(ACG-T), a Richmond maker of digital wireless and communications products, filed for bankruptcy protection under the Companies’ Creditors Arrangement Act.
Ascalade – which makes wireless phones and other devices – was one of the bigger players in a B.C. wireless scene that’s been exploding of late, with an ever-increasing number of competitors. While it appears Ascalade’s troubles are bigger than those of its competition, they are emblematic of the sector.
ProblemAccording to president Greg Allen, Ascalade’s board decided to sell the company because it faced cash-flow problems due to “significant operational and business challenges.”
This shouldn’t come as a surprise. The wireless ecosystem for developers is so complex and new it’s a surprise that any of the 200 or so players in B.C. are able to function at all. It’s a Wild West show that’s about as crazy as business gets these days.
The wireless industry in B.C. also suffers from a familiar disease: it’s mostly made up of very small, under-funded companies, many of which are focused on one or two products. Every week new players with a cool idea join the game.
That game is focused on a highly complex marketplace. There are about three billion mobile phones currently in use worldwide, with dozens of manufacturers producing new ones faster than babies. Really. Every second in the world, four new babies are born and 25 mobile phones hit the market. Then there are the myriad operating systems that power those phones, and of course thousands of phone types, each with its particular quirks. Lastly, there are all the different carriers that supply the services that drive cellphone use, each using a different system.
SolutionDoes any of this sound familiar? To some old-timers with memories going back to the ’80s and ’90s, it should. It’s a mirror of the early days of computers. Back then there were multiple companies producing those new marvels, and each decided it needed its own operating system, methods and technologies. It was a potential gold mine and everybody wanted to get their piece. Eventually, Microsoft Corp. (MAFT-Q) and Apple Inc. (AAPL-Q) set standards for software-makers that established some order in the market.
The wireless industry is still in its baby phase, and companies involved in it need to fix on a small piece that supports them until it grows up, says Bill Tam, CEO of Eqo Communications Inc., which brings free instant messaging, cheap calling and cheap texting to mobile phones. Fortunately, he adds, the industry has examples it can emulate: the fixed-line telecom industry, which showed that the telephone can be used to bring extra services such as web access; and the computer industry, which showed how to monetize new technologies.
One way to survive this growth spurt is to go back to old-fashioned strategizing. Although long-tail economics – selling into many tiny markets – is all the rage in business today, wireless-services providers have to concentrate on a few big markets. In wireless the 80-20 rule is all-powerful: 80 per cent of business is going to be done by 20 per cent of the players (actually, when you’re talking about mobile, it’s closer to 90-10). So to survive, a company should design services that work on only a few top-selling models.
“Right now it’s a hard business, and it requires patience,” Tam explains. “But it’s changing and is ready to take off. Of course, as entrepreneurs we’re eternal optimists.”
Lessons• Recognize your constraints. In a business landscape with no rules, you have to be very pragmatic.• Know that it’s always going to take longer. When you’re ahead of the curve, you have to focus on early users and wait for the mass to catch up. • Look outside your own yard. Draw from other industry examples to determine what might happen to you.