What Business are You In?

From time to time, "telcos" and "access providers" (ISPs, cable companies, satellite firms and system integrators) essentially ask themselves "what business are we in?" and "what business should we be in?" In nearly all cases, those questions are answered in a way that suggests the solution is "we need to be in X, in addition to our present business." X can be marketing, advertising, internet of things, private networks, edge computing, content ownership, content retailing or some enterprise vertical.

In the past, telcos have tried to be in computing hardware and software, app stores, data centers or consumer hardware. Success has been mixed at best. In the internet era, when all access service providers have adopted internet platforms as their next-generation network, almost all efforts to find X will require moving into some different part of the internet ecosystem.

But startups often face tougher issues. Telcos at least know who their customers are, where they are located, why they buy, what the minimum viable product is, where price points must be set, competitor strengths and weaknesses, how distribution channels work at scale, and so forth.

New industries or product categories sometimes are hard to pinpoint, when defining contestants in a “market.” Kyte, for example, says it is in the “on-demand vehicle rental business.” But its business model includes having a Kyte driver deliver the vehicle to the renter’s location. So Kyte might be competing with Uber, Lyft or other ride hailing apps to an extent. 

In a larger sense, as ride hailing competes with use of taxis and public transportation and car ownership, Kyte might be viewed within a larger transportation market. 

Such market definitions remain even for contestants in more-established markets. Is Amazon a contestant in cloud computing? Yes. Is it also a contestant in online retailing or retailing in general? Yes. Is it a competitor in video and audio streaming? Also yes. Is it a retailer of consumer electronics devices? Yes, again. 

Defining a market matters for startups. It matters for market researchers, who must decide who the participants are in a market before quantifying their market shares. It matters for business leaders who must benchmark against their key competitors and craft growth strategies to match.  

A firm must define its market to understand where to compete, who its cusotmers are and who are the key trading partners. Defining markets also helps firms focus on what their customers value.

Perhaps the classic example is railroad operators. “The railroads  did not stop growing because the need for passenger and freight transportation declined,” noted marketing professor 

Theodore Levitt. “The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was not filled by the railroads themselves.”

In other words, they saw themselves as in the “railroad” business, not the “transportation” business.