Michael Kowalzik never thought he’d be running a successful German technology company when he graduated from INSEAD in 2000. Then again, the products and services he is providing for global companies didn’t exist twelve years ago. He had to invent a whole new business model.
Like most of his colleagues on the INSEAD MBA programme in 2000, Michael Kowalzik wanted to be an entrepreneur. He concentrated on traditional core course modules like finance, marketing and strategy and paid less attention to organisational development. Now, as the CEO of a successful German technology company, he wishes he’d concentrated a bit more on the softer people skills and leadership courses.
“It doesn’t matter what business you are in, it’s about the passion you have to build a business. Of course, you have to have some idea of what the industry is about. Industries you can learn. What you cannot learn is the passion about what you do and how you build a business.” The growth of his company, tyntec, is as much down to the ability to harness the collective intelligence and passion of his team as it is with the ability to generate elegant technological solutions for a changing telecoms market.
The joy of text
In 2003, tyntec was a three-man start-up company in Munich providing enterprise quality SMS to businesses. Until then, telecom operators and industry had seen SMS as purely a consumer play – young people sending texts to organise their social life. They were one of the first companies to see the commercial potential of messaging. By creating a proprietary SMS platform that linked seamlessly with any mobile network, they provided businesses with an unprecedented level of speed, reliability and security. They also gained first mover advantage in the crucial U.S. market providing a European-based solution for major U.S. technology companies.
The company now works for some of the world’s biggest telecom players and provides service to a host of global companies. But for Michael Kowalzik the key to success is creating the space for his Munich-based team to innovate and have the confidence to embrace failure. “We tried to enter into certain markets and it didn’t work; in some markets it did. But we never gave up. It’s about creating a power and a spirit in the people so that they always try it again; and if they failed, we tried again.”
Learning to love failure
Kowalzik acknowledges that Americans find it easier than Europeans to see failure as virtue for an entrepreneur. “Probably over the last nine years running tyntec, 60 percent of new products and ventures that we tried didn’t work. But the 40 percent that did made us as successful as we are. So it’s about trial and error – trying as often as we can until you find an attractive product.”
This approach is not something that he could have learned solely in a lecture theatre because while tyntec still operates in much the same way as a local start up, it is now operating in the global marketplace. Some 140 people work for the company and they operate in over 100 countries. That’s a business model case study that didn’t exist in the year 2000. They’ve had to invent it.
The Internet, cheaper banking and travel were the three main enabling factors behind their strategy. “We can’t put a country manager into each country. Basically the big trick was to apply a lot of the principles that very big global organisations use, but scale it and change it in a way that also works for a small organisation.”
Going over the top
Having established a significant position in the SMS enterprise space, Michael Kowalzik’s team has now turned its attention to a new strategic challenge. Traditional mobile telephony and SMS revenues are under threat from newer, Internet-based OTT alternatives such as Skype and WhatsApp, which come in “over the top” of the mobile operators networks. At the same time, third-party web content and social networking companies such as YouTube and Facebook are making a huge amount of money – and driving high levels of data traffic – over the operators’ fixed and mobile broadband networks. According to a recent tyntec white paper (click here) this could cost the mobile telecom companies upwards of US$160 billion of lost revenue.
Kowalzik’s “tt.One” technology bridges the gap between the telecom world and the Internet world. The clever bit is the provision of “virtual numbers” to the OTT players which allows their cloud-based technology to work seamlessly with all platforms so there’s no need to agree multilateral protocols and roaming agreements.
The virtual numbers game
“Until now, cloud-based technology like this has struggled to communicate with the networks because networks were reluctant to release virtual numbers to the OTT players,” says Michael Kowalzik. The success of their cloud-based solution lies as much in the quality of their established relationships with mobile operators, which is prising the precious virtual number out of them, as in the elegance of the technology. It’s those people skills again.
“We show them that this is a win-win for everybody. I believe the Internet and the telecoms world will merge together. And we will have the power shifting from the mobile telecom companies to the Internet operators then towards the Skypes the Facebooks and the Googles with communication more centralised round these social media platforms.”
He believes the communications industry faces a disruptive and game changing challenge – an increasingly fragmented infrastructure and market. “When you want to roll out such a service in Europe you have to deal with more than 100 mobile network operators – a super fragmented market. Whereas if you’re a Google or a Facebook and want to roll out your service on a global scale with a press of a button that’s what they’re used to.”
The smart money would seem to be on companies like tyntec who can provide a unifying layer of cloud-based infrastructure on top of this super fragmentation which benefits both mobile operators and Internet OTT players. Twelve years ago Michael Kowalzik never imagined that he would be “providing the plumbing” for OTT players to redefine the mobile telecoms industry. But he acknowledges that he would never have been able to achieve what tyntec has achieved without the global mindset that INSEAD gave him.
“We implemented a culture in the company that is about innovation and entrepreneurial spirit. So it’s about trying things you may not be comfortable with.” For Michael Kowalzik experimentation is more useful than case studies. After all, in 2000 there were no case studies for the kind of business he is now running. His cohort of MBAs are having to invent the new business paradigms for the 21st century by going over the top of the established business rules.
This article is republished courtesy INSEAD Knowledge (https://knowledge.insead.edu). Copyright INSEAD 2013.