In a seminal management article published in 1990 titled “Core Competence of an Corporation”, authors C. K. Prahalad and Gary Hamel highlighted the importance of developing a competence which enables introduction of a product that benefits the customer, and that are difficult for competitors to imitate. In their book, “Built To Last – Successful Habits of Visionary Companies”, Collins and Porras argue that companies get into trouble when they confuse core ideology with specific non-core practices.
With complete disregard to these two fundamental management principles, Comcast announced earlier this week that it will begin offering wireless services next year to customers, competing head on with AT&T, Sprint, T-Mobile and Verizon. One may wonder why would Comcast do this after several of its peers – including Cablevision and Cox Communications tried the same strategy, only to pull out soon after because of their inability to offer phones that people cared about i.e. Apple and Samsung. The answer lies in the West Coast of the US with companies bearing the names of Netflix, Amazon, Hulu, Roku among others. These companies have decimated Comcast’s model of offering TV and internet services for $125 per month and have forced Comcast to do something irrational in a desperate attempt keep its customer base from continuing to cut the cord.
Comcast’s strategy is allow its smartphone users to use Verizon’s wireless infrastructure combined with its own 15 million WiFi hotspots.The hope is that Comcast customers would combine wireless service with Comcast cable or internet and delay leaving Comcast. At a time when the wireless industry is reaching saturation and the big 4 wireless providers are in their own battle to retain and attract subscribers, Comcast’s late entry is a headscratcher. And then, there is the touchy subject of Comcast’s dismal customer service.
Soon, we will all able to complain about Comcast’s wireless service in addition to their horrible cable and home internet service and there will be more outrageous recordings on the internet of customers trying in vain to desperately cancel their subscription with Comcast’s customer service agents.
Future Wealth’s View
Companies like Comcast are old behemoths who thrived in an age of monopolies. Instead of being an also ran in the wireless market, Comcast should be buying T-Mobile if it wants to be a serious player in the wireless business. Absent that, we believe the current strategy will only exacerbate Comcast’s problems. At Future Wealth, investments we choose for our clients are that of fundamentally solid companies that continue to invest diligently in their core business and grow their revenues, earnings and dividends. Comcast does not fit the profile, in our view.