Insights - OTT Services and the Potato Revolution.
OTT Services and the Potato Revolution.
The term Over-The-Top (OTT) is used to describe a disruptive way and business model for delivering a service directly to end-users, typically bypassing a previously dominant player in the value chain. For the mobile industry, YouTube, BBC iPlayer and Facebook are good examples of OTT services. Albeit well established, OTT is an unfortunately chosen term: for some Over-The-Top implies delivering a service on top of someone else's infrastructure and investment. That is by far not the case, as the following example illustrates:
In 2012, amidst the peak of the Greek economic crisis, desperate farmers protested against how little vendors were willing to pay for their potatoes. So instead of selling them to middlemen at a loss, or letting them rot, they decided to just give them away to people on the street for free.
This action inspired a group of local activists in the northern city of Katerini to set up a website to allow people to order potatoes from local farmers, and then pick them up directly from their trucks in a parking lot on the weekends. People registered in their 100's, soon bulk orders could be regularly placed, and 100's of tons of potatoes were delivered from the field directly to the consumers hands, bypassing the middlemen. The new setup allowed cash-strapped Greeks to buy potatoes at half the supermarket price, and farmers to earn double the amount they were offered from vendors before. The Potato Revolution was born, creating a win-win situation for farmers and consumers. Vendors and supermarkets lost out.
Returning to the OTT terminology, the activists did not use the existing vendor infrastructure and investment (trucks, storage areas, supermarket chains, etc) but delivered a similar service, using the internet. The key was offering the right price, with acceptable user experience. By challenging the value added by middlemen, they forced vendors and supermarkets to make a choice: either adjust their value proposition (price) or stop selling potatoes. The supermarkets adjusted, however the late reaction meant that the potato revolution is still going strong, with olive oil and other produce being added regularly.
The forced choice the supermarkets had to make, is not unlike the dilemma mobile operators face today. Using the ubiquity of the Internet, OTT services are successful in either delivering the value the mobile industry did not previously deliver or simply doing a much better job at it. Much like the Potato Revolution, as soon as disruption happened and the alternative was perceived as workable, there was no way back. OTT Service Providers now believe and see how they could do more. The mobile operator's middleman position has been seriously and irrevocably weakened.
There is a lot of discussion originating from the operator community asking for, and even demanding, new models that reward the operators for their investment. It is highly unlikely this will happen. Instead, the focus should be turned to value creation. The good news is that operators are sitting on massively valuable and under-utilised assets they could use to generate profitable growth. We have recently uncovered such a valuable asset which is now being qualified in a global trial setup.
What can be learned from this discussion? First and foremost: a value chain player is prone to disruption whenever he / she is not perceived to deliver sufficient value. Secondly, when disruption happens, it is better focus on the search for value in the new context, rather than trying to defend a losing position. It is the task of every CEO and his / her executive team to
- create a learning organisation that naturally senses value chain movements
- act promptly to those inputs and lead and provide direction in addressing threats
- distill opportunities from the new context that create increased value for customers
CREDITS & REFERENCES
- Over-the-Top Application (OTT) from Technopedia.
- Greeks ditch middleman to embrace Potato Revolution, BBC coverage.
- O Topos Mou, website of the local activist group that started the Potato Revolution. The site is in Greek.