Thursday, February 10, 2005

Hope for Innovation

About seven years ago, my family was tackling a home renovation project. My “insider” knowledge, then as an AT&T employee, influenced my decision to use only CAT-5 (Category 5 UTP used for connecting computer networks) wiring for all the telephone connections in the house. This was an innovative move, I thought, because the CAT-5 transmission speeds would be faster and the voice connection clearer. The veins of wire stretching out behind the walls of each room were demonstration of my preparedness for the future of voice and data transmission, and AT&T was going to bring the future to me.
However, after the drywall was up and the telephones were plugged into their jacks, nothing different really happened. The phones rang whenever someone called us, and there was always dial tone when I wanted it. The future of communication was a bit elusive then, and now SBC’s ( $16 billion bargain purchase of AT&T ( makes me wonder who will shape the future of the industry.
The value of the future is perception.
When it came time to sell our "wired" home, the technology behind the walls was a special feature of value. And, we were convinced that the technology angle and positioning the house as being one step closer to the future was what lured the buyers and closed the deal.
Apparently, Wall Street analysts and the boards of AT&T and SBC seem to be in the market for a similar home: one with all the technological piece parts and market power that offer hope for the industry’s future.
The hope AT&T offered was bright and continuously regenerated. However, the company’s hope and continuous innovation was only a veil over Ma Bell’s dimming eyes. The technological future for consumers, positioned always within reach, was an emotional concept that fueled the power of the AT&T brand. No one could capitalize on building the positive public perception of a company’s innovative capabilities like AT&T.
The impact created by AT&T with the transistor, the laser, the recording of sound and the transmission of digital voice and video are still rippling around the world. AT&T’s public relations machine relentlessly leveraged every opportunity to build equity into the brand with each successive announcement. Today, the national media report on AT&T as if it always existed, a testament to its brand power. In fact, the formal launch of the brand began after the U.S. Federal Court-ordered mandate to break up the Bell System monopoly in 1984. Since then, the AT&T brand has captured the essence of innovation, customer service, honesty, quality, reliability and ubiquity. The list could go on.
Nonetheless, while the AT&T brand was growing stronger, its operations were crumbling and its profits were declining. A monopoly must be inventive or face a losing battle of market share. Behind the hard work of innovation, was AT&T’s lack of velocity to be first in the marketplace with its product or service. Its heritage was rooted in a monopoly mentality that moved much slower than its ability to create expectation. Sprint was first to build a complete digital network and MCI’s Friends & Family calling plan stumped the market leader. However, a blockbuster AT&T product or service announcement every now and then backed by gargantuan public relations and marketing machines, continued to propel its public prowess. Yet, on Wall Street, its financials still communicated doubt, while through a series of acquisitions and spin-offs it strived to communicate hope for the future. The public’s perception continued to reflect belief in AT&T’s promise of hope, while investors gradually placed their bets elsewhere.
Now, AT&T’s hope is for sale, and its sale is pending. The purchase of AT&T and its lucrative base of business customers will help fund SBC’s battle with the cable industry over residential customers. SBC seems to be offering hope for the future of communication through acquisitions, while failing to bring forth any innovation of its own.
The closing date on this purchase is at least a year away. Expect distractions to consume both parties while consumers continue looking for an industry leader that will deliver on its promise for the future. SBC is fooling only itself if it does not quickly leverage the still effervescent power of AT&T and demonstrate to the public that its brand attributes are still relevant. If not, it leaves wide open the door of opportunity for real innovators in the communication industry to fill the void created by a toppling icon.