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002: The Serial Disrupter, David Morken, CEO, Bandwidth.com

unnamedHow can a middle-market telecom provider compete successfully against industry giants such as Verizon and AT&T? Join us as David Morken explains how Bandwidth.com’s two operating divisions, Republic Wireless and Bandwidth Business Solutions, are growing remarkable value from mobile and IP networks.

Listen to the COMPLETE EPISODE Below (00:21:26)

Words in the Middle

“When you are innovating, when you are a mouse among elephants and you must find the path that’s novel, you should be intrigued by areas of inquiry where the answers are not obvious or clear. You should be investing dollars into those areas of uncertainty because they often unlock the greatest opportunities that no one else is pursuing.”

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The Abstract

The following is an edited abstract from the Middle Market Thought Leader podcast featuring David Morken, CEO of Bandwidth.com, and Jack Sweeney, co-host of MME Thought Leader.

MMTL: How does someone who seems to find satisfaction in starting new things, find satisfaction running a middle-market telecom company?

Morken: To get to the heart of your question, if you like to start things, that’s important obviously if you are going to innovate. But I think it’s more important or equally important to finish well. And by finish, it doesn’t necessarily mean that you sell or that you leave but that you complete the innovation cycle in any given product or service to the point where the yield for customers, the value to people, is reached and maxed out. It is only at that point that you should then refocus investments dollars and your own attention into a new area where you can unlock new value. Does that make sense?

MMTL: Yes, Excellent way of putting it. Given your size, a mouse among the elephants, how have you been able to compete against the likes of AT&T and Verizon today?

Morken: Our primary advantage is that we are closer to the ground. By that, I mean in the case of the public for example, we paid attention to Wi-Fi being all around us. And when you are an elephant and your head is much higher, it is harder to see sometimes what is all around us in real time. And for us, it’s that recognition that a Wi-Fi router was at home, was at work, at school. Often, it’s in a public place. That recognition, being a mouse dancing among elephants, allowed us to say “Well then, why can’t my Android smart phones which need a dialer, use Wi-Fi when I place or receive a call? How come it can’t do that?” And that was the thing. Simple question asked by a terrific team, although as small as a mouse. It was because we were looking around us at the real problem and opportunity right in front of our nose. And when we asked the question, the answer became much clearer.

Hey! Maybe we can work with this open operating system called Android, and maybe we can partner with a terrific team like Motorola, and create the world’s first Android smart phone that natively would use Wi-Fi to both place and receive calls with our caller ID, with our regular number, as well as through SMS? So my answer would be sometimes it is an advantage to be the mouse among elephants because if you keep your eyes close to the ground when you are running around, avoiding being stomped on, you can often see both the clear problem and opportunity as well as the solution.

MMTL: Have you done something different as far as your capital needs and how you fund some of these innovative launches that have led you to succeed where others so often fail?

Morken: The primary investment hypotheses that warrant capital are those that are pursuing the unknown. And this is really counter-intuitive because it could lead to speculation and gambling type of investments, and that is not what I am suggesting. But what I am suggesting is that there’s capital that should be allocated toward your golden goose business that is well known, and it is harvesting value on a learning curve that is well understood. That’s an appropriate use of capital. However, when you are innovating, when you are a mouse among elephants and you must find the path that’s novel, you should be intrigued by areas of inquiry where the answers are not obvious or clear. You should be investing dollars into those areas of uncertainty because they often unlock the greatest opportunities that no one else is pursuing.

But how do you do that with conviction when there isn’t any data that support the outcomes you’re hoping for? In our case, with Wi-Fi, we had no idea how many calls or text messages would natively be transported over Wi-Fi if we created a phone that uses Wi-Fi natively. We didn’t know. There was no data anywhere to support that, so we spent the money to do the development, to do the software development, to file the patents, to partner with Motorola, to buy the phones, to go to market, and we found out that a huge percentage that allowed us to save an enormous amount of costs for people would build the Wi-Fi. So, in that case, we had conviction and we followed the courage of our conviction. But investing in areas that are unknown is very, very difficult to do. It takes courage.

MMTL: Now that Bandwidth.com is growing into a larger middle-market enterprise, what organizational approaches do you have to help protect and encourage innovation?

Morken: Boy, is that a great question! My short answer is that the innovators’ dilemma is a cautionary and real dilemma for those who have achieved any success in serving a customer: You tend to build additional features or capabilities that fewer and fewer of your customers actually utilize in order to try to support a profit margin or a revenue number. The solution to that is to focus on the customer and the actual job the product is being bought to do.

Structurally, as to the second part of your question, as a company, how do we ensure that we stay focused on the customer and on the job that the customer is asking the product to do? In our experience, that includes having vibrant communities of customers who are encouraged to collaborate with us. We call it “collaborative co-creation,” and I know that sounds silly or musical. What it looks like, in practice, is online communities of folks posting things that they would love to see next, things they hate about the product – and that’s collaboration. That fearlessness about talking to customers all the time permeates our organization and the product leadership in the company.

One last point, which is if you keep focusing only on your P&L, if your leadership are just focused on yield, on dollars to the top and bottom line, you will miss the next cycle of innovation and opportunity presented by either technology or circumstance because you won’t be looking forward. You’ll be looking in the rear-view mirror at what already exists. So to encourage your leadership to experiment or uncover unknown things that are right in front of them is a constant tension that you have to reconcile and that you have to structurally orient your folks for. Perhaps it’s an NBO goal for revenue from brand new product in one year. We don’t even know what they are yet, but suddenly a certain percentage of somebody’s bonus is tied very directly to creating something out of thin air.

MMTL: Over the next 12 months, what are the top priorities for your middle market business?

Morken: Our number one priority at Republic is to increase the value proposition of the service that has enjoyed high regard and acclaim by customers and the media. But to improve that value proposition even more and, notice – that’s a different top priority than grow, scale. Instead, it’s be more valuable to both the customers that are on board today and the next customers. That’s a focus on product innovation and service innovation. On the business solution side of our business, the number one priority is to build out and scale the service to more and more customers, and we have a strong solid investment in that network that’s scaling rapidly. And so it’s a very different top priority than Republic, but those are the two top priorities at the company this year.


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