Innovation Technologies in Vodafone - Case Study Example

Innovative Organizations - Vodafone ID 19714 Order No. 294418 Name] [Supervisor] [Any other details] 29 April 2009 Table of Contents: Introduction: In the modern world of stringent global competitiveness, organizations are under pressure to maintain & improve their competitive advantages in existing & new market segments. An old classical theory by Schumpeter (1942) emphasized the need for innovation in growth of the industry by virtue of "creative destruction" whereby new entrepreneurs will introduce new products & services that makes old products & services obsolete in the market (taken from Daneels. 2002. pp1095). Daneels (2002. 1096-1098) established that product innovations result in overall organizational renewal due to renewed internal competencies & value system. He emphasized on alignment of innovations towards customer needs by taking inputs from customers when re-engineering existing products or developing new products. Hendricks & Singhal (1997. pp432-435) conducted a research in relationship between timing of new product introductions and market value of firms to discover that all firms that are late in introducing new products to the market lose market value. These theories indicate the importance of innovations for organization to remain competitive in the markets & the overall industry. As presented by Brown and Kozinets et al (2003. pp30-33), just carrying forward the heritage of the brand will not ensure its survival - old brand need to keep on learning new tricks of survival. In this essay, the author presents a brief introduction of innovations of Vodafone whereby the history, innovation characteristics and most innovative service of Vodafone have been covered in brief. In the end, the author has presented they perspective of his contribution to the innovations of Vodafone. History & Current Performance of Vodafone Vodafone has slightly more than two decades of history and hence is relatively younger compared to many competitive firms in the telecommunications industry. It started in 1988 as a 100% owned subsidiary of Racal Electronics Plc and was operating in the name of Racal Telecom Plc which first time got listed in 1988 offering 20% of the overall capital to the public. Racal Telecom Plc became independent of Racal Electronics Plc in 1991 and was renamed as Vodafone Group Plc after the de-merging. As on today, the Vodafone Plc executive board is chaired by Sir John Bond and the Group CEO is Vittorio Colao who has taken charge from Arun Sarin very recently after the latter's retirement. Vodafone operates in 20 countries directly or through franchises that are Albania, Australia, Czech Republic, Egypt, Germany, Ghana, Greece, Hungary, India, Ireland, Italy, Malta, Netherlands, New Zealand, Portugal, Qatar, Romania, Spain, Turkey and the UK. In every country, the local operations are led by the country CEO who acts as the business in-charge of Vodafone in the country. All the country CEOs collectively report to the group CEO. (http://www.vodafone.com/start/about_vodafone/who_we_are.html) Vodafone Group Plc is one of the largest global mobile communications company having the vision to achieve the number one position in this industry. The vision statement of Vodafone states that "Our goal is to be the communications leader in an increasingly connected world". The "Cute Dog" advertisement with the "Happy to Help" message at the end itself is an innovation. Currently, this advertisement is getting close to hearts of the Indians with many variants of it floating in the local markets (http://www.resourcesforlife.com/docs/item1413). Vodafone has largely focussed on the global wireless communications market unlike their nearest global counterparts AT&T Inc. & British Telecom Plc. that are engaged more in wired telecommunications markets across the world. In the statement by the Group Chairman, Sir John Bond, it is emphasized that Vodafone is actively looking at mobile communication markets of developing countries as he clearly visualizes the link between growth rate of mobile penetration in the developing countries and their economic growth (he cited some independent researches possessing clear evidence of this linkage). Their most recent major step towards expansion in developing countries has been the complete acquisition of Vodafone Essar in India in 2007. Their internal term for the developing markets is EMAPA (Eastern Europe, Middle East, Africa, Asia, Pacific and Affiliates). Vodafone has different objectives in the developed markets Like U.S., Western Europe & the UK where the mobile communications business is already maturated to a large extent. They are looking forward to develop mobile data services (includes E-Mail, Music and Internet) on 4G spectrum in developed markets. They already are operating the 3G spectrum in many countries and are working closely with Verizon Wireless (U.S.) to develop the 4G technology through joint R&D efforts. Other corporate objectives of Vodafone are - health, safety & well being of employees, people development, and equal opportunity & diversity among employees. [Vodafone Group Annual Report. 2008. pp2-3, 8, 21] The following table shows Debt and Equity in Vodafone's capital structure in past four years (values in million dollars - retrieved from CNN Money): Year 2008 2007 2006 2005 Equity 154783 132021 148306 215059 Debt 53934 44401 35066 28711 Debt to Equity Ratio 0.35 0.34 0.24 0.13 Table 1: Debt to Equity Ratio of Vodafone in their Capital Structure (CNN Money) The author's own guesses about the reasons for high contribution of Equity in Vodafone's Capital Structure are: The debt limits established by creditors (banks & financial institutions having credit commitments to Vodafone) maybe too less compared to the Capital size of Vodafone The capital cost of diversification in multiple countries (buying companies, purchase of equipment & infrastructure components, etc. in developing countries) is too high and Vodafone does not wants to take the burden of long term interests against them. Vodafone is more inclined towards shareholder maximization at high risks given the potential offered by emerging markets. R&D investment of Vodafone is very high and as established by O'Brien (2003. pp420) - firms having higher emphasis on innovations (R&D investments) possess lower leverage ratios because R&D results in intangible assets that cannot serve as collaterals to support high debt financing. Vodafone made good profits in 2005 and 2008 but incurred heavy losses in 2006 and 2007 as reported by CNN Money at http://money.cnn.com/quote/financials/financials.htmlsymb=VOD&sid=2384280&report=1&period=annual. Characteristics of Vodafone that facilitate innovation Sir John Bond, Group Chairman of Vodafone stated that "This is a period of unprecedented change in our business. The industry is changing shape as mobile phones, new technology and the internet converge, enabling us to expand the services that we can offer. This is also bringing new competitors both from within the industry and from outside" (Vodafone Group Annual Report. pp3). Mapping with the uncertainty map of Pearson (1991), Vodafone stands at the "Applications Engineering" quadrant as they are leveraging on the power of Internet and its technological integration with mobile phone networks to develop user friendly applications whereby they might be facing high uncertainty about output but do have sound process framework to support their innovations (Reyes. 2009. pp7). Figure 1: Vodafone in the third Quadrant of Pearson's Uncertainty Map However, they do have the potential of moving from quadrant 3 to quadrant 2 on Pearson's uncertainty as handset companies like Nokia are rapidly developing compatible cell phones with the new Mobile Internet technologies at the networking level as well as at the applications level. Vodafone management have carefully mapped the external factors (demands) with internal strategies as presented in the figure below: Figure 2: Vodafone's Strategic Objectives in line with the External Environment (Vodafone Group Annual Report. pp10) The author maps the speeches of Group Chairman and the Group CEO (Vodafone Group Annual Report. pp2-7) with Trott's theory of ten characteristics and concludes that Vodafone's innovation mission fits with all the ten characteristics (2008) - growth orientation, organizational heritage & experience, vigilance & external links, commitment to technology & R&D intensity, acceptance of risks, receptivity, cross functional cooperation & coordination, space for creativity, strategy towards innovation and diverse range of skills (Reyes. 2009. pp14-17). Vodafone possesses a dedicated R&D center for innovations whereby their latest investment in this direction is the Vodafone Betavine Laboratory. Betavine is an open community for developing web based systems & applications that work on mobile phones specifically in the 3G & the forthcoming 4G space. This R&D commitment of Vodafone demonstrates their commitment towards value added data, voice & video services on mobile phones which many developed countries can avail due to 3G implementation. In fact Vodafone has been elementary in introduction of 3G spectrum in many developing countries. The product line for Mobile Internet innovations is termed internally by Vodafone as "Vodafone Mobile Connect" which is targeted to provide high speed & secured access to Internet based business services like E-Mail, Company Intranets and Corporate Applications. As stated in the annual report of 2008 - "The emphasis of the Group R&D work programme is providing technology analysis and a vision that can contribute directly to business decisions" (Vodafone Group Annual Report. pp14). The most innovative Service of Vodafone Although all the Mobile Internet innovations of Vodafone are excellent, from the author's perspective the Vodafone Betavine is the most innovative service being offered by Vodafone. As argued by Duryee (2009), this initiative of Vodafone reveals that even the largest telecom operator's of the world may not be having enough resources to adopt closed room innovations. This also demonstrates the openness & receptiveness of Vodafone pertaining to their innovations. The Vodafone Betavine portal allows anyone across the world to design and upload a Mobile Internet application which should work on wireless networks across the world on 2G/3G spectrums. These applications can be downloaded by anyone across the world for testing on any network and not just Vodafone's network. Vodafone may not be gaining any intellectual property in this process but do get benefited by observing the latest trends in mobile Internet application development and also to test the capability of their own network in running those applications. Vodafone recently tested the power of Linux in running the mobile Internet applications when connecting to wireless broadband using the Betavine framework. This innovation is sure to provide the benefit Vodafone of having the network with largest compatibility with mobile Internet applications of the world and also in identifying some of the best mobile network innovators in the world. How the author wants to contribute to the future of Vodafone The author wants to contribute to the future of Vodafone by running a community of mobile application developers across the world that are committed to develop mobile based applications for the educational world across the globe. The applications shall be customized in such a way that students can have access to global libraries like JSTOR, Wiley Inter Science, Science Direct, etc. through mobile devices. Moreover, students can connect to their respective university networks to communicate with professors, to access class notes, to work on urgent assignments while they are not connected to their laptops, to reply to urgent mails, to access University Intranet, etc. I intend to invite a number of students like me and learn the platforms supported by Vodafone Betavine and then develop & upload educational applications which can be used by colleges & universities across the world at nominal charges that shall be payable to the developers. Although the author does not possess technical skills of developing such applications at present the community website will be used to invite such experts across the world to develop & load applications on Vodafone Betavine. This initiative of the author can make Vodafone the de facto choice of educational institutions across the world for their phenomenal compatibility with educational applications. Conclusions: Vodafone has proved that innovation is not just the work of a group of scientists & engineers working in silo in closed R&D laboratories. Innovation requires a powerful vision & mission and clear cut identification of contribution to the future of the business. Innovation cannot just be carried out by hiring an internal R&D team and setting aside a budget for the same. Innovation requires receptiveness, openness, willingness to grow, high risk appetite, and above all the top management commitment. This essay has touched upon the innovation capabilities of Vodafone Plc with special emphasis to their commitment to Mobile Internet Applications. The best innovation of Vodafone that the author liked is the Vodafone Betavine which is an open source portal inviting mobile web developers across the world to develop and upload mobile Internet based applications. The author wishes to contribute to this innovation of Vodafone by developing a community of developers that are dedicated to development of applications for the educational institutions across the world accessible through mobile devices. This initiative of the author can lead to Vodafone becoming the de facto choice of community of teachers, scholars and students across the world. Reference List: Annual Report for the year ended 31 March 2008. Vodafone Group Plc. pp. 2-21, Retrieved on 29 April 2009. Available at http://www.vodafone.com/start/investor_relations/financial_reports/annual_reports.html Brown, Stephen and Kozinets, Robert V. et al. (2003). Teaching Old Brands New Tricks: Retro Branding and the Revival of Brand Meaning. The Journal of Marketing, Vol. 67, No. 3. pp30-33. American Marketing Association. Daneels, Erwin (2002). The Dynamics of Product Innovation and Firm Competences. Strategic Management Journal, Vol. 23, No. 12. 1095-1098. John Wiley and Sons. Duryee, Tricia. (2009). Vodafone embraces Openness to keep innovation moving. MOCO NEWS. Retrieved on 29 April 2009. Available at http://www.moconews.net/entry/419-vodafone-embraces-openness-to-keep-innovation-moving/. Hendricks, Kevin B. & Singhal, Vinod R. (1997). Delays in New Product Introductions and the Market Value of the Firm: The Consequences of Being Late to the Market. Management Science, Vol. 43, No. 4, Frontier Research in Manufacturing and Logistics. pp432-435. INFORMS. Reyes, Jose Dr. (2009). Ethics, Environment & Innovation. Arts, Design and Technology. University of Derby. pp7-17 End of Document Read More