Vodafone Finds Olympic Gold in China

Sept. 29, 2008
The surprise payoff for Vodafone setting up in China came from the innovation area.

It looks like much of the gold that was brought to China for this year's Olympics will remain there after the games end. China's weightlifters, divers and gymnasts have seemingly come out of nowhere and simply outclassed their competition. Vodafone made a big early bet on China and got in on the gold.

When Vodafone went into China in 2000, it did so by investing $2.5 billion in joining with China Mobile, the country's largest carrier with 40 million subscribers compared with Vodafone's 66 million. China had not yet joined the World Trade Organization and the Olympics were not on the horizon. The plan was to collaborate on technology, management and marketing initiatives and to possibly cooperate in other Chinese market investments.

Has Vodafone succeeded? The company has done so in a few ways, some of them unexpected. In terms of the number of subscribers, Vodafone now has leaped to 260 million while China Mobile exploded to 415 million and has become the company with the world's largest subscriber base. Things cost a lot less in China so dollarwise Vodafone remains by far the biggest worldwide player with revenues at $63 billion and a brightening profit picture.

The surprise payoff for Vodafone setting up in China came from the innovation area. Vodafone is sometimes described as a collection of European countries. More of a wireless consortium than a multi-nation service provider. Something Vodafone has not been good at is innovating. Things got so bad in the innovation area that the 'New Business and Innovation Group' created in early 2006 was shut down and dismantled later that same year. There have been dramatic improvements since then.

Just prior to the Olympic Games in Beijing, we interviewed John Samarron, Vodafone Turkey's CTO, who became very excited when talking about China. When we asked him which companies Vodafone looks to as being successful leaders in innovation, he first answered with the usual suspects which he described as the "classic that everybody looks to: Google, in Turkey - Microsoft and Ericsson." He then mentioned "Chinese Huawei", the largest networking and telecommunications supplier in China.

"Huawei has been around for 15 years. Mostly in Asia. An incredible powerhouse. I was in China last fall. Like colleagues, I am overwhelmed. An insatiable appetite to understand what the pain points are in our industry and solving them in real time. I tell my daughter that when I retire in ten years, they will be one of the big two or three left in the world. It will be one of the rest and Huawei. They bring in more talented people in one year than all the other operators combined."

When asked what sets Vodafone apart, his answer was "Innovation is a way of doing business here. It is part of the DNA of the business. We have various systems that support that." He then described Dr. Mike Walker who "works in the technology community and is a direct report of group CTO. The CTO reports to the CEO. Mike has 150 people working for him in various places around the world. They are the first to scout things to see what is possible and what is happening. We are all encouraged to do trials in our markets. Our regional leaders sponsor every half year a two or three day sharing exchange. We look at Philips innovation lab, Rolls-Royce, etc. A lot of support and a lot of people looking at best practices. Mike has little groups all over in different places."

More than one of these places is in China. Earlier this year, Vodafone, China Mobile and Softbank agreed to establish a Joint Innovation Lab (JIL) to promote the development of new mobile technologies, applications and services. This was to accelerate the commercial deployment of mobile internet services. The JIL is being built to serve as a launch pad for projects based on emerging technologies and market demand. This is expected to enable different devices and applications to run seamlessly on different handset platforms and operating systems across different mobile operators.

When asked about incentive systems for innovation, Samarron said "I can't think of an incentive process. Clearly, there is recognition. We have the 'gold database.' The Vodafone way it happens is that we have a global and large brand. Every market has a true Vodafone look and feel that comes from central - a tranche of global products owned at world headquarters. Plus acknowledgement there is a competitive landscape in every market. Vodafone uses a product roadmap to adapt to local areas."

Our own experiences in China during the Olympics suggest that Chinese wireless subscribers are just as far ahead as anyone can be when it comes to having low cost options available to them. Olympic events, results images and video and messaging were widespread and instant. One taxi driver taking us across town had four wirelss devices handy, one for his incoming calls, one for outgoing calls and text messaging, another for personal family needs and his main one which was currently serving as his umbilical cord to the Games in Beijing with various text, voice and multi-media feeds coming into it from a variety of sources. We had a hard time finding anyone who did not have a wireless device in their possession and many people carried two of more of these ubiquitous gadgets with them. The costs of using them seemed petty compared to what we are used to paying.

Clearly, Vodafone needs only to keep its lines into China open to continue reaping the gold from this massive and hyperactive market.

Peter Paul Roosen and Tatsuya Nakagawa are co-founders of Atomica Creative Group, a specialized strategic product marketing firm. Atomica helps companies achieve greater returns on their investments in bringing new products to market and their existing businesses. They have co-authored Overcoming Inventoritis: The Silent Killer of Innovation www.atomicacreative.com

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!