Defensive Innovation

Some companies have had phenomenal success in a relatively short period of time. If the level of success is high enough, then the company becomes a target for others. The most disruptive competitors are those that are traversing traditional boundaries.

A good example is Vodafone and Microsoft. Back in 2004, Vodafone was a fast moving, entrepreneurial telecoms operator. Vodafone’s operations had become global via some aggressive acquisitions and the new branding strategy had been activated. At the time Orange, led by Hans Snook, was the clear leader in branding and consumer products. To catch-up with Orange, Vodafone established a spin-out company Vodafone Multimedia. Vodafone Multimedia was instructed to produce as many product and services as possible.

One of the products we wanted to do was a Mobile Office. This product would sit well with our highly profitable business customers and by leveraging connections with Microsoft we could scale globally in a short period of time. However, Microsoft had a slightly different perspective. Microsoft wanted to integrate ‘Voice’ into Microsoft Office. Ironically, this led to a potential product discussion changing into a series of defensive moves.

During the strategic dancing sessions, Microsoft and Vodafone wrote a white paper on the potential synergies.

Behind the scenes at Vodafone, a controlled panic had set in when we realised that Microsoft might use something like VoIP to take our unbelievably successful voice and text services. To thwart this we came up with a fundamental concept, how could Vodafone charge for products and services on a PC. Lets take the battle to them, rather than wait. This led to the creation of a number of Trusted Transaction Manager patents in a matter of weeks. We even protected the USB stick design that we planned to use in demonstrations. Once the newly appointed Vodafone IP attorney had helped us get these patents filed, we told Microsoft that Voice/Text for Office was off the table. However, we now had a way of allowing Microsoft to install software on every new PC on either rental or purchase business model.

This idea was independently valued at $1.2Bn.

More than enough to distract attention away from Voice/Text services?

Image courtesy of Ministry of Defence.