Free, a radical story turning disruptive (1/3)
Greg Satell points out the definition of disruptive innovation unfolded 10 years ago by Clayton Christensen in The Innovator’s Dilemma: ‘Great firms get disrupted and fail when they got blindsided by a completely new market’. Greg notes that disruption can ‘start with a product worse from a traditional standpoint, but performing better in areas such as price or convenience: a new market would then develop, the new upstarts will serve a different kind of customer that seemed tangential, niche and less profitable to incumbent firms’.
When radical innovation is about technological leapfrogging, disruption brings a new market to the landscape, explains similarly Venkatesh Rao. In other words, the CD is a radical innovation (great technology, same players shoot again, with better margins) while the MP3 is a disruptive innovation (value shift, complete recomposition of the market, incumbent players get disrupted).
I have in mind 2 additional perspectives:
- disruption unveils features that meet deeply ‘social imagineries’, thus funding a solid basis for a new tradition: that’s what managed ‘Champagne’ wine, firstly a disconcerting invention by docteur Jules Guyot, patented in 1844, and then becoming tradition and common language;
- disruptive products involve high sales volumes, reducing manufacturing costs per unit for the new entrant, and leading to fast rising profits: this is precisely the iPhone business case and the Apple exponential margins.
In “four quadrants of innovation”, Hugh Carpenter goes one step more in detail, distinguishing 4 innovation types by crossing market and technological axes as shown below.
Free is a French Internet Service Provider (ISP) set-up in 1999.
For Free, the defining moment to take over the French market is 2002 with the launch of the ‘Freebox’. A few hints illustrate Free’s radical move:
- Freebox is a creative ADSL modem home-designed by Free: it is first presented as a radical new technology giving access to broadband network, bringing the tremendous benefits of high-speed and ‘always-on’ Internet to the subscriber: a radical change compared to former slow PSTN access. Free bundled his powerful Freebox with an agressive pricing, a monthly fee of €29,9 undercutting price competition by half.
- €29,9 established a new plateau for Internet access, and is still a reference in customer’s mind 10 years later. All competitors progressively aligned with this pricing.
- Following Free initiatives led to unbundling from the incumbent operator, thus reducing anxillary access cost, and promoting Triple Play offering: Tiple Play is a combination of three services, Internet, Telephony (VoIP), and Television (IPTV) in one single subscription. Free would hit the nail by keeping the same monthly fee, while empowering its product: adding Telephony (free VoIP calls) in 2003, IPTV channels in 2004, Pay Video On Demand, Personal Video Recorder, and free TV On Demand (Catch-Up TV) over the successive years, Free delivered a continuous trend of innovations.
- Free’s strategy sent a clear and strong message to its subscribers: ‘Free provides you continuously with the latest features, at a constant price’.
Shall Free then be considered as a disruptive innovator?
ADSL and IPTV are stunning technologies which, combined with the infinite resources of the Internet, developed new markets at fast pace: 22 millions ADSL subscribers at the end of 2012, close to the number of French households of 25 millions, and 12 millions IPTV subscribers.
Though Free did contribute largely to shape this market, Free did not disrupt the historical firm, incumbent operator France Telecom.
It was indeed not the only player to surf the ADSL wave, and trigger IPTV usage. Multiple ISPs gave it a try: at peak time, 10 ISPs were commercializing Triple Play on the French market! Some players managed to follow quickly every innovative step accomplished by Free, and became nimble ‘Fast Followers’. Fierce competition ended in market consolidation: Free performed a brilliant market share, more recently with top position in acquisition in 2012, but France Telecom, now rebranded Orange, still holds a lead position.
French ADSL market 2012/12/31 :
Orange : 9 893 000 subscribers, 44.61% market share
Free : 5 364 000 subscribers, 24.19% market share
SFR : 5 075 000 subscribers, 22.88% market share
Bouygues : 1 846 000 subscribers, 8.32% market share
During this period, Free built a strong brand image as innovator, always on edge of most recent technology, and gained to be considered as ‘the best provider for Geek communities’. The offset was unfortunately a perception of ‘Do It Yourself’ service, along with a long-lasting criticized customer care. The common word was: ‘If your Freebox installation works, it’s the best; but if it doesn’t, it can be a real nightmare’. It was all the more upsetting to deal with the customer service that hot-line used to be at premium rate at that time.
The missed rendez-vous of the ‘Smart TV’ ?
Free kept on going on his innovative path, delivering the first Internet-enabled box in 2010, the ‘Freebox Revolution’, turning your TV into a ‘Smart TV’.
‘Freebox Revolution’ is a groundbreaking box providing an impressive range of services on your TV, complementing advanced IPTV services with Internet games and TV apps, a Blu-ray player, a Mediaplayer service connected to home devices, and an Internet Web Browser. It works both with ADSL and fiber networks, going one step further toward lighting speed connections.
A noteworthy focus was made on aesthetic, resulting in a slick UI (User Interface), elegant form-factor, and a futuristic remote-control designed by Starck with gyroscop and accelerometer features, facilitating web browsing and gaming.
Yet, to my opinion, a Freebox is still more perceived as a technical commodity than a personal emotional device such as the iPhone or iPad are: those create a special connection with the user, and furthermore with the Apple brand.
A slight twitch is missing to turn ‘Freebox Revolution’ into THE box.
- Maybe it relies to some extent to the fact that Internet and broadcast TV are handled as 2 distinct worlds in the Freebox experience: there is no sign of blending TV viewing with related content coming the Internet, nor is there aggregation between TV programmes and Internet videos. As Daniel Danker, General Manager Programmes & On Demand at the BBC, puts it: ”Today TV and Internet are completely separate worlds in the Smart TV user experience, and I don’t think that is good enough. It would make more sense if Live TV and Internet TV were brought together’.
- ‘Freebox Revolution’ did not capture the primary social essence of TV. As a matter of fact, Social and enhanced TV experience through the Internet would emerge shortly after, through the phenomena of ‘Social TV and Second Screen‘: these servives display social conversations, extra content, and offering various interactions synchronized with the TV show, through Smart Phones and Tablets.
Having said that, no one has still cracked the code to design a ‘Smart TV’ and make it an unforgettable experience!
No doubt either that it’s not easy to bring people to see an ADSL box as statutory as their Smart Phone or Tablet, or in the next future, their Internet-enabled Watches and Glasses: it lacks a consumer-facing interface. A broadband box is often shelved below the TV set, gets dusty and forgotten, and is not exactly something you show spontaneously to your friends, proudly saying: ‘Hey, have a look at my box!’.
Will it be one day? Don’t miss our next episode on the Free story.
image credits: www.niemanlab.org, innovation excellence, huffingtonpost.fr, www.mac4ever.com, www.trendsnow.net, www.universfreebox.com
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Nicolas is a senior VP at Orange Innovation Group. Serial innovator, he set-up creative BU with an international challenge, and a focus on new TV experiences. Forward thinker, he completed a thesis on “Rapid Innovation”, implemented successfully at Orange, and further developed at nbry.wordpress.com. He tweets @nicobry
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