AT&T, Verizon, T-Mobile and the Unspoken Truth about Strategy

The first big theme is called, “AT&T, Verizon, T-Mobile and the Unspoken Truth about Strategy.” As you may know, the United States has auctioned off many licenses for wireless spectrum to be able to use the 5G standard. This means that the US is preparing to roll out 5G. Buying licenses that allow telecoms companies to compete in 5G is a prerequisite. It’s almost like they’re buying a distribution channel so they can move data. It’s a costly endeavor—billions and billions of dollars are spent on this.

I’m going to talk about one of the messy, unspoken and ugly truths about strategy: No one really knows what good strategy looks like. It’s almost impossible to know what a good strategy looks like, as distinguished from a bad strategy.

AT&T, Verizon and T-Mobile are three big, powerful companies. They’re giants of the corporate world. Clearly, some of these companies are going to succeed, and some are going to fail. Not everyone can be number one in the space. So, one is going to be number one, one is going to be number two and one is going to be number three. But it’s not as if being number three is something to be proud about. If you are number three, you’ll be destroying shareholder value. It’s not like you get a bronze medal and you get your photograph taken as a CEO—no, you get punished. You get activist shareholders buying stock and trying to push for dramatic changes in your strategy.

If you look at the board of each company and the management team, these are very accomplished individuals. Almost everyone is looking at the same data. The data that they have is almost always the same. Everyone understands the others’ cost structure. Everyone understands the others’ competencies, weaknesses and assets.

How is it that they can come up with different and divergent strategies that lead to different outcomes? Why is it that strategy is such a messy process that you don’t even know what good looks like? There’s no objective way of knowing what good looks like. Strategy is about deploying capital and making sure that capital gives you a return.

If you’ve been following what’s happening with T-Mobile, you know that T-Mobile has caused a massive shift in the industry because they have found a way to grow off a low-cost base. They’re growing at a tremendous rate. They have “raving fans.” If you’ve been to a T-Mobile store, you know that they have a different energy and a different vibe. It’s like they think they’re taking over the world, making a big impact and that they’re the coolest people. When you go to a Verizon or AT&T store, you feel like you’re in the corporate world. These guys serve the corporate world, they are buttoned down, and that’s the space they want to play in.

So how come three brilliant teams come up with different strategies when they see the same things and when they’ve been in the industry for so long, when they know all of the CEOs, and they’ve studied other companies around the world? How is it that one is able to create raving fans that love the product and the others are strugling to do it?

In the end, the customer always wins. So, why is it that one group of companies doesn’t know that they don’t have raving fans? The picture gets muddied and worse because buying 5G spectrum costs billions of dollars. Just having it doesn’t mean you can flip a switch and start generating money from 5G. No, you have to invest in infrastructure behind it. Then you have to work with mobile companies to make sure they bring the phones that can use your mobile infrastructure. We’ve seen this precedent play out before in Europe when telecoms companies overpaid for the previous level of licenses, 4G and 3G, and they didn’t have enough money to invest in the spectrum by building the infrastructure out around it.

A race to build 5G capability has started. It’s not just a race to see whether T-Mobile is going to be better than Verizon or if Verizon is going to be better than AT&T. No, this is a race to see whether AT&T, Verizon and T-Mobile are going to lay the infrastructure that will allow the US, as a nation, to compete with China and many other parts of the world. It’s not about whether AT&T is going to beat Verizon. It’s about whether one of these companies isn’t just going to make money from 5G but is going to allow the US to be successful in the next phase of economic growth.

Think about this: Why is it that no one ever says strategy is a terribly painful process? There are no objective measures. We don’t know what good looks like. We don’t know what the right strategy is.

Of these three teams, one team is going to do very well. What’s going to happen to the other two teams? Nothing. Let’s assume Verizon is the company that doesn’t win in this 5G race. Does that strategy team take an objective reflection of why they weren’t able to come up with the right strategy?

Of course, sometimes it’s implementation, but not always impelentation. Sometimes the strategy is wrong. And is it a reflection only of that we were not able to come up with the right strategy, or maybe there was a problem with the way strategy is done in the first place? It’s an expensive field with very nebulous concepts. It’s almost impossible to know what a good strategy is versus a bad strategy. There are many books about it, but in the real world, when you’re a CEO and you have to make a decision, it is very difficult to know what a good strategy is. If it was easy, we wouldn’t have bad strategies.

This is an excerpt from Monday Morning 8 a.m. newsletter, issue #21. Many of you have found Monday Morning 8 a.m. so useful that you’ve asked us to release a book version of these newsletters. We’ve obliged and released a Kindle version, which you can find on Amazon under “Strategy Insights.” It contains the insights from previous Monday Morning 8 a.m. issues, edited into a bite-sized format that’s very easy to use. And you can learn about other FIRMSconsulting books here. 

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