The Drum Awards for Marketing - Extended Deadline

-d -h -min -sec

Google Technology Huawei

Huawei, Google and the operating system Armageddon: what it means for marketing

By Nick Fawbert, Founder

May 23, 2019 | 11 min read

If you think that Huawei’s conflict with the US government over Android OS licensing for mobile phones is a peripheral issue for marketing in Asia, you may have another thing coming.

Google Huawei

Sure, Huawei represents the salutary tale of a market leader that built their fortune on a vulnerable supply chain (a nightmare in its own right), but it also impacts on consumer engagement for every brand with a digital channel.

Marketing transformation is a hard enough game to play when we’re trying to navigate the commercial transition from simple marketing communications to digital supply chain management, but when the ecosystem itself is under attack it feels like there is no firm foundation on which to build.

If you’re still grinding out branding campaigns whilst your retail teams carry out the heavy lifting on sales, then you may have some breathing space. You should count your blessings while you can.

For progressive practitioners taking the opportunity to exploit the entire marketing mix to drive top-line growth, then the conflicts that threaten mobile communications and commercial platforms used by hundreds of millions of customers can have an immediate financial impact.

A Clear and Present Danger

Huawei has waved off the threat of US government-imposed restrictions on Android by revealing a cunning plan to deliver their own Operating System (OS), but this entirely misses the point.

Mobile OS wars are an assault on the underlying methodology of modern digital marketing.

If entrepreneurial innovation is the lifeblood of the digital era, then marketing teams are reliant upon the ability of small, agile, low-cost teams to generate ideas that we can take to market, test and iterate.

‘Fail fast’ is only a comfortable mantra when the cost is insignificant.

When operating systems come under attack and markets fragment, when teams find themselves designing multiple solutions for conflicting platforms and costs start to escalate, we have an issue with our geese and their golden eggs…

Counting the Cost

Whatever your industry, Huawei owners are likely to constitute a big proportion of your customer base. Shipping almost 60 million handsets a quarter, offering exceptional quality at low cost, Huawei boasts second place in the mobile handset marketplace. It offers an installed base of hundreds of millions of users worldwide – with around half of them in China.

That’s a lot of consumers whose primary interface with the outside world is the Huawei phone in their pocket.

Google’s announcement of service restrictions on Huawei undermines their customers’ confidence in mobile security through update delays, a potential loss of connectivity for Google-powered services like email, and a hard stop on Google facilitated services like interactivity and entertainment through App downloads in Google Play.

Like economic gravity, collapsing confidence stymies growth.

US government restrictions represent not only a stranglehold on Huawei but a vice-like grip around mobile trade for hundreds of thousands of brands globally.

The marketing industry needs a plan of their own.

Trust Matters

The marketing industry won’t like being a dog on a choke chain to an impulsive US administration whose parochial political philosophy seems at odds with the global values the industry holds dear.

After the initial announcement was timed to create maximum damage to Huawei’s 5G strategy, the follow up offered a 3-month breather as a gesture of goodwill.

But the damage is done.

The industry now knows that the US government is willing to impose catastrophic penalties on the marketing industry by dint of collateral damage in its global trade war, and trust is the biggest victim.

OS wars threaten a loss of trust that changes the risk factor when looking ahead – and that alters the cost of capital.

Finance Matters

Whatever your marketing strategy, it is budgeted against future returns.

OS wars increase costs and risk, and that means that Finance departments start factoring that into their forward planning.

It affects a figure known as ‘discounting’ – the amount that forecasted future revenues are reduced in order to accommodate risk.

The higher the discount figure, the less return the company anticipates receiving, and the lower the return, the lower the budget.

Add in an increased cost base for multiple OS platforms development and the noose starts to tighten.

OS wars threaten marketing budgets.

Future Matters

It is potential ownership of new 5G networks that triggered the crisis and represents the largest future risk.

Mobile commerce growth has tracked hand-in-hand with access to new technology, and 5G represents the best yet in terms of connectivity and flexibility.

In the UK it has even driven conflict around lampposts.

It isn’t about a canine pissing contest (although the analogy is strong), it is about access to public street furniture to install network equipment.

The conflict is over money: street furniture owners such as local councils want their share of the 5G revenue, and they’re fighting tooth and nail through the courts to get it.

Dominating 5G is seen as owning the ‘final mile’ when it comes to mobile commerce, and that’s perceived to be a cash cow.

While governments may be legislating to ensure competition, big telcos and hardware suppliers want ownership, and the US government (it seems) want that cash for US companies.

The outcome of that battle will ripple back to brands and their customers through access and distribution costs.

OS wars threaten the supply chain.

Response Matters

How governments and suppliers respond to this situation is critical.

Trust can be repaired, and a change in the attitude of the US administration to a more inclusive approach may allow the industry to shake off this temporary indulgence like a bad hangover.

But the temptation to protect against repetition or future damage may trigger defensive responses in regional markets.

Huawei’s announcement of a secret OS is an example of this and may result in a cascade of industrial activity designed to ensure this problem cannot happen again.

If OS wars result in fragmentation, it’s a risk for the entire industry.

Insurance Matters

In the end, the marketing industry can only play the cards it has.

Marketers need to look at internal strategies to accommodate the risk and insure against future threats. The most powerful insurance against risk is foresight.

Two figures are critical: customer lifetime value and discounting.

Marketers who know what their customer assets are worth and the risk to those revenues represented by discounting are best placed to weather the storm of debate over budgets and outcomes in industry boardrooms.

These are interesting times, and whatever the outcome of OS Wars the winners will be marketers who understand their role within the organisation and leverage the insights, competence and flexibility to drive growth despite market volatility.

Nick Fawbert is the founder of Mutiny Asia.

Google Technology Huawei

More from Google

View all

Trending

Industry insights

View all
Add your own content +