Navigating the Choppy Strategy and Technology Waters Ahead

Minfdull consideration of real world events, of late, confirms why CEOs view formulation and execution of business and technology strategy as the paramount impedement facing their enterprises.

Consider the following:

Verizon Wireless wins the FCC TV broadcasters frequency auction by paying $4.7b after agreeing to fully appease Google in its main objection filed with the FCC to make the network on this spectrum fully open to all user such as Google. In this way, Google, a master in on-line advertising, SaaS, search and applications focuses on delivering these services on to mobile handsets of the future while Verizon incurs the cap-ex and operating costs of building and running the network. Although Verizon will add incremental revenue, when levied against the spectrum acquisition cost and the capex for the build-out , it will still be operating in an increasingly commodity oriented space (connectivity) while the value (The Super Premium Realm) has shifted to Saas, Services and Web 2.0 applications such as social computing delivered on the nearly 1.5b mobile devices worldwide. The real winner, Google.

Following Verizon and AT&T’s win of the broadcast spectrum auction, Google is now asking the FCC to allow for that TV broadcast spectrum’s “white space” also known as vertical blanking interval (VBI) to be used to deploy Wi-Fi connectivity. Google’s goal is consistent with its strategy in this domain: to have as many networks (licensed, unlicensed, PANs and MANs) deployed to assure high-quality (99.999) and cheap (commodity) bandwidth. Once there, Google intends to sell the high-value added applications and services (Maps, GPS, Restaurant Locations, Coupons, etc.) via the Google portal downloaded via Google Widgets on to you cell phone regardless of the connectivity provider. Loser: the pure network operators and connectivity providers. Apple has employed a similar strategy with its iPhone and the AT&T network connectivity.

Microsoft pays nearly $10b for aQuantive, an on-line ad serving network in its quest to compete with Google and its acquisition of Double Click. In-spite Microsoft’s move, Google continues to gain more of the on-line ad revenues, its growth rate and customers while Microsoft is not even in a distant 3rd in the game. Similarly, after it lackluster on-line and search services attempt, Microsoft is now bidding $44b for Yahoo who has lost every Web 2.0 competitive race to Google. The nearly $54b Microsoft is willing to pay to have a play in the on-line advertising market represents nearly 20% of the total size of the revenue pie for off-line and on-line advertising in the US of $247b where at the moment only $12b of it is on-line. And, much of that business is owned by Google.
Google is now offering Microsoft Office as a SaaS service for $50/seat/year and has GE as one of its first key customers.

Nearly $200m in VC capital has been invested in IP Video storage intermediaries to re-sell spent syndicated IP video content of up-stream content producers and providers such as AP, Reuters and MSNBC. Meanwhile, in view of owning the digital assets to be re-monetized and proliferating CDN SaaS video hosting and delivery services, the upstream content providers integrate forward and render the intermediaries useless. This business model literally ended over-night because neither these intermediaries nor their VC investors were monitoring the Matrixx and the value chain from the outside on rolling basis.

CISCO, with its reasonably broad array of products and services is still perceived as the router company which lays the TCP/IP layer out there and has not managed to move beyond this market image and perception. It is further not capturing and integrating its acquisition with a Web 2.0 solution approach and spin. As an example Web-ex and Tele-Presence SBUs are hardly capturing the true share of their potential in solving real business problems or diffusing future oriented applications in the enterprise market segment. Furthermore, CISCO is still perceived, and perhaps rightfully so, as a box company. And, even at that, its competitors with single product lines such as modems or set-top boxes or core network switches are trading at a higher stock price premium compared to CISCO. Finally, CISCO is yet to truley figure out its trajectory path toward services.