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The Telecommunications Carriers' Dilemma: Innovation vs. Network Operation
Abstract
As the telecommunications industry moves out of its traditional monopolistic environment to a highly competitive one, incumbent service carriers struggle with legacy networks, outdated regulations, and technology silos that don't easily integrate with each other. Additionally, many new equipment and software vendors as well as new competitors (that use incumbents' networks to offer their services) threaten incumbent firms. The objective of this study is to understand what is viewed as sources of competitive advantage in this industry, specifically for carriers. The key question in particular is how operational competencies and innovation competencies are perceived in influencing future performance. While managers state that innovation is critical to the success of the carrier business, the firms' business objectives and metrics tell a different story. The study shows that the respondents, while commenting on the importance of innovation to stay competitive, really emphasize the network operations. This result exemplifies a dilemma carriers are facing to stay competitive: maintaining operational excellence while pursuing an innovation-driven strategy.
... One of the reasons behind it is the introduction of new players to the telecom market and the threat of potential new competition coming in from foreign markets, facilitated by globalization. Another reason that has made this strategy viable was cost leadership (Lechler et al, 2007). Operator's ability to reduce the operational cost and optimize internal processes has made it possible to provide "more for less" to their customers. ...
... The high penetration rate of user acquisition across developed and many emerging markets coupled with the impact of the recent recession and the compelling challenges of the industry present a real dilemma for telecom operators, a Network Operator vs. Value Provider (Lechler, 2007). ...
Uncertain economic times have substantial impact on global markets. With economic recessions come drastic changes in business dynamics. This paper explores the effect of economic recessions on market stability and delineates practical aspects of innovation that can be effectively utilized to boost economic sustainable development and combat downturns. The paper also presents operational strategies for organizations across industries and in telecommunications industry in specific. The findings described in this paper stem from the innovation theory and the value chain framework, and are based on modeling the best practices that can be used by organizations to not only survive, but also thrive in turbulent times.
... We know [6,17] that the probability of finding an M |M |m|n system in a p k state is: ...
Implementing the almost limitless possibilities of a software-defined network requires additional study of its infrastructure level and assessment of the telecommunications aspect. The aim of this study is to develop an analytical model for analyzing the main quality indicators of modern network switches. Based on the general theory of queuing systems and networks, generated functions and Laplace-Stieltjes transforms, a three-phase model of a network switch was developed. Given that, in this case, the relationship between processing steps is not significant, quality indicators were obtained by taking into account the parameters of single-phase networks. This research identified the dependencies of service latency and service time of incoming network packets on load, as well as equations for finding the volume of a switch’s buffer memory with an acceptable probability for message loss.
... Unlimited growth of network traffic, processes of convergence of networks and network devices and the need for new business models determine the growing importance of new methods of reducing operating costs, making efficient use of network resources, and reducing risks in managing digital businesses. However, the existing management systems for networks and communication services [1][2][3][4][5] are able to render next-generation infocommunication services with the required level of flexibility, management and cost-saving only in part. ...
The existing management systems for networks and communication services do not fully meet the demands of users in next-generation infocommunication services that are dictated by the business processes of companies. Open digital architecture (ODA) is able to dramatically simplify and automate main business processes using the logic of distributed computing and management, which allows implementing services on a set of network nodes. The performance of a distributed operational management system depends on the quality of solving several tasks as follows: the distribution of program components among processor modules; the prioritization of business processes with parallel execution; the elimination of dead states and interlocks during execution; and the reduction of system cost to integrate separate components of business processes. The program components can be distributed among processor modules by an iterative algorithm that calculates the frequency of resource conflicts; this algorithm yields a rational distribution in a finite number of iterations. The interlocks of parallel business processes can be eliminated using the classic file sharing example with two processes and also the methodology of colored Petri nets. The system cost of integration processes in a distributed management system is reduced through partitioning the network into segments with several controllers that interact with each other and manage the network in a coordinated way. This paper develops a model of a distributed operational management system for next-generation infocommunication networks that assesses the efficiency of operational activities for a communication company.
... Innovation is crucial for the long-term prosperity of organizations (Patterson, Kerrin & Gatto-Roissard, 2009). Firms, today, are expected to captivate customers with their creativity and innovation through services, products or methods (Kandampully, 2002), notwithstanding that decades ago these traits were considered two of the principal ways of "attacking well-entrenched competitors" (Porter, 1985: page 176;Lechler, Taylor & Klingenberg, 2007). In consequence, organizations require competitive but also innovative employees. ...
Purpose: Innovation competences are expected both in businesses and in higher education. Software organizations, in particular, require engineers that collaborate to deliver better services and products. Staff recruitment and training are human resource management tasks that are crucial to insuring that applicants and job holders have the competences that will facilitate quality output in software development processes.
This paper seeks to determine the competences that describe high-performing, innovative professionals in software engineering in order to weigh them against the FINCODA model on innovation competences devised to assess and enhance individuals’ capacity to innovate, a core outcome of the Framework for Innovation Competences Development and Assessment Project.
Design/methodology/approach: A review protocol was followed to examine the literature on software engineering to identify the innovation competence and behavioral indicators that are required in individuals.
Findings: According to the literature, the innovation competences required of the staff in software companies are creativity, critical thinking, initiative, team work and networking, dimensions that are contained in the FINCODA model. Findings also support the inclusion of the thirty-four behavioral indicators that constitute the five dimensions of the FINCODA model.
Originality/value: Business organizations need tools to assess innovation competences in employees. Universities, as well, lack the instruments to measure development of innovation competence in undergraduates that teaching/learning methods should enhance before students reach the workplace. This research sheds light on innovative workplace behaviors of software engineers and on feasible designs of training programs for staff and undergraduates by using the FINCODA model and its behavioral indicators. Future research will focus on ratifying the validation of the model and the online assessment tool derived from it.
Future communication networks are planned to be based on software-defined network technologies and network function virtualization, where orchestration is used for automatic placement, coordination and control of network resources at many levels. These technologies can provide broad capabilities for wideband satellite network architectures, providing flexibility, scalability, customization and cost savings. The aim of this work is to ensure the required quality of information and communication services by developing methods for implementing functionally parallel processes, distributing computing and network resources (physical and virtual) between processes, as well as means to prevent blocking. Based on the formalism of coloured Petri nets, models and methods for implementing functional parallel processes of the NFY protocol have been developed. The capabilities of the CPN Tools environment allow to perform step-by-step verification, analyze the probability-time parameters of the protocol, and based on the analysis of behavioral properties of the model, make a conclusion about the correctness of the NFY protocol. The research results can be used in the design and operation of communication networks that implement the concept of network function virtualization.
This chapter addresses how micro-level preferences and decisions about collaboration made by a large number of heterogeneous firms can affect the macro-level evolution of inter-firm networks and the structure of industrial knowledge bases. We conduct the analysis by way of an agent-based model (ABM) that mimics key stylized facts about firm-level business strategies and innovation networking in the Nordic internet service provider (ISP) industry.
To develop the model, we make use of an existing ABM—Simulating Knowledge Dynamics in Innovation Networks (SKIN) and to visualize the results we use the social network analysis software Gephi. As a means of improving the empirical validity of the model, we iteratively presented and modified the model through a sequence of discussions with strategic analysts at Telenor, a large Norwegian internet service provider.
The paper suggests that the adoption by many firms of a collaboration-oriented and explorative innovation strategy facilitates the evolution of a densely connected regional network in which the participant firms gradually build complex but increasingly similar knowledge bases. By contrast, the adoption by many firms of more internally oriented and exploitative innovation strategies facilitates the emergence of less densely connected networks in which the knowledge bases of the firms are less complex and more heterogeneous. This latter outcome appears to have more beneficial implications for the competitive performance of smaller specialized firms, and for the novelty-generation potential of the industry as a whole.
Strategy has been defined as “the match an ovganization makes between its internal resources and skills … and the opportunities and risks created by its external environment.” 1 During the 1980s, the principal developments in strategy analysis focussed upon the link between strategy and the external environment. Prominent examples of this focus are Michael Porter's analysis of industry structure and competitive positioning and the empirical studies undertaken by the PIMS project. 2 By contrast, the link between strategy and the firm's resources and skills has suffered comparative neglect. Most research into the strategic implications of the firm's internal environment has been concerned with issues of strategy implementation and analysis of the organizational processes through which strategies emerge. 3
Scientific literature discusses four basic schools (explanations) of the sources of a firm's competitive advantage, namely the industrial organization school, the resource-based school, the capability-based school and the knowledge-based school. While these schools share several similarities, they also differ in some aspects especially in their width, understanding of the origin of competitive advantage and the organizational level at which such advantage emerges. Empirical research based on the sample of 225 Slovenian firms shows that the constructs representing the resource-based, capability-based and knowledge-based schools and all schools together exert a positive influence on a firm's competitiveness and performance, whereas this cannot be said to apply to both varieties of the industrial organization school. Among all schools, the knowledge-based and capability-based schools seem to be the most relevant for explaining a firm's competitiveness and performance. We may therefore conclude that our research largely supports the findings of most past empirical studies that 'internal' sources of competitive advantage (especially capabilities and knowledge) are more important than 'external' sources.
Constructs an analytical framework for a resource-based approach to strategy formulation. There are five stages in this framework: analyze resources, appraise capabilities, analyze competitive advantage, select strategy, and identify resource gaps. The concepts of this framework are illustrated by reference to existing U.S. firms such as IBM, Xerox, Harley-Davidson, and 3M. This framework uses resources and capabilities as the foundation for a firm's long-term strategy because they provide direction for firm strategy and serve as the primary source of firm profit. Resources are defined as the inputs into the production process and include items of capital equipment and skills of individual employees. Capabilities are defined as the capacity for a team of resources to perform some task or activity. When analyzing the competitive advantage of a firm, durability, transparency, transferability, and replicability are considered important factors. To be successful, firms must develop strategies which utilize their unique characteristics. (SRD)
We build on an emerging strategy literature that views the firm as a bundle of resources and capabilities, and examine conditions that contribute to the realization of sustainable economic rents. Because of (1) resource-market imperfections and (2) discretionary managerial decisions about resource development and deployment, we expect firms to differ (in and out of equilibrium) in the resources and capabilities they control. This asymmetry in turn can be a source of sustainable economic rent. The paper focuses on the linkages between the industry analysis framework, the resource-based view of the firm, behavioral decision biases and organizational implementation issues. It connects the concept of Strategic Industry Factors at the market level with the notion of Strategic Assets at the firm level. Organizational rent is shown to stem from imperfect and discretionary decisions to develop and deploy selected resources and capabilities, made by boundedly rational managers facing high uncertainty, complexity, and intrafirm conflict.
This paper examines the nature of the core capabilities of a firm, focusing in particular on their interaction with new product and process development projects. Two new concepts about core capabilities are explored here. First, while core capabilities are traditionally treated as clusters of distinct technical systems, skills, and managerial systems, these dimensions of capabilities are deeply rooted in values, which constitute an often overlooked but critical fourth dimension. Second, traditional core capabilities have a down side that inhibits innovation, here called core rigidities. Managers of new product and process development projects thus face a paradox: how to take advantage of core capabilities without being hampered by their dysfunctional flip side. Such projects play an important role in emerging strategies by highlighting the need for change and leading the way. Twenty case studies of new product and process development projects in five firms provide illustrative data.
The business and academic communities continue to have an interest in the concepts of knowledge management and strategic competencies or core capabilities. This book attempts to establish the links between strategic competencies, knowledge management, organisational learning and innovation - specifically, how an organisation identifies, assesses and exploits its competencies, and translates these into new processes, products and services. The contributors to this book include leading researchers and practitioners in the field. Adopting a practical but rigorous approach to the subject, they focus on the measurement, management and improvement of organisational, technological and market competencies, and identify the relationships with strategic, operational and financial performance. In this second edition, the original material is updated and three new chapters are added, reflecting the latest developments in the field.
This paper investigates the ‘importance’ and ‘awareness’ of firm–specific competencies as determinants of technological innovation in the context of a European newly industrialised country. A literature–based portfolio model was developed including 17 established innovation–determining factors, related to the firm’s technical, market, human resource and organisational competencies. The ‘importance’ of those factors as determinants of innovation in the Greek industry was tested with a survey of 105 manufacturing firms. Using correlation and regression analyses the author classified the competencies into ‘major importance’, ‘moderate importance’ and ‘unimportant’ ones. ‘Major importance’ determinants of innovation included the intensity of R&D, strength in marketing, proportion of university graduates and engineers in the staff, proportion of staff with managerial responsibility, proportion of professional staff with previous experience in another company and incentives offered to the employees to contribute to innovation.
The ‘awareness’ of the important competencies differentiating Greek innovative companies was tested by comparing the above ‘objective’ results with the perceptions of the responding managers. The perceptual analysis confirmed the importance of the statistically–driven variables at the aggregated level. At the level of the individual variables, a number of inconsistencies were identified. The managers overestimated the importance of international work experience of professional staff and of training and underestimated the importance of the potential contribution of shop–floor employees.
Relating the results to the Greek institutional context, the study’s general finding was that the important determinants of innovation were scarce in the Greek business environment. The highly innovative companies were the ones to overcome country–specific innovation barriers, such as negligible industrial R&D, general weakness in marketing, outdated educational system, limited labour mobility and cultural problems with involving shop–floor employees in the innovation process.
The research question of the article is: Does the competence-based view, representing a theory of sustaining competitive advantage, offer simultaneously a comprehensive theory of the firm? In order to develop an answer, it appears to be necessary to elaborate the theoretical basis of the competence-based view by delimitating this perspective from the resource-based one. The scrutiny suggests that the competence-based view represents a theory of the firm with other answers than current theories of the firm in use. Moreover, not all the answers of the competence-based view as to the theory of the firm are convincing. Therefore, fundamental weaknesses and shortcomings, which can be dispelled, are pointed out.
This paper examines the nature of the core capabilities of a firm, focusing in particular on their interaction with new product and process development projects. Two new concepts about core capabilities are explored here. First, while core capabilities are traditionally treated as clusters of distinct technical systems, skills, and managerial systems, these dimensions of capabilities are deeply rooted in values, which constitute an often overlooked but critical fourth dimension. Second, traditional core capabilities have a down side that inhibits innovation, here called core rigidities. Managers of new product and process development projects thus face a paradox: how to take advantage of core capabilities without being hampered by their dysfunctional flip side. Such projects play an important role in emerging strategies by highlighting the need for change and leading the way. Twenty case studies of new product and process development projects in five firms provide illustrative data.
A resource-based approach to strategic management focuses on costly-to-copy attributes of the firm as sources of economic rents and, therefore, as the fundamental drivers of performance and competitive advantage. Interest presently exists in whether explicit acknowledgement of the resource-based view may form the kernel of a unifying paradigm for strategy research. This article addresses the degree to which a resource-based view represents a fundamentally different approach from theories used in industrial organization (10) economics. The central thesis is that, put informal terms, the resource-based approach is reaching for a theory of the firm. To determine its distinctiveness in comparison to IO, therefore, an appropriate comparison is with other theories of the firm developed within that tradition. Section I summarizes and analyzes five theories that have been significant in the historical evolution of IO. These are neoclassical theory's perfect competition model, Bain-type IO, the Schumpeterian and Chicago responses, and transaction cost theory. The first part of Section II analyzes the resource-based approach in terms of similarities to and differencesfrom these IO-related theories. The conclusion is that resource-based theory both incorporates and rejects at least one major element from each of them; thus resource-based theory reflects a strong IO heritage, but at the same time incorporates fundamental differences from any one of these theories. The second part of Section II analyzes resource-based theory as a new theory of the firm.
This paper reviews the progress of the strategy field towards developing a truly dynamic theory of strategy. It separates the theory of strategy into the causes of superior performance at a given period in time (termed the cross-sectional problem) and the dynamic process by which competitive positions are created (termed the longitudinal problem). The cross-sectional problem is logically prior to a consideration of dynamics, and better understood. The paper then reviews three promising streams of research that address the longitudinal problem. These still fall short of exposing the true origins of competitive success. One important category of these origins, the local environment in which a firm is based, is described. Many questions remain unanswered, however, and the paper concludes with challenges for future research.
This paper critically examines the contribution of aspects of the resource-based view of the firm to global competition in particular, and to strategic management in general. Three concepts—core competence, organizational capability, and administrative heritage—are defined and compared with the current mainstream economic tradition of strategy. The value of these concepts in analyzing and explaining competitive strategy is determined through a detailed field-based case study of three firms in the worldwide bearings industry. It is found that the resource-based view of the firm complements economic analysis, and that both are essential to a complete understanding of global strategy.
This article introduces the concept of the capability lifecycle (CLC), which articulates general patterns and paths in the evolution of organizational capabilities over time. The capability lifecycle provides a structure for a more comprehensive approach to dynamic resource-based theory. The analysis incorporates the founding, development, and maturity of capabilities in a manner that helps to explain the sources of heterogeneity in organizational capabilities. In addition, the analysis includes the ‘branching’ of an original capability into several possible altered forms. Copyright © 2003 John Wiley & Sons, Ltd.
Given incomplete factor markets, appropriate time paths of flow variables must be chosen to build required stocks of assets. That is, critical resources are accumulated rather than acquired in "strategic factor markets" (Barney [Barney, J. 1986. Strategic factor markets: Expectations, luck, and business strategy. Management Sci. (October) 1231--1241.]). Sustainability of a firm's asset position hinges on how easily assets can be substituted or imitated. Imitability is linked to the characteristics of the asset accumulation process: time compression diseconomies, asset mass efficiencies, inter-connectedness, asset erosion and causal ambiguity.
Much of the current thinking about competitive strategy focuses on ways that firms can create imperfectly competitive product markets in order to obtain greater than normal economic performance. However, the economic performance of firms does not depend simply on whether or not its strategies create such markets, but also on the cost of implementing those strategies. Clearly, if the cost of strategy implementation is greater than returns obtained from creating an imperfectly competitive product market, then firms will not obtain above normal economic performance from their strategizing efforts. To help analyze the cost of implementing strategies, we introduce the concept of a strategic factor market, i.e., a market where the resources necessary to implement a strategy are acquired. If strategic factor markets are perfect, then the cost of acquiring strategic resources will approximately equal the economic value of those resources once they are used to implement product market strategies. Even if such strategies create imperfectly competitive product markets, they will not generate above normal economic performance for a firm, for their full value would have been anticipated when the resources necessary for implementation were acquired. However, strategic factor markets will be imperfectly competitive when different firms have different expectations about the future value of a strategic resource. In these settings, firms may obtain above normal economic performance from acquiring strategic resources and implementing strategies. We show that other apparent strategic factor market imperfections, including when a firm already controls all the resources needed to implement a strategy, when a firm controls unique resources, when only a small number of firms attempt to implement a strategy, and when some firms have access to lower cost capital than others, and so on, are all special cases of differences in expectations held by firms about the future value of a strategic resource. Firms can attempt to develop better expectations about the future value of strategic resources by analyzing their competitive environments or by analyzing skills and capabilities they already control. Environmental analysis cannot be expected to improve the expectations of some firms better than others, and thus cannot be a source of more accurate expectations about the future value of a strategic resource. However, analyzing a firm's skills and capabilities can be a source of more accurate expectations. Thus, from the point of view of firms seeking greater than normal economic performance, our analysis suggests that strategic choices should flow mainly from the analysis of its unique skills and capabilities, rather than from the analysis of its competitive environment.
This paper is concerned with the formulation of a framework for competence development as a research area and an area of management attention in firms. It will be argued that there is, indeed, a need for research and management practice of competence development. Based on this need a model for competence development is proposed. The model is followed by some considerations as to how competence development can be practised in management—this being the main contribution of the paper. In conclusion, a number of questions yet to answered by research in competence-based strategy are raised.
Flexibility is assumed to be one of the most important requirements for firms to survive and prosper in turbulent and unpredictable environments. In this article, we first define the concept of flexibility, showing that there are, in fact, several different types of flexibility, e.g., supply, production, and product assortment flexibility. A longitudinal study designed to overcome difficulties encountered in previous empirical studies based on the resource view of strategy found that different, balanced forms of flexibility are required for firms to cope in uncertain, turbulent environments. Finally, the article discusses the theoretical and practical implications of flexibility.
Development of a firm's core competencies is identified as the key for global leadership and competitiveness in the 1990s. NEC, Honda, and Canon are used as exemplars of firms that conceive of themselves in terms of core competencies. Core competencies are the organization's collective learning and ability to coordinate and integrate multiple production skills and technology streams; they are also about the organization of work and delivery of value in services and manufacturing. A firm must conceive of itself as a portfolios of competencies, instead of a portfolio of strategic business units (SBUs). The latter limit the ability of firms to exploit their technological capabilities; they are often dependent on external resources. The real source of advantage lies in management's ability to consolidate corporate-wide technologies and production skills into competencies, which will allow individual businesses to adapt to emerging opportunities. Cultivating core competencies does not mean outspending rivals on R&D, sharing costs among SBUs, or the price/performance of end products. Three tests identify such competencies: (1) they provide potential access to a wide variety of markets; (2) they significantly contribute to the customer benefits of the end-product; and (3) they should be difficult for competitors to imitate. Cultivating core competencies also means benefiting from alliances and establishing competencies that are evolving in existing businesses. The tangible links between core competencies and end products are core products, which embody one or more core competencies. Companies must maximize their world manufacturing share in core products. Global leadership is won by core competence, core products, and end products; global brands are built by proliferating products out of core competencies. Firms must avoid the tyranny of the SBU, the costs of which are (1) under investment in developing core competencies and core products, (2) imprisoned resources, and (3) bounded innovation. Top management must add value to a firm by developing strategic architecture, which will avoid fragmenting core competencies, establish objectives for competence building, make resource allocation priorities transparent and consistent, ensure competencies are corporate resources, reward competence carriers (personnel who embody core competencies), and focus strategy at the corporate level. A firm must be conceived of as a hierarchy of core competences, core products, and market-focused business units. Obsession with competence building will mark the global winners of the 1990s. (TNM)
Understanding sources of sustained competitive advantage has become a major area of research in strategic management. Building on the assumptions that strategic resources are heterogeneously distributed across firms and that these differences are stable overtime this article examines the link between firm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate sustained competitive advantage—value, rareness, imitability, and substitutability—are discussed. The model is applied by analyzing the potential of several firm resources for generating sustained competitive advantages. The article concludes by examining implications of this firm resource model of sustained competitive advantage for other business disciplines.ABSTRACT FROM AUTHOR
Capitalism, Socialism and Democracy remains one of the greatest works of social theory written in the twentieth Century. Schumpeter's contention that the seeds of capitalism's decline were internal, and his equal and opposite hostility to centralist socialism have perplexed, engaged and infuriated readers since the book's first publication in 1943. By refusing to become an advocate for either position, Schumpeter was able both to make his own great and original contribution and to clear the way for a more balanced consideration of the most important social movements of his and our time.
Sumario: The Marxian doctrina -- Can capitalism survive? -- Can socialism work? -- Socialism and democracy -- A historical sketch of socialist parties -- Prefaces and comments on later developments
Core competencies are the crown jewels of a company and,
therefore, should be carefully nurtured and developed. Companies can
determine their future business directions based on the strengths of
competencies. However, because generalized terms such as resource,
asset, capability, and competence are not clearly explained in
connection with competence theory, these posing difficulties in
understanding many contemporary management concepts. In this paper, the
authors provide a summary of the recent management theories by comparing
their salient features. They then propose a linking mechanism between
assets, resources, capabilities, competencies, and core competencies.
They provide a methodology to identify core competencies by isolating
unique and flexible capabilities of the firm. They use this framework to
identify the core competencies of a UK manufacturing company. The
results of their analyses are used to help the company to make more
informed strategic management decisions regarding capability
development, outsourcing, focusing, or diversification, with regards to
new products, services, or markets. The framework is generic in nature
and is applicable to benchmark a manufacturing, public, or service
sector organization
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