Chat apps are cutting into the profits of China Mobile, who blamed their first drop in profits in 14 years on competition from the likes of Tencent’s WeChat messenger (FT, March 21). China Mobile is not the first and certainly not the last major company that will see the landscape changing as a result of consumers’ interests shifting towards platforms with valuable and relevant content, such as WeChat and WhatsApp.
Not only telecommunications companies, but market leaders in every commercial sector are soon going to face innovations like this. We’ve seen the same thing happen before in the music and entertainment industry (Spotify, Netflix), the hotel business (AirBnB) and the transportation market (Uber): startups putting pressure on the profit margins and the ways things are done. It’s a common practice in all of those large industries to blame new companies for decreasing revenue and shrinking margins, although nobody ever told the market leaders they’re not allowed to innovate themselves, to continue to shape the market and to retain their leading role in providing value.
Change is impossible if you believe the rest of the world is to blame for your decreasing revenue and shrinking margins, you need to want to look for the causes of the lack of adaptation in your own organisation. And you need to be bold enough to invest majorly, to change your business model, and in doing so, to say goodbye to some of your revenue and profits in the short term. Doing so might just be the only way to survive in the long run.