expansion or pager R&D currently most european operators have discontinued their paging service Case ERMES

TMitTI 21 © Sakari Luukkainen Conclusions Market and committee based mechanisms – strong standardization culture differences between USA and Europe Success requires economies of scale and network externalities - early setting of global objectives Market aspects for new services have to be considered early in the standardization process: enduser real needs, threat of substitutes, service / terminal pricing and availability, system life cycle, network roll-out strategy Modular open system architecture, scalability, open service platforms The role of governments in the creation of global standards