Siphoning Value

Is your company focused on creating value — or on siphoning it off from others? Capturing value from other stakeholders by manipulating the competitive market process to the company’s advantage exposes a company to reputational or legal risks. It also can undermine corporate values. Value extraction is typically easier than developing a competitive advantage through ongoing value creation. Companies can get hooked on the practice, to the detriment of real value creation.”
Paul Strebel and Salvatore Cantale
on Sloan Review.

The article in the link above goes on to say, “To use a metaphor, if value creation increases the size of the pie and value capture enables companies to get a slice of that pie, value extraction involves obtaining a larger slice by manipulating the process for dividing up the pie.”

As we all know, the Telco industry is undergoing major structural shifts. Market caps and revenues are on the wane (generically speaking). So are project budgets. Has Telco spending (and OSS spending by association) already seen its glory days?

Conversely, like most boards, the boards of OSS vendors and solution integrators (SIs) expect to see revenue growth. Sadly, this often comes through vendors and SIs siphoning value from CSPs (or vice versa). It comes in the form of contract variations, failure to deliver on obligations or just failure to establish any tangible business benefits from the time and effort invested. Sometimes it’s the OSS project that siphons value from both sets of organisations.

When structural shifts have torn other industries apart, we have often seen dominant organisations emerge through clever, disruptive business models. Over the coming days, I’m going to provide some alternative perspectives on how OSS can create, rather than siphon, value from the Telco industries upon which they rely. I hope you can join me.

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