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A Telecom Disrupter Masters the Discipline of Serial Innovation

leverages value

Raleigh, NC — To David Morken, business growth is a mere by-product — a sort of residual unearthed by his middle-market firm’s primary focus, the pursuit of innovation — or, as he prefers to describe it, “the act of unlocking remarkable customer value.”

Over the past 13 years, Morken’s firm, Bandwidth.com, of Raleigh, North Carolina, has launched a half dozen products and services designed to unlock new value for telecom customers as it battles the likes of telecom titans AT&T and Verizon. Included among Bandwidth.com’s most disruptive telecom salvos have been a Web 2.0 suite of VoIP services and a mobile phone that promises customers unlimited calling, texting, and data — all for just $19 a month.

davidMorken300dpi_hip-286x300“We have been really successful at identifying value, and these half dozen products and services have each now reached a scale of between $10 million and $100 million of profitable revenue,” says Morken, whose 350-employee firm received $22 million in private equity financing from Carmichael Partners in 2011.

The mobile phone recently launched by Bandwidth.com offspring Republic Wireless has made headlines with its low monthly charges — a customer-pleasing attribute achieved through the phone’s ability to transmit calls over WiFi (when WiFi is not available, the phone uses the Sprint cellular network.)

“We believed that despite our size, we had to go for it — because we knew that the customer value that would be unlocked would be monumental. Today, for every million Republic subscribers, we will be able to save them $1 billion annually,” boasts Morken, whose firm’s overall collection of products and services is expected to capture close to $150 million in 2013.

“Republic is now explosive — it may take its current subscriber base and increase it 10 times in the next 6 months and take it to a revenue and profit realm faster than we have ever experienced,” explains Morken, who says that looking forward, the firm will need to position its different products and services in such a way that they can continue to grow and be innovated “just as thoughtfully and deliberately, but at different rates” within the same company.

The company’s latest innovations have led the firm to serve both small and medium business customers as well as consumers.

“We do have a couple of different mechanisms that we use to foster creative disruption and the creation of product that is different from the current product family,” notes Morken, who adds that Bandwidth.com has embraced “a labs concept” whereby new ideas can be captured and led through a vetting process that has in the past resulted in the launch of a number of so-called minimum viable products (MVPs).

Asked whether Bandwidth.com’s lab is soon likely to introduce innovations as worthy of note as what Republic Wireless has turned out, Morken observes: “We have an embryonic team that is rapidly working to get something out the door that we believe will be equally interesting to our telecom customers.”

A quick look back at Bandwidth.com’s 13 years of growth clearly shows that Morken’s steely-eyed focus on customer value has led to the maturation of a highly entrepreneurial organization wherein the ability to pivot and fearlessness in the face of failure appear to be admired.

“When you’re innovating, there are going to be many unknowns, whether they are customer lifetime value, total cost of ownership, customer acquisition cost. There will be really huge pivots in any model. At the earliest stages, this is how it will be,” explains Morken, who comments that authority within the organization is welded largely by a team of seasoned general managers.

Says the firm’s CEO: “GMs around here are mini CEOs, and they drive hard with autonomy.”

Asked how Bandwidth.com expects to remain competitive with its more sizable competitors, Verizon and AT&T, Morken replies: “If it ends up that this is an industry where marketing dollars are all that matters, then we will have a hard time, but I firmly believe that the value of the service and the innovation of the services is what will be able to rise to the top.”

Related Article: Middle-Market CEO Interview: David Morken of Bandwidth.com Discloses the Seeds of Serial Innovation

crotty headline july 15

timthumb-150x150As we advance into the second half of 2013, there are growing indications that business sentiment is improving despite nagging unemployment numbers and a shortage of merger-minded CEOs.

Cindy Crotty, middle-market business watcher and head of KeyBank’s commercial banking segment, once more shared with Middle-Market Executive the findings of a KeyBank’s middle-market business sentiment survey, which reveals that merger-minded business leaders remain a minority in 2013. Download report here. 


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