GROWTH
CODES
Extended strategies edition
May 2015
contents
IDENTIFYING FRONTRUNNERS 3
BEHIND FRONTRUNNER EMERGENCE
10
A MINDSET FOR SUCCESS 5
LINKING STRATEGIES TO CODES
11
STRATEGIES TO PROFITABLE GROWTH
7
Introduction
There has been a widely held view in the market that
operators are struggling to generate growth as they
move into a smartphone and data-centric world.
However, some operators around the world are proving
this to be false. They are prospering thanks to large
amounts of data and the usage of new services –
not in spite of them.
We have identified what makes a frontrunner:
operators with superior service revenue growth
and a high share of non-voice revenues. We have
found the common components and significant
differences in their strategies for profitable and
sustainable growth. Our key finding was that
there are six common traits that are shared by
frontrunners – we call these Growth Codes.
The Growth Codes
Rather than specify a single recipe for success,
Growth Codes represent a consistent approach
taken by frontrunners to generate profitable
revenue growth in their own markets.
DRIVE USAGE
MONETIZE USAGE
Streetwise
Metrics
Create performance
gap to competitors
Gap
Minding
Measure and manage
user experience
Showcasing
Market your
performance
leadership
GROWTH
CODES
Create strategic
partnership for
innovation
Co-Partnering
Embrace innovation
2 ERICSSON GROWTH CODES REPORT MAY 2015
Unboxing
Eco-Systematic
Create
innovative
offerings
IDENTIFYING
FRONTRUNNERS
Frontrunners were identified using three criteria:
Frontrunner dynamics
> Achieving a healthy annual revenue growth
signified by 5 percent or higher
> Maturity in respect to capturing business
through a higher proportion of non-voice
revenue, beyond 25 percent
> Remaining profitable through positive EBITDA
The criteria used to identify frontrunners is
formulated based on the entire results of a given
year. Dependent on the maturity of the market
and the dynamics of growth, some frontrunners
that previously satisfied the criteria might drop
out. The frontrunners that drop out due to not
entirely fulfilling the criteria do not contribute to
the total number of frontrunners in the drop-out
year. That being said, an operator that stops
being a frontrunner may still
exhibit the traits of Growth Codes,
in light of unique market growth
activity and relative performance.
These operators have market-leading revenue
growth and leverage on their strong performance
in non-voice revenue segments. We also looked
at how these frontrunners were able to maintain
stability and sometimes grow their voice revenue.
From just 12 frontrunners in 2013, to around 20 in 2014,
it is forecast that by the end of 2015 there will be 30.
This study sheds light on how the six different codes
are used in conjunction with strategies deployed in
unique market conditions.
Frontrunner performance
These operators have succeeded through a combined
focus on technology and a go-to-market strategy
across the six Growth Codes, monetizing on the
increased data and services usage. As Figure 1 shows,
these operators were able to achieve an average
12.4 percent CAGR in revenue 2010–2014, compared
to their peers on the same market at 7.3 percent.
These frontrunner operators have not only been able to
drive top-line revenue, they have done so profitably.
Figure 1: Average CAGR of included operators
Peers
achieved
180%
7.3%
Peer
Frontrunner
160%
Frontrunners
achieved
CAGR
12.4%
140%
CAGR
120%
100%
80%
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Source: Ericsson analysis based on data from Strategy Analytics
ERICSSON GROWTH CODES REPORT MAY 2015 3
An increasing share of reported revenue comes from
data. These frontrunners each have quite different
starting points; they may be leaders or challengers in
their own markets, or active in markets with different
levels of maturity.
Interestingly, it was noted that the presence of a
frontrunner in a market could be a passive driver for
their peers to achieve a stronger performance. When
looking at the entire industry, through the summation
of revenues (Figure 2), we note that frontrunners’
CAGR is at 9.6 percent, their peers are at 2.7 percent
and the rest of the market is at -1.4 percent.
Figure 2: CAGR of total revenue per group
Peer group
achieved
140%
The rest
Peer
Frontrunner
120%
Frontrunner
group achieved
2.7%
CAGR
9.6%
Rest of
the market
achieved
-1.4%
CAGR
CAGR
100%
80%
2010
2011
Source: Ericsson analysis based on data from Strategy Analytics
4 ERICSSON GROWTH CODES REPORT MAY 2015
2012
2013
2014
A MINDSET
FOR SUCCESS
Quality of service is the foundation of growth
Independent of the market role that a frontrunner
takes, we have found a clear pattern in growth
strategies; there is huge emphasis on the quality
of service as the foundation of growth. Network
performance also has a prominent position in the
growth strategy of all frontrunners and remains a
constant focus. We have found that frontrunners
leverage this in two different ways.
Some frontrunners use network performance as
a differentiator. They constantly strive for superior
performance compared with their competitors.
Others emphasize the importance of network
performance in order to meet customer expectations.
They typically have not had a leading position in the
market and have realized the need to avoid a head-on
collision in direct competition. Rather they diversify
their focus into both the understanding of users and
incorporating that into their Quality of Service. They
are usually motivated by a competitor with superior
network performance driving the average customer
expectation higher.
You need to have a credible
network, it’s a must have.”
CSO, Frontrunner North America
The frontrunner approach to growth
Frontrunners are characterized by a mindset that
challenges conventions to make connectivity more
available to people, businesses and society. They seek
new ways of doing business, leading the transformation
of their customers’ lifestyles. In order to achieve this,
frontrunners deploy growth strategies with a dual focus,
enhancing their core business while at the same time
exploring new markets and capabilities to secure
future revenues.
In this report, we are focusing on the strategies for
current growth, in order to understand what has made
this particular group of operators so successful.
Frontrunners seek new ways
of doing business, leading the
transformation
of their customers’ lifestyles
ERICSSON GROWTH CODES REPORT MAY 2015 5
Figure 3: Investigating the three strategies
DIFFERENTIATION
MARKET SCOPE
3 STRATEGIES
CUSTOMER SCOPE
PRODUCT SCOPE
TECHNOLOGY AND OPERATIONS
Through investigating frontrunners’ differentiation, market, customers and
product scope, as well as their approaches to technology and operations,
we identified three different strategies that frontrunners adopt:
Quality-led
progression
Market-led
adaptation
Offering-led
transformation
Each of the three strategies has five components,
as displayed in Figure 3. These five categories are
made up of the following:
Differentiation
What’s the main differentiation in the way they conduct
their business, how do they see themselves in respect
to the market, and how does the user see them?
Market scope
How do they market their offerings to the user and
what channels/tactics do they utilize?
Customer scope
What customer elements do they focus on and
how do they deliver on these?
6 ERICSSON GROWTH CODES REPORT MAY 2015
Product scope
What products do they offer and how does their
portfolio variety play into their strategy?
Technology and operations
What kind of partnerships do they utilize and how
do they become more than a simple connectivity and
communications platform provider? Is there a focus
on internal efficiency?
STRATEGIES TO
PROFITABLE GROWTH
The framework used to structure this study is from the
Colin Campbell-Hunt, Strategic Management journal
titled ‘What have we learned from generic competitive
strategies?’. This framework is based on 17 generic
competitive strategies covering more than 6,000 firms,
in which strategy classifications are reflected back to
the ones that correlate with financial return and growth.
The study’s research included analyzing financial
statements and interviews with frontrunners’
C-Suites, across a variety of countries.
The result was the identification of the three
different strategies adopted by frontrunners:
> Quality-led progression
> Market-led adaptation
> Offering-led transformation
QUALITY-LED PROGRESSION
Frontrunners that take a quality-led progression
strategy differentiate themselves due to their
high-performing networks and services,
as well as strong brand preference.
Differentiation
> Invest in a high-performing network
and high brand preference
> Focus on core products and services
> Project the brand image of a high-performing
network to consumers using simple messaging
> Diversify the business growth strategy
Market scope
> High brand preference through sales
and service quality
> Aim to be close to a broad customer base
through distribution channels
Customer scope
> Address all major segments,
consumers and enterprises
> A consistent customer experience
and focus on gap filling
CASE STUDY
Frontrunners in practice
American operator
> Significant lead in data coverage
> Showcasing extent of coverage
visually against the competitors
36%
Revenue growth over 5 years
CUSTOMER
DATA
MOBILE
BUSINESS
NETWORK
Product scope
> Rarely first to market, and rely on an
extensive high-quality service portfolio,
converged offerings and customized solutions
> Few strategic partnerships
Technology and operations
> Fully-fledged variety of support platforms
and processes
> Relatively low focus on efficiency
ERICSSON GROWTH CODES REPORT MAY 2015 7
MARKET-LED ADAPTATION
Frontrunners that adopt a market-led adaptation
strategy are differentiated thanks to their quick
adaptation to market conditions.
Differentiation
> Quick adaption to market conditions
CASE STUDY
Frontrunners in practice
Global operator
Market scope
> Generally more selective distribution,
for example, some channels, fewer resellers,
more online
> Often utilize sub-brands to target
certain segments
> Fast follower
> Tailored bundling for targeted segments
– Targeted service for a vertical segment
> Innovative billing
> Reuse strategy in other markets
Customer scope
> Focus on providing a superior end-to-end
experience for the selected target segments
through being close to the user and
understanding their needs
28%
Year-on-year subscriber growth
in targeted segment
Product scope
> Fast followers of new products and services
> Medium-sized portfolio with some degree
of customized solutions
> Some strategic partnerships
Technology and operations
> Medium focus on operational efficiency
> Agile business support systems and
processes in key areas
We think from a customer
point of view, putting the
customers at the center
of everything we do.”
GROWTH
COO, Frontrunner Asia Pacific
DATA
NETWORK
CUSTOMER
MOBILE
8 ERICSSON GROWTH CODES REPORT MAY 2015
OFFERING-LED TRANSFORMATION
An offering-led transformation strategy sets
frontrunners apart from rivals with its uniquely
designed offerings that redefine customer value.
Differentiation
> Uniquely designed offerings and first to market
Market scope
> Sales and marketing efforts rely on their
unique offering
> Often relying on growth from certain segments
> High focus on market innovation
CASE STUDY
Frontrunners in practice
Asian operator
> Open-ended innovation
> Improved brand sentiment and NPS
through strategic partnering and improved
network performance
> Attractive plans targeting pre-paid users
13%
Customer scope
> Continuously renewing offerings to promote
customer interest and loyalty
> Focus on customer satisfaction and brand
Product scope
> Many strategic partnerships with attractive,
leading companies
Technology and operations
> High focus on operational efficiency
> State-of-the art business support systems
and related processes
As it is a highly competitive
market, we continuously
create new offerings.”
CSO, Frontrunner North America
Year-on-year growth
in total revenue
NETWORK
MOBILE
CUSTOMER
DATA
LTE
ERICSSON GROWTH CODES REPORT MAY 2015 9
BEHIND FRONTRUNNER
EMERGENCE
Crowning an operator as a frontrunner does not come
with any requirements in terms of size or position in the
market. The diverse elements of the three strategies
show that there is a fine balance between the focus on
the superior technological network performance and
knowing exactly what the customer wants.
Figure 4: Frontrunner emergence through varying strategies
30
Offering-led transformation
Market-led adaptation
Quality-led progression
As the markets evolved, other strategies started shining
and gaining more momentum. It is likely that these
strategies were applied by the challengers to capture
some market share, without a head-on collision that
would create a price war. Figure 4 highlights each
strategy adopted by frontrunners between 2013 and
2015. As time progresses, it has become clear that all
three strategies can garner success.
Size doesn’t matter
By observing frontrunners over the same timeframe
and focusing on their market position, we see that
they are found in both market leader and challenger
positions. In fact, in 2013 the majority of frontrunners
were positioned third in their respective markets.
We have found no direct correlation between being a
frontrunner and the size of an operator’s subscriber
base. The frontrunners in the study have between a
few million and hundreds of millions of subscribers.
This indicates that profitable growth can be achieved
regardless of market size or position, and that smaller
markets with fewer subscribers pose no hindrance to
becoming a frontrunner.
Number of frontrunners
Between 2012 and 2015, we have seen a diverse set of
strategies deployed by each frontrunner. In 2012, the
majority were leveraging their size and assets to deliver
superior quality and thereby achieve profitable growth.
With time, we have seen that operators applying other
types of strategies are also emerging as frontrunners,
indicating that profitable growth can be achieved
through different strategic directions.
20
12
2013
2015
Figure 5: Market share distribution
30
Market share position 1
Market share position 2
Market share position 3
20
12
2013
Source: Ericsson analysis
10 ERICSSON GROWTH CODES REPORT MAY 2015
2014
Source: Ericsson analysis
Number of frontrunners
This balance is achieved through a combination of
methods, ensuring that an operator’s strategy fits
the technology evolution strategy and aligns with
consumer readiness, willingness to pay and the
go-to-market dynamics.
2014
2015
LINKING STRATEGIES
TO CODES
The use of Growth Codes varies for each strategy. Frontrunners
will place higher importance on some codes, but will also
complement them with others.
Quality-led progression
Streetwise Metrics
Differentiate on high-performing network and brand preference
A network performance gap is created between competitors in
the market through the Gap Minding code. This is coupled with
the ability to showcase this gap in a simple and understandable
manner. There also needs to be a focus on creating innovative
offerings that capture customer value effectively, which is known
as Unboxing. Frontrunners using this strategy will partner with
organizations that share a similar innovative mindset, which refers
to Co-Partnering.
Gap Minding
Showcasing
Co-Partnering
Unboxing
Eco-Systematic
Market-led adaptation
Streetwise Metrics
Gap Minding
Showcasing
Differentiate on quick adaptation to market conditions
Frontrunners look to understand, measure and manage
user experience through Streetwise Metrics. This strategy
quickly adapts to market conditions and the need for
targeted segments, so frontrunners showcase their user
experience to a select set of segments. These frontrunners
mirror other successful offerings from competitors, but add
value by capturing more customer needs.
Co-Partnering
Unboxing
Eco-Systematic
Offering-led transformation
Differentiate on being first to market with uniquely designed offerings
Streetwise Metrics
Gap Minding
Showcasing
This approach understands the need for Gap Minding in terms
of network performance, and operators target the segments that
their innovative offerings are directly impacting. Their Unboxing
considerations are very strong, they are Eco-Systematic and do not regard
OTT players as threats, but instead generally leverage their offerings.
Co-Partnering
Unboxing
Eco-Systematic
ERICSSON GROWTH CODES REPORT MAY 2015 11
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