Disruptive Innovation

Etam: Lingerie in disruption

When the subject of textile is brought up, looks grow sombre, voices become whispers as if standing aside of a cancer-infected person. And yet, inspiring successes do exist. In 1996, Etam created the 123 Lingerie brand and new growth ensued. What was the winning combination which opened the gates to success? This new brand brought novel benefits: comfort and pleasure. It exploited a new disruption in client's habits towards lingerie. It took advantage of technological disruptions in textile materials.

The first novel benefit that Etam brought is comfort when buying. Any woman will tell you that a bra is difficult to choose. It must be perfectly adjusted to be comfortable all day long. When our story begins, buying undergarments was no simple matter in most stores. The client struggled while trying the bra in changing rooms of insufficient number.  Often not having found the right size, she had to dress up, go back to the aisles, wait for a changing room to become available and retry. Added to this was the nearby wailing infant and husband wandering aimlessly in the mall. Losing all patience, the woman would leave with an unsatisfactory garment. Christine Plazanet, who was at the time the head of this new activity, comments that "We put ourselves in the shoes of our clients. We understood that a successful trial of clothes was the requirement for a satisfying purchase. We have created a new concept of shops centered on trying clothes." The clients have access to spacious changing rooms. Vendors stay close in order to bring articles from the aisles while clients try them on. When a client doesn't find a fit, vendors bring the right article with the right size. This way the client is sure to buy a perfect fit. Rapidly this concept is adopted by clients. In store guest books,  clients praise the level of service.

The second novel benefit that Etam added next is pleasure. Delighted by these new stores, clients ask for innovation in products. Christine Plazanet explains: "We have decided to take a leap forward towards the pleasure of our clients. Pleasure is first expressed through personal well-being.  We have conceived "second skin" lingerie products. They are comfortable, soft when touched, and invisible under the clothes.  Pleasure is also felt through the satisfaction of seduction. We have created a seduction range of products with an elegant or sexy style. By playing on forms and colours, we have gone faster and farther than our competitors.”

This product renewal rests on a disruption in the client's behavior. In the 70s, women emancipate. It was an era of utmost feminism. They abandoned the bra and put their sweaters on bare skin. They boycotted traditional underclothing since it appeared to be an obstacle to their freedom. But it is only a phase in which taboos drop. In the 90s, they dare take care of themselves. They aspire to well-being. They often attend care centers for massages or thalassotherapy.  They want to expose their bodies. The big brands of Haute Couture understood this. Looking to revive a sluggish market, they launched "chic porno". Sexy clothes like the thong, once reserved to prostitutes, proliferate. A latent need is just being revealed, provoking a breaking off in client's behaviors: underclothes are no longer simply functional but embody the expression of sensuality. The Etam lingerie team has perceived this change of mentality and exploits it to the maximum in its new range of products.

A technological disruption in fabrics is what enables these innovations. New materials such as lycra and tactel are born. They are soft upon touch and make undergarments arousing. They allow designers to conceive new shapes fashioned without seams that render underclothes invisible.
 
This story illustrates an original strategy in a market disruption. Etam has understood how to skilfully navigate on the waters of its market troubled by disruptions. The company was able to
initiate novel client benefits. These accomplishments show that even in sectors losing momentum such as textile, a well coordinated strategy can bring success.

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Lingerie at Etam

Lingerie is the original activity of Etam, its soul and the source its pride. The firm has created the independent 123 Lingerie brand in 1996, which she reintegrated in its Etam Lingerie division in 2001. Today it benefits from past innovations and is the European leader in its industry. It has circumvented the traps of Chinese competition by early outsourcing production to Chinese factories. The group now has more than 1600 outlets in China. Etam Lingerie brings valuable profits to the mother company whose ready-to-wear activity is given a rough time by strong brands such as Zara and H&M.

How to stand out from the crowd?

How do you stand out from the crowd when you are anonymous? "John is an ordinary manager in a run-of-the-mill company. He just spent a long day working on some arcane file of which he is the sole person understanding the complexity. He knows that his contribution is not always appreciated by his peers. Despite the fatigue, he raises his gaze with pride on a newly published book where his accomplishments are quoted as an example. He belongs to an elite. He is one of the best experts in his domain." This is the promise that the new collection 20 Questions makes to its readers. It is a powerful demonstration of unprecedented value brought to clients. This new disruptive approach has the potential of overturning the rules of the game of the publishing market.

This is a story of a start-up who is launching a major innovation in the publishing world. It was told to me by Etienne Pluvinage, director of 20 Questions. When he talks to me about his project, his eyes twinkle and his voice resonates. He shares with me his passion for reading. He has a long carrier as a small business executive where, although swamped by his responsibilities, he manages to take some reading time and achieve a personal balance. “At the age of 52, I decided to combine my passion and my professional project. I undertook a new mission: I decided to create a new business book series to efficiently circulate ideas among managers. That is how I started 20 Questions.

The initial vision has a hard time convincing potential readers. At first, the concept aims the needs of managers who, during their career, rapidly become generalists. They are constantly confronted to new problems. They have to tackle new concepts that largely exceed the scope of their education. Etienne Pluvinage explains : "In response, 20 Questions is a series of books covering multiple topics in a simple and graspable manner. Each book is divided in 20 frequently asked questions that the author answers. Its content is made up from examples that seem familiar to the reader. It’s a simple format that is easy to read and generates concrete results. The readers subscribe and receive one book every month." Despite the clarity of his speech, his ideas do not spark the readers’ enthusiasm he was hoping for: they are good but not revolutionary enough.

The key to the unprecedented value of 20 Questions is found in the exchange between readers and authors. To help authors illustrate their books with real examples, the publisher gives subscribers the possibility of participating in the book's writing. These subscribers can consult books in progress on the Internet and offer their insight on the questions being discussed. If the input is interesting, the author can use it and immediately publish it on the site. The ones that brought the information can earn the privilege of being quoted as an example in the book. They can enter in contact with the other subscribers and read their comments. They are, at no expense nor travel, incorporated in a network of experts. Etienne Pluvinage reports : "When I speak about my project, it is the possibility of participating in the books’ writing that appeals most to readers".

The power of this value is explained by a regulatory disruption in today's employment market. The tacit contract that ties the company to the employee has considerably evolved these last years. Formerly, in exchange of a well-done job, a contributor benefited from the promise of a flourishing career and lifetime employment. The high marks given by his superiors were enough to support his social status. Today, with the pressure of competition and globalisation, companies can not pretend escaping from the necessity of downsizing. Whatever may be the quality of an employee's work, he can be brutally laid-off and find himself unemployed. The esteem of his superiors is only of small interest since they too can prematurely leave the company.

This situation leads to another disruption in the behaviour of managers who are the clients of 20 Questions. They have to find new ways to satisfy two needs: feeling important and secure. Since the company is no longer a reliable source of self-esteem, they need to be appraised beyond the walls of their company. They aspire to inform the world of their expertise. While doing their job, they do not want to be caught off-guard when a new competency is requested. In case of lay-off, they need to develop a network that will allow them to find a new job. They have to accumulate visible and appreciated achievements outside of the company.

The approach of 20 Questions perfectly responds to managers’ worries and aspirations. Without having to put in a lot of time, its subscribers build up a network made up of professionals that appreciate their know-how. They have the possibility of exposing accomplishments that are published in a book. Such quotations will of course be part of their resume. The contact with experts in a number of domains will help them dominate unexpected situations in their company. If they find themselves unemployed, they can immediately activate a network that will be very precious when searching for a new position.

The presence of an unprecedented value often makes the difference between success and failure. We have here a very good example of unprecedented value that should translate into success.

Too much excellence can be dangerous

Excellence of your own teams can sometimes become your enemy. It is the lesson that we can conclude from the adventures that encountered Souchier, a small business prey to violent disruptions on its market. We saw passengers perish on a sinking ship. They held on to their treasure preciously tucked away in the hold rather than abandon ship on an escape boat. They did not hear the dull sound of water invading the bridges nor the warnings of fellow  passengers.  In the same way, the technical teams of Souchier were clinging on to their very high technical capacity relative to their products. They did not foresee that these same products were declining rapidly and were dragging them inevitably to the bottom. These teams were reluctant to launch forth on new unclearly defined products which are the essence of an emerging market. This was precisely the road that would save them…

Although small in size, the Souchier Company is a leader on its market. Today it detains the enviable position of second among the European suppliers of smoke clearing systems. The company manufactures automatic roof ventilators for public, industrial and commercial buildings. In the event of a fire, these openings evacuate the opaque and acrid smoke, preventing people asphyxiaand revealing to firefighters the source of fire.

At one time Souchier had at almost been engulfed in a market disruption. Evacuating smoke was not the original business of the company.  40 years ago, it was manufacturing windows for saw-shaped roofs whose outline was a lasting visual symbol of factories built after the Second World War. In the 1970's, Souchier's windows were confronted to a fatal technological disruption. Thanks to technological progress in materials, terrace rooftops, more economic and discreet, progressively replaced saw-shaped ones.  Souchier’s windows did not suit the new demand and sales diminished rapidly. The company fought ferociously to survive throughout harsh competition against its rivals. But it was vain to struggle against a technological  disruption: the decline was inevitable. Jean-Pierre Thévenet, Souchier's CEO, had to lead two simultaneous actions to be able to overcome the problem. He restructured the company in order to adjust resources to a decreasing turnover. While managing usual restructuring panic, he searched for new opportunities.

Resolution came from the  regulation disruption of fire security norms. Of course, it was natural to contemplate  manufacturing sky-domes which are the equivalent of windows for terrace rooftops. This possibility was quickly rejected: Souchier did not have the technology or the specific know-how and was facing well-entrenched competitors. It's a regulation disruption that saved the company from downfall. By the end of the 70's, fire security norms for buildings changed. Smoke clearing progressively became compulsory in public, industrial and commercial buildings. The managers of these buildings looked to acquire automatic smoke clearing systems.

The excellence of their teams was a major obstacle to seize this opportunity. When Souchier, like many other companies, was consulted on the subject, the interest of addressing the market was not obvious. The plans for operational implementations of the new security norms were vague. No statistic on the size or the growth of the market was known. The first client's contract specifications were hazy because the solutions to satisfy them did not  exist. Confronted to this situation, the natural reaction of the technical teams was disregard. Jean-Pierre Thévenet reports: "the lab engineers were proud of the quality and the technical nature of the equipments they conceived. At the time the client's demand for smoke clearing seemed like trifles done with bits of rope. They did not judge this demand worthy of their attention." It is true that at the time the saw-shaped roof's regressions had only begun. The engineers were complacent in this technology they knew well and were blinded by their self-satisfaction. They did not foresee the decline of their actual business or the safe getaway provided by smoke clearing. 

Thankfully, the CEO was able to overcome the obstacle. He convinced a few engineers to attempt the adventure. They tested rudimentary solutions with their first clients. Strong with these first experiments, Souchier conceived the first industrial product. The company rapidly dominated the first niches on the French territory. It went abroad and invaded Spain and Portugal. It continued to improve its product and gain market share. Thanks to this progression Souchier is today number 2 in Europe. The company enjoys excellent profitability and continued growth.

Today the company is much better armed to confront future disruptions. Now that it has been able to take advantage of a particularly delicate disruption  , it will be able to handle future ones that will undoubtedly come on its market. 

Hard Discount on the move

Hard-discount stores represent a major overturn in the food distribution industry during these last ten years. They are an excellent example of business model disruption with a “low cost” approach. And yet, such a success would have taken place without the joint disruption of clients’ behaviour.

Hard-discount supermarkets appeared in France in the late 80’s with the arrival of two precursory brands : Aldi and Lidl, later followed by Leader Price, Ed, Netto. Hard discount brands now represent 13% of the food market, a surprising performance. For a long time, hypermarkets have neglected their threat. But in the last few years, they were forced to react in order to stop their market share erosion. They reinforced their offer through first-price or private label products. The Auchan group has created the concept of self-discount aisles where common products are sold in bulk at discount prices. Other distribution groups have acquired or launched hard discount brands: Ed for the Carrefour group, Leader Price for the Casino group. Such measures are clear evidence of success of the hard discount concept.

The hard-discount store’s format represents an excellent example of business model disruption compared to the traditional hypermarkets and supermarkets principle. They are small sized stores, often close to city centres. Their presentation is basic and the assortment of products is limited. The personnel is reduced and versatile. The prices are low, whether it be on private labels or major brands. The rotation of products is very fast and leads to important stock reductions. The important volumes concentrated on a small number of products leads to high supplier discounts.  This “low cost” model is a very efficient alternative to the supermarket and hypermarket’s system.

However, the business model does not allow us to fully explain the success of hard-discount stores with consumers. It is a disruption in clients’ behaviour  that has established their success. In the begin of their implantation, these outlets were  essentially frequented by people with modest revenues. However, their clientele has quite changed. It is now mostly made up of middle classes and families with young children. These customers find in hard-discounts shops a way to save time. The small size of the store and its limited choice allows them to do their shopping in approximately 20 minutes. Also the distance to get there is short. Such a reversal is even more spectacular since these clients were a privileged target of hypermarkets: nobody had anticipated their defection towards a type of store known as “low quality”.

It is the combination of these two simultaneous disruptions that have provoked the growth of hard-discount stores. It is also these disruptions that blinded their competitors and delayed their reaction. The latter were hypnotised by their own conception of distribution; they did not imagine that a new model could steal customers whom they had already attracted and earned loyalty from.

Dell : Market disruptions that fostered its success.

Dell is an astonishing business success. In 2005, the company is the Number 1 Personal Computer vendor in the world even though it was just an unknown start-up in 1984.Its market capitalisation is exceeding $ 75 millions dollars even though it started with a $ 1000 capital. How is such a miracle possible ? Dell is largely viewed as an excellent success of business model disruption. However, such a success would not have happened without the presence of two other disruptions :  the disruption of the computer industry and the Internet technology disruption.

The business model disruption initiated by Dell is one of the best ever achieved in a long time. It is based on two simple concepts : build-to-order (product manufacturing only starts when a customer order has been received), and direct sales (selling is done exclusively online or over the phone without distributors’ involvement). The build-to-order process eliminates heavy inventory costs while still providing customers with the perception of a customized service. Direct sales creates a strong relationship where customers feel served personally by the vendor ; it drastically reduces costs of sales. There are other famous examples of business model disruptions. In the air travel industry, SouthWest has pioneered the low-cost, point-to-point travel business model. In the retail sector, based on the same principle, hard discount stores (Aldi, Lidl, Ed, Leader Price) have invented the concept of small sized, reduced assortment, low-cost stores. In these last two examples, several competitors within the same market have mimicked the model successfully. In comparison, Dell has reached the achievement of being the only manufacturer in the world to be able to adopt the business model : other competitors such as HP or IBM were never able to copy Dell efficiently.

In order to understand the phenomenon, one has to analyze another simultaneous market disruption : the disruption of the computer industry structure. Until the mid 80’s, the computer industry was vertically integrated. Manufacturers were doing everything (vertical integration). Like IBM, they designed and manufactured all their computers components and sold them through their own sales force. When Personal Computers emerged, the industry moved to a horizontally disintegrated structure. Every item in the value chain was provided by different specialists. As an example, in 1990, processors were provided by Intel, operating systems by Microsoft, networks by Novell, memory chips by Samsung, disks by Seagate, office applications by Lotus, final assembly by Compaq, sales by independent distributors. Thanks to this new structure, Dell was able to introduce a then unique concept. Dell started its activity by assembling PC components according the specific demands of its customers. Initially, this model was only attractive to a small elite of techies. Later, thanks to the marketing effort of the different components suppliers, an increasing number of users got familiar with the technology and felt comfortable with specifying their PC configuration to Dell. At the same time, the indirect channel lost its added value of technical advice to end-users : Dell’s direct sales model ended up strengthened.

In the late 90’s, the Internet technology disruption gave additional weapons to Dell. Internet has become the number one media to establish a direct link between vendors and customers. Dell’s sales organization who was previously taking all orders over the phone ceased the opportunity and created an Internet portal where customers could get all necessary information to configure their PC. It went further by offering services all along the life of the product : financing, custom configuration, on-line help to install, use and maintain. The efficiency of these tools has further reinforced the competitive advantage of direct selling versus a complex distributor network.

The Dell example is a good illustration of the complexity of market disruptions. Disruptions are often the combination of independent trends that add up and topple the markets. It took no less than three market disruptions to give Dell a decisive advantage. One can understand why so few companies are able to anticipate and exploit disruptions.

Competing with your own channels

There are many different marketing theories about how to manage distribution channels. But everybody agrees on one point: a company should never have its sales force compete with its own channels. Against all odds, one division of Hewlett-Packard has been very successful at doing just that. HP's OpenCall Business Unit (OCBU) sells the same products to Telecom Service Providers (TSPs) such as Verizon or Vodafone, both through the channel of Network Equipment Providers (NEPs) such as Nokia or Nortel and through its direct sales force. How is that possible? The reason lies in one specific characteristic of the Telecom market: it is constantly subject to intense disruptions, where traditional models have to be bended to ease market players' necessary evolution.

Let's look at it in more details. Until 1999, OCBU products, the OpenCall product family, were systems for telecom network applications sold almost exclusively through NEPs: the latter developed integrated solutions on top of the HP platforms and sold them to TSPs. In 2000, the OCBU management team decided to change sales strategy. It created a sales force and a system integration team that would compete with NEPs by selling integrated solutions directly to TSPs. In parallel, it went on selling through NEPs who would build their solutions on top of HP platforms and sell them to TSPs. As Lionel Lapras, OCBU Director of Strategy, points out: "We realized that relying exclusively on an indirect channel did not allow us to continue our growth. We decided that a mixed direct / indirect channel strategy would offer more opportunities". This situation inevitably created conflicts with NEPs that HP managed on a deal per deal basis: if NEPs selected the HP platform in their proposal to the deal, HP would stay away and not compete; if NEPs did not select the HP platform, HP would compete with its integrated solutions.

This awkward sales strategy received good acceptance from the market because of two factors. First, a major market disruption was developing in the early 2000’s. At the time, the telecom market was barely going out of an almost-collapse situation: many TSPs such as Global Crossings or MCI had gone bankrupt; remaining TSPs were strangled under huge debt and had stopped all investments; NEPs such as Lucent, Nortel or Alcatel had seen their orders plunge by 50% to 80 %. At the same time, TSPs began shifting their attention from the “mobile Internet” to a new generation of advanced communication services. This situation created a drastic disruption in the way TSPs behaved when making purchasing decisions. Steve Dietch, OCBU director of WorldWide Marketing, says: "TSPs shifted their business objectives from service quality and availability to time to market and cost advantage. From their suppliers, they no longer accepted inflexible and proprietary solutions that were the norm in the Telecom paradigm until recently. Instead, they were looking at reducing the cost of failure and experimentation by using flexible solutions based on industry standards". The move to more open systems architectures created a wealth of new application developers who generated a new wave of solutions. As a consequence, under the pressure of TSPs, NEPs changed strategy. They no longer tried to develop in-house all components of their solutions, but rather integrated 3^rd party products and built solutions based on standardized architectures. In this context, thanks to its unique experience of applying Information Technology standards and Open Systems to the highly demanding telecom network applications, Hewlett-Packard was an attractive player that could help smooth the change. TSPs asked HP to play a more prominent role, by offering complete solutions in competition with NEPs. By doing this, HP helped challenge the status quo and accelerate the change to Open Systems.  Meanwhile, NEPs core business of telecommunications equipment was not being attacked. HP ended up complementing the NEPs core solutions and competing on the fringe.

Second, the Telecom market is a complex world where players need to maintain long-lasting relationships. As Telecom Equipment life typically spreads over more than 10 years, HP is now still supplying NEPs with platforms that are integrated in previous generations of equipment. Therefore, HP needs to keep a strong working relationship with them. And both NEPs and HP have an interest in evolving their installed bases to next generation open solutions. Also, HP's systems integration capabilities are limited and are way smaller than those of NEPs: it does not have the capacity to serve the whole market for solutions even if when its open architecture is superior. Therefore, Service Providers are very favorable for HP to continue sharing its open technology with NEPs. Barry Hill, OCBU Sales Manager, says: "By getting direct access to end customers, HP is able to fit better its product to their requirements and in turn NEPs benefit from HP's advanced technology". Thanks to its expertise in Open Systems, HP is able to implement new architectures efficiently in response to TSPs' requests. When its solution has been tested and approved by a TSP, HP has a large amount of credibility to convince NEPs to adopt its architecture in future deals.

As a result, HP has been able to grow it business faster than the market, both in the direct and indirect channels. Even though HP OCBU's sales strategy is at odds with traditional channel management, it is an important factor in facilitating the transition from proprietary to open systems. By selling its solutions directly to Telecom Service Providers, it helps uncover innovative architecture and prove their viability in the network. By continuing to supply its platforms to NEPs, it helps the whole industry absorb faster the new paradigm and overcome more efficiently the market disruptions that they are faced with.

Voice over IP is about to unsettle the mobile telephony market

Skype's voice over IP products are currently triggering a market disruption that is about to unsettle the mobile telephony universe. Skype is leading the way to a new business model by offering free telephony with new internet possibilities now expanding to mobile phones. Mobile Service Providers, who have long been enjoying higher prices than those of fixed telephony, are most threatened.

Skype started in 2003 by offering software that enables free phone calls between PCs. Even though it gives away the software for free, the company generates revenues with "Skype In" and "Skype Out" services that enable users to establish phone calls with non-Skype users. Moreover, Skype's market approach is not a short-lived, isolated phenomenon. Indeed other service providers have launched or announced similar offers, such as  Wengo by Neuf Telecom, Livecom by France Telecom and "Internet Phone Service" by AOL. 

Skype's business model brings a market disruption causing massive pressure on both fixed and mobile phone call prices. Voice over IP is not new in fixed telephony: service provider's products and prices have already integrated the effects of this new technology. The market of mobile telephony will be hit most since, unlike fixed telephony, it has never suffered significant competitive pressure on retail prices. Jean-Patrick Théveny, director of TMT Consulting, specialized in telecommunications, points out that "mobile phones such as last generation PDAs (Personal Digital Assistant) and smartphones can easily execute Skype software and access the Internet to establish Voice over IP communications through, for instance, a Wifi connection. Mobile phone manufacturers such as Motorola have already included Skype in some of their products."

If Voice over IP was to be a major success in the mobile phone market, revenues generated by outgoing calls are threatened. Mobile Service Providers' financial results can crumble. How can they react? For the last three years, they have tried to counter the threat by applying a classical move of introducing new value added services. However, today such services generate much less revenues than voice communications.

In the face of such a severe market disruption, the best strategic response often resides in innovating around ill-served customers' needs. Convergent strategies announced by different players are a good illustration. The idea is simple: current solutions poorly fulfil users' desire for voice communications accompanied with Internet access through a single terminal, at a competitive price, available anywhere and anytime. For telecommunications service providers, the purpose of fixed, mobile and high bandwidth convergence is to provide all of these services with clarity to the user. A good example is the "Next" program that France Telecom has just announced. It covers an ambitious set of new convergent services targeted to multiple usages, such as telephony, music, video surveillance, etc. Other competitors have similar offers: in the UK, BT Fusion launched by British Telecom in partnership with Vodafone; in Germany, Genion offered by O2. The key point of convergence strategies is that they focus on real customer needs. They stay away from the downward price spiral trap dictated by Voice over IP.

Up to what point will a convergence strategy make up for revenue losses induced by Voice over IP? In Jean-Patrick Théveny's opinion, "this will be true if customers' acceptance of new added value brought by convergence services spreads faster than the value destruction caused by Voice over IP services. The bet is huge. If it succeeds, it will give an advantage to integrated Telecom Operators that own both fixed and mobile networks and provide Internet access, such as France Telecom, Telecom Italia or Deutsche Telekom."

If the bet fails, Mobile Telecom Operators, who have provided sustained growth to the telecom industry for the last 10 years, can suffer a brutal revenue collapse with serious effects on the overall industry.

The success story of a French start-up

Here is the riddle. Which French start-up has been selected by Red Herring as one of the most promising European companies? Has started at the worst point of the Telecom crisis and is still in existence? Was able to take advantage of opportunities created by numerous and varied market disruptions? The answer is Volubill.

Volubill is a start-up company based in the suburbs of Grenoble, France. It works in an industry that is shaken by numerous disruptions: the mobile Telecom market. Within the last few years, this business dominated market becomes mostly a fashion driven consumer market. New business relationships take place when Service Providers such as Orange prepare to distribute Hollywood video clips. IP telephony, personified by Skype, threatens to brutally destroy the source of voice communications revenues which bring about 90% of European mobile operators' income.

Volubill founders, coming from large groups like Hewlett-Packard and Cegetel, identify a new market need uncovered by these disruptions. The Telecom Service Providers' existing billing systems are not able to deal with new multimedia services. Service Providers have to bill users according to the content perceived value as opposed to the communication duration. For instance, a mobile phone user may receive a weather forecast map free of charge, but he may have to pay to watch live goals of a football cup final. Volubill is created in 2001 and takes the challenge to adapt legacy billing systems to these new requirements.

However, the market evolution is such that this vision does not materialize as fast as planned. The first obstacle is timing. During a market disruption, it is difficult to anticipate the point when the market takes off. As André Meyer, Volubill CEO says, "We initially thought that we were six months late. We ended up being one year in advance". The consequence was a lack of revenue in 2002 and 2003. The second obstacle is the Service Providers' capacity to uncover new uses that will set off consumers' massive adoption and justify to invest in Volubill' billing solutions. Since 2000, several new mobile services were launched with meagre success: WAP (mobile internet access), MMS (photo pictures attached to short messages), push-to-talk (walkie-talkie functionality). Only in 2004 did new mobile services meet a broad user acceptance: messaging, video clips, music and games download.

In response to these challenges, Volubill executives engage into three strategic moves. First, they search which market niche will lead off. Thanks to high mobile users growth, Asian Service Providers are better prospects than their European counterparts. Alain Lefebvre, VP Marketing at Volubill, flies across Asia and evangelizes the market. He finds his first large customer in the Philippines, followed by many others. Second, Volubill tunes its value proposition. Inspiration comes from watching Amazon's billing efficiency: when a customer places an order with Amazon, he knows precisely how much he will pay, when his credit card will be charged and when his order will be shipped. From this observation, Alain Lefebvre derives a simple and powerful value proposition : Volubill' solutions bring full clarity to Service Providers when billing their customers. Third, Volubill creates a core competency to keep one step ahead of competition. Nicolas Bouthors, Volubill's CTO, bets on the combination of expertise of computer networks and Telecommunications networks.

Thanks to these 3 strategies plays, Volubill was able to stick around while competing US based start-ups were forced to give up. The latter selected a less focused strategy and spent more money to reach a poor result. On the contrary, Volubill showed its products marketability in Asia and prepares to attack the European market.

This example shows that a European start-up can succeed better than US counterparts, thanks to a clear strategy in a disruptive market. It shows the way to other European companies on how to innovate.

The 2001 Telecom crisis: was it just a timing error?

During market disruptions, market players often make timing errors. Most people underestimate their impact. Such errors have created major surprises and sometimes huge disasters. The 2001 Telecom crisis is a striking illustration of such a phenomenon. During the crisis, market players made a fatal mistake that triggered the crisis: they misjudged the timing of the effect of the internet traffic upon global telecommunications networks.

Internet traffic first takes off in 1993 when the first browser, Mosaic (later renamed Netcape), hits the market. Then, an unprecedented growth takes place. A new market is born, with new products (e.g. Internet Explorer), new players (e.g. Internet Service Providers), new services (e.g. Instant Messaging) and new business models (e.g. on-line services).

In 1999, a major milestone is reached in the global Telecom network: data traffic, which internet is part of, outreaches voice traffic. Until then, voice communications dominated bandwidth usage. Their evolution was slow and predictable with 3 % growth per year. Internet traffic represented a small volume and could accommodate the bandwidth left unused by voice traffic. In 1999, the picture is quite different. Not only Internet traffic is now a major part of the total traffic, but ISPs notice that it doubles every 3 months. Such growth requires a radical extension of the Telecom network.

The entire industry rallies to a new noble cause: optical fibres must be installed everywhere in the world to meet the almost infinite Internet demand. A flow of optimism swarms: the vibrant enthusiasm of one part of the players reinforces the ambitious vision of the other part. Telecommunications Service Providers engage into an unprecedented fury of investments. New Service Providers are born. Between 1997 and 1999, Telecom equipment vendors' revenue rise to unseen highs.

The timing error occurs at the end of 2000. Internet traffic growth decreases and is now way below the initial forecast. Thanks to multiple network optimization initiatives, Internet traffic doubles every 24 months instead of every 3 months. Investments that are already engaged are not justified anymore. Market players altogether make the same mistake. They misjudge the time when traffic growth drops and demands a more reasonable investment pace.

The crisis is inevitable. Offer for bandwidth is overabundant and surpasses the weak demand. Prices fall. This adds up to Service Providers' inflated debts. At the start of 2001, these combined factors generate an unprecedented crisis in the global Telecom Industry. Some Service Providers go bankrupt, others slash their payroll. They suddenly stop all investments. As a consequence, their suppliers, Telecom Equipment vendors, stumble as well. Many small companies disappear; larger companies are forced to lay off half their work force. Only in 2003 does the situation get back to a stable state.

What is the cause of this stunning error that drove to such catastrophic consequences? The first cause can be explained by a curious characteristic of the fibre optic technology. Thanks to technology evolution, low-cost upgrades of terminating equipment provide the possibility to double the capacity of an optical fibre every 9 months. If traffic grows faster, trenches have to be dug and new optical fibres have to be buried in the ground. That is the premise that Service Providers choose to build their business case. But while they invest, growth is slowing down (doubling every 24 months from 2000 on) and such investments are not justified anymore. We see here that the error is very subtle. It is centred on Service Providers not anticipating the inflexion of the traffic growth curve.

The second reason is that it is a collective error. All players, Services Providers, Equipment Suppliers, Bankers and Financial Analysts are making decisions out of the same flawed numbers. Some make optimistic assumptions; they confirm the unrealistic plans that others are building; in return, the latter influence the former to raise their forecasts. Encouraged by the surrounding light-hearted frenzy, nobody questions the fundamental hypothesis.

This example shows us the catastrophic consequences of a timing error that caused the near collapse of the Telecom industry. Which conclusion can we draw? In a market disruption, anticipating the new market trends is not enough. It is imperative to precisely evaluate their timing.

Blogs: a revolution in Corporate Marketing

The blog (interactive journals on the web) phenomenon is quite impressive: it is big and spreads at dashing speed. Perseus, a web survey company, estimates that there are 31 millions blogs in the world today, of which 10 millions were created during the first quarter of 2005. They are not reserved to young people: according to the Pew Internet & American Life report, 52 % of bloggers (blog creators) are more than 30.

We are witnesses of a major change that will permanently alter the way we communicate. It is caused by two simultaneous disruptions. The first one is a technological disruption. The blog technology brings blog authors unrivalled easy to use tools to create and broadcast web content, whether text, image or video. This content is made easy to access by search engines such as Google: if a blogger publishes an original and interesting information on a specific topic, blog readers who care about that topic will most likely learn about it and read it. The second one is a user behaviour disruption. Blogs meet a need for authenticity that has been neglected so far by traditional media. Bloggers are passionate individuals who express their feelings and opinion with fervour. They write about what they want, when they want, without constraint. Readers love their notes that come right from the heart or the guts. Their blogs differ from the slick and anonymous web site style and from the deceit of institutions. Never before has any media provided such a degree of authenticity to so many users.

In the professional world, journalists followed by political celebrities were the first to understand the power of this new media. But another major revolution is about to burst out: blogging will overturn the relationship between companies and their clients. They will redefine completely the art of marketing. This disruption will be irreversible and companies that do not pay attention will lose ground to competition. This trend is only emerging and we can sense where it is heading by looking at a few successes and failures.

Two major failures give us clues about what not to do. When launching the Mazda 3, Mazda created a fake blog displaying three spectacular video clips of the new car, supposedly uncovered by a blogger eager to share them with the blogosphere (the bloggers' community). But blog readers quickly became suspicious of the professional quality of the videos, and discovered the truth: these videos had been designed at great cost by Mazda's communication department. A flow of negative comments poured denouncing the outrage and spread over the whole world. Mazda showed us the number 1 rule of blog marketing: do not lie. The second failure story started when the endgadget blog published a video showing how to open the Kryptonite Evolution 2000 U-lock with a simple bic pen. Less than 24 hours later, bloggers who bought the product burst in anger and alerted the attention of newspapers. Kryptonite's first reaction was deny the issue: it was not their problem as any similar lock sold by other vendors had the same defect. Only 10 days later did Kryptonite offer its clients an exchange program at a cost of 10 million dollars. If the company had responded earlier to the bloggers' complains, it might have avoided being publicly humiliated and it would have limited the impact on its image and finances. Kryptonite teaches us rule number 2 of blog marketing: pay attention to what bloggers say about your company and respond immediately.

Fortunately, not all experiences lead to fiasco. Three companies are early adopters and demonstrate how to take advantage of blogs in their marketing approach. First, Microsoft reached an astounding achievement: create a human corporate image, close to its customers and to the software developers' community. A Microsoft employee, Robert Scoble, authors one of the most visited blogs on the planet. He shares his personal ideas and opinions on all kinds of topics, in total freedom, without any review by Microsoft's organization. He does not hesitate to criticize Microsoft's products when competitors do a better job. His bluntness gives him utmost credibility within the High-Tech community and he has acquired a strong authority when defending Microsoft' positions that he agrees with. This is such a success that Microsoft invites a number of its employees to follow his example and to create blog communities around diverse themes.

The second is Nokia who uses blogs to apply the best marketing tool for the promotion of new products: word of mouth. Nokia has created a blog to promote its new mobile phone, Nokia 7710, where it invites about 20 VIP customers (early users of the product) to share their experience. The result is a series of independent opinions, written in a casual and funny style, full of stories and useful practical tips. The site is a fantastic resource for all potential buyers who search for a relevant input on how the product can meet their needs.

The last example comes from Michel-Edouard Leclerc, President of the French retail chain Centres Leclerc in France. He shows us how an executive can create a strong connection with its public. He has created a blog where he freely expresses his stance on business issues and his personal interests. Rather than relying on a remote and stereotyped image formatted by the information media, he lets readers understand his passions, sense the depth of his views, appreciate what he like and what inspires him. In short, readers get the feeling of knowing him as a close friend even though they never met him.

It is clear that blogs will become a particularly efficient media to support companies' marketing strategies. Each of them will now have to find how to best implement this new marketing dimension.