Why Technology Doesn't Matter

by Neale Martin published January 23, 2006 in Telephony Telephony

The information industry (information creation, storage, display and transmission) is ambivalent about its future. On one hand is euphoric optimism about the future of wired and wireless broadband communications serving millions of customers with everything from on-demand entertainment to wirelessly enabled business services. The other hand is filled with depressing skepticism as the demise of traditional service providers is heralded not only in the blogosphere, but also on the pages of Fortune, Forbes and the Wall Street Journal. This is not two sides of the same coin — it is the razor's edge.

As a columnist, it is my job to skate on the thin plane of reality between optimism and skepticism, seeing both the opportunity and the challenges presented by the relentless advance of the information/communication technology revolution. This entails combining the dynamics of the marketplace with an understanding of the impact of new technologies.

With this regular column, I intend to share some of the lessons I've learned as a consultant and strategist to the information industry for more than a decade. One of the toughest lessons for many in the industry is that technologies aren't markets — yet companies, analysts and the media have a tendency to organize around technologies, creating a myopic view of the marketplace.

An example of this type of thinking is the marketing of the technical acronym DSL as a product. It's not simply that the term is meaningless, but that everyone selling broadband over copper uses it. It's the equivalent of Ford, Chevrolet and Chrysler selling 6-cylinder engines rather than Mustangs, Malibus and Sebrings. The other major problem is that tens of millions of dollars have been spent on a short-term technology. Verizon must now spend millions more to educate the marketplace about FiOS, as well as continuing to market DSL.

I saw the converse of this recently while in a Korean Air lounge in Seoul, South Korea, enjoying the free Wi-Fi. Beside me was a gentleman making calls from his laptop using a headset. “Skype?” I asked. “Of course,” he replied. He was talking to his colleagues in Connecticut and a customer in Shanghai — for free, over a voice-over-IP connection.

In discussions with incumbent service providers over the last several years, I was repeatedly told that VoIP was not a threat because the technology wasn't as good as circuit-switched. My response was that customers buy voice service from Skype and Vonage, not VoIP. (On the Web sites of Skype and Vonage, there is almost no mention of VoIP.) Customers are not making a technology choice, they are making a choice based on value.

This same dynamic is visible in the nascent stages of broadband wireless. There is not a market for WiMAX, EV-DO or HSDPA, though there is a significant and growing market for applications enabled by wireless broadband. Sprint, Cingular and Verizon Wireless are struggling with initial branding efforts for their 3G services, vacillating between explaining the technology and selling services. They are feeling pressure to establish brand awareness in front of the rollout of WiMAX services while also trying to jockey for a leadership position in 3G.

Though highly counterintuitive, competition is necessary to help build markets. Rather than tout technological superiority in the early stages, competitors should focus on educating the marketplace to build demand.

Understand markets and then apply technologies, not the other way around. Billions are currently being spent deploying wired and wireless networks in the belief that if you build it, they will come. We should not soon forget that Iridium, 360networks, Winstar and scores of others had the same belief.