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Twitter 2.0 | The Huawei Ban
Second Opinion on Elon Musk's Twitter 2.0
In October 2022, tech entrepreneur Elon Musk made headlines when he acquired Twitter for $44 billion. Since then, speculation has been rampant about his intentions for the social media platform. In a recent tweet, Musk provided some insight, stating his aim to provide "Trust as a Service" (TaaS):
We're going to use a Wardley Map to provide a Second Opinion on Musk's strategy and explore what other moves Musk might be making. In short, we think Twitter 2.0 is about to disrupt multiple industries and threaten the survival of many key players.
Current State of Play
Twitter today functions as a near-global public square helping registered users meet a basic human need: To connect with others. Twitter provides the platform that enables users with a digital device (provided very profitably by third party companies) and an internet connection to connect with anyone in the world. This platform relies on commodity-like components delivered as utility services (data centres and electricity supply) and manages its own infrastructure that keeps the site running.

Humans seek to connect with others in order to share knowledge and build mutually-beneficial societies. Social groups need mutual trust to function effectively but trust in modern institutions (governments, businesses, media) is both historically low and counting to fall. Journalists in particular are widely distrusted as many people believe they are actively being lied to by them. Can Musk meet this widespread but under-met need to develop an institution people can trust?

Developing "Trust as a Service" (TaaS) will require Twitter 2.0 to become an honest knowledge broker, which requires radical transparency. Under its previous management Twitter colluded with government to moderate information flows on the platform. Publishing the 'Twitter files' has been an early move by Musk to draw a line under these non-transparent practices, which wrought significant harm the platform's reputation as an honest broker. Musk has also tried to take the concept of radical transparency further by running Twitter polls, where millions of users have been invited to weigh in on company decisions (though Musk hasn't always followed through on the polls' results).

We've added these components to our Wardley Map (below). Note how the technology components that have pre-occupied the media following Musk's acquisition of Twitter are on the right of the map: This means these are specific, commoditised components with a lot of certainty about them, which suggests that issues here are known and solvable but contain little opportunity to build future competitive differentiation on (as they're largely invisible components to the end user). However, the components needed to build TaaS (Trust-as-a-Service) are on the left of the map: This means these are more fluid or transitional components with a lot of uncertainty about them, (which may explain why media is talking about them less). But where there's widespread uncertainty there are also potential sources of future value for those who can tap into them. This is what Musk is trying to do.

Map 1 — Twitter's Current State (high-level)
Cashflow — Upon acquisition Musk fired half of Twitter's workforce to make the company's cashflow positive. The media immediately raised concerns, which turned to outrage about who now would moderate information on Twitter especially under he leadership of 'free speech absolutist' Musk. Negative publicity caused a significant number of advertisers to take a time-out, which fuelled the #RIPtwitter hashtag predicting the platform's imminent collapse due to diminished advertising revenue and having too few staff to run things.

Musk then announced a new, paid subscription service (Twitter Blue) but this was quickly ridiculed as being insufficient to off-set the loss of advertising revenue. However, this move unlocked a new, recurring source of revenue which starts to reduce the absolute reliance on (and bargaining power of) advertisers. If this and other new services, such as e-commerce, helps Twitter 2.0 to keep growing its active users then advertisers are unlikely to stay away for long.

Advertisers — Some companies, especially car manufactures who spend lavishly on advertising, now have an "advertising on a media platform owned by one of our competitors" problem. This is especially acute on social media as Musk's Tesla will more easily be able to gather data about rivals' well researched customer segments and track responses to various campaigns and new products. If this doesn't seem like a problem to you just think how much information your company would be comfortable sharing with competitors about your target segments, customer reactions to your products, campaigns, and even their interactions with you?

Time as a weapon — Twitter's major differentiator from legacy media is time-based and this will be at the heart of its future moves. Twitter 2.0 aims to become both the first and (relatively) most trusted institution to get your news from. Millions of potential content creators around the world, armed with sophisticated digital devices, capture what's happening and publish instantaneously. Yet the time lag in how existing media reports stories (even online newspapers and 24 hour TV news) means 'breaking news' segments that attract eyeballs and the scoops they've built their reputations on will be a thing of the past as Twitter will have been there first. Unless legacy media makes smart counter-moves they'll increasingly rely on Twitter for even more of their content going forward. Amplifying Twitter in this way will drive more traffic to a platform that, with greater TaaS and the ability to engage in two-way dialogue (rather than being passive consumers), will eventually become the legacy media's chief nemesis.
Making Moves
Here are the moves we think Musk and Twitter 2.0 could (and perhaps will) make next:

Content Co-creation — Blue check marks on user accounts previously indicated notable figures (or little known figures from notable institutions) and conferred a sense of authority on these accounts, (even when they were from increasingly distrusted institutions). The new Twitter Blue service now gives anyone who pays for it a blue check mark. This initially led to instances of people and institutions being imitated by others (sometimes with amusing results), which legacy media quickly jumped on to sow further fear, uncertainty and doubt about Twitter 2.0 — lamenting the dangers of allowing just anybody to buy status. But this is a feature, not a bug.

Twitter Blue will attract and amplify those who think they have something valuable to say and are prepared to put their money where their mouth is for the opportunity to win an audience. Twitter will provide these users the tools to post long-form, blog-like tweets and directly embed video content to support their out-reach (rather than linking to external platforms as they do today). In turn, this will enable Twitter to leverage the increased data flows published directly on its platform to develop a powerful (open sourced?) algorithm that will verify (and then amplify) trusted content, using and building on insights from peer-reviewed academic papers and ranking systems on other platforms. Maybe they'll call this something like the 'wisdom of crowds algorithm' to further distinguish Twitter 2.0 from Twitter 1.0 where content was moderated by a small clique of non-transparent actors.

The opportunity for well-informed voices that are outside the (increasingly untrusted) mainstream media will make Twitter the publishing platform of the growing alternative media industry. It also has the potential to make it a real global public square resplendent with real-time applause, heckling and where reputations get made. This will pile further pressure on the ratings and readership of media rivals and lure advertisers away with the promise of ever more eyeballs for each dollar spent.

Land Grab — The other major tech story of late 2022 was the release of the AI product, ChatGPT by OpenAI, which made a record-breaking sprint to 1 million users in just 5 days. This was something of a 'Sputnik moment' for the West — an advance in technology that has so surprised society that the future looks very different. (Notably, the East already had its own AI 'Sputnik moment' back in 2016 when Google's AI — DeepMind — beat the Go world champion).

Musk had been an early investor into OpenAI but is now not a fan. He immediately paused further access to Twitter's data that ChatGPT had partly been trained on, which suggests a few things; the most important being that Musk will make a move in this direction. The moves needed to develop TaaS — creating reliable content, from reliable providers (who will be incentivised) — are part of a land grab to occupy the valuable future real estate of AI. Musk's recent announcement that Twitter would be directly translating and promoting tweets from other countries of the world is part of a move to develop a more 'ethical AI' — one free from many of the biases hard-wired into other AI systems trained predominantly on data from one part of the world and overwhelmingly in one language. Twitter 2.0 and TaaS is a move to create a more trustworthy dataset for AI to train on.

Map 2 — Trusted Content = More Ethical AI
Sapping Rivals — Silicon Valley has taken a "light" approach to harnessing the power of the internet by building apps and platforms focused on connecting people and sharing information, while off-line activities (for example, on the ground logistics) have been left to traditional brick and mortar firms. In contrast, Chinese tech firms go "heavy" by building platforms, but also recruiting sellers, handling goods, running delivery teams, supplying the scooters they deliver on, repairing them and handling the payments for all the above. Musk has also been explicit that "Twitter is an accelerant to creating X, the 'everything' app" — one app for everything you need to run your business and life. If successful this will sap the life out of Musk's many rivals:

  1. First of all, Musk's Starlink — providing cheap satellite internet connectivity — will expand to more countries and disrupt traditional telecommunication cable and DSL providers
  2. Then, Musk's status as a global walking billboard will attract new users to Twitter 2.0 and, as more users, especially from large and increasingly affluent markets join (attracted by real-time content in their own language) advertisers will follow, which will disrupt advertising firms
  3. An improved Twitter direct messaging function — sprinkled with the gold-dust of Musk's 'freedom of speech absolutism' and enhanced encryption — will become a WhatsApp killer
  4. Twitter's launch of video conferencing will do the same to Zoom and Zoom-like rivals as people will have no reason to leave the app to connect directly with others
  5. Users will start seamlessly paying for services through the app using Dogecoin, which will not only threaten ApplePay and GooglePay but, by bringing more of the global unbanked online, it will pose a potentially fatal threat to large, slow-moving banks
  6. With a critical mass of people using Twitter as their main news source legacy media companies will take a bit hit as advertisers will flee to Twitter, (where the eyeballs will be)
  7. Tesla will use the meta-data from these advertisers on its platform to improve the targeting of its own marketing and promotions, helping it out-compete its rivals
  8. And, if the TaaS move really works, and Twitter 2.0 produces 'ethical AI' we may see more people opt to get Musk's Neuralink … at which point we're not in Kansas anymore!

Are these the moves Musk is going to make with Twitter 2.0? He certainly has options and it will come down to how clearly he can articulate them and how effectively his teams can execute (which explains Musk's call for a 'hard core' team willing and able to go on this journey to step forward). The only other thing that can stop Twitter 2.0 becoming the everything app is how well rivals adapt.

It's all to play for. Who is your money on?

If you'd like to have something similar done for your organisation and the challenges you're facing get in touch and talk to us about getting a Second Opinion.

Second Opinion on the 'Huawei Ban'
In May 2019 the United States government designated Huawei — the telecommunications giant — a risk to national security and restricted the Chinese company from doing business in the U.S. What became known as the 'Huawei Ban' ban was later extended to restrict anyone, anywhere from selling Huawei anything that had been designed or made with U.S. technology. This cut Huawei off from using Google Mobile Services and restricted functionality of the Android Operating System, used on all Huawei's mobile devices, which accounted for 55% of their total revenues. Worse still Huawei was now threatened with being cut off from the crucial chipsets all digital devices rely on.

Huawei's CEO estimated the ban would mean that the company would take a $30 billion hit in the first two years alone and they were now in a "life or death" battle. To survive Huawei would need a "war-like strategy" to survive. In this latest of our 'Second Opinion' series we will look at the strategy Huawei deployed and seek out insights other companies — those also finding themselves in the sanctions cross-hairs — can use as a guide through troubled waters.
Huawei's Moves
Where the Western approach to strategy attempts to deliver victory by bringing down the full weight of one's forces against a decisive point, the Eastern approach to strategy focuses more on identifying and executing multiple, simultaneous moves quickly⁠1. This is the approach Huawei took.

Map 1 — Huawei's Strategic Moves (high-level)
1. Attacking Moves (Directed Investments)

A) Huawei's first move was to identify attractive markets that would still be open to its products. Since 2014 sales in Russia (Europe's largest consumer market) had been growing annually at over 50%. Furthermore, Russian consumers don't rely on Google Mobile Services (GMS) as Yandex — Europe's biggest tech company with its own suite of voice, maps, ride-hailing, music and news apps — is Russian. This meant that being cut off from GMS would not be a deal breaker for locals.

B) Russia also offered Huawei a value added extra — an unenviable talent base in advanced maths, science and engineering making the country a great place to "source components and software, develop new technologies, and attract high-quality talent". Huawei had long been cultivating partnerships with Russian universities and research institutes — especially those focused on AI/machine learning, neural networks, and data storage — and even set up their own OpenLab in Moscow. But now, as partnerships with elite American universities were severed and those in other western countries came under pressure, Huawei re-directed $100 billion in R&D funding to Russia, significantly extended its R&D facilities in the country, tripled their staff and trained 50,000 new Russian technical experts. Huawei was mobilising forces to make the second of its key moves — developing viable alternatives to both GMS and the Android OS (Operating System).

2. Ecosystem Moves (Alliances)

A) Industry experts would have considered anyone trying to create a rival to the Android OS and GMS as being on a fool's errand, but Huawei simply had no choice. However, they didn't try to do this from scratch. Instead they moved to incorporate Aurora (a Russian OS developed by Rostelecom, a state-owned carrier) onto their devices. Then, as part of a large scale field test, they supplied the government with 360,000 Huawei tablets pre-installed with the new OS for use in the country's census — announcing Huawei as a genuine alternative to established global players on the Russian market. Importantly Aurora, (like Android) was developed on the open source Linux platform meaning Huawei — with a supporting cast of thousands of highly-qualified and specially-trained Russian engineers — could rapidly develop and deploy its own operating system.

B) Just two years into the 'Huawei Ban' the company launched their own alternative to Android — Harmony OS. But to be useful to end users mobile devices need apps. Cut off from GMS (Gmail, Chrome, Maps) and the Play Store meant Huawei had to develop alternatives. They moved quickly to incorporate Yandex's extensive suite of apps, (including a voice assistant, Celia) and worked with other leading Russian companies (such as those providing popular local alternatives to Facebook (VK) and other widely successful tech companies, like Wildberries and Ozon) to make their Android apps compatible with Huawei's new Harmony OS. But it was Yandex that was he key partner.

C) Together China's leading Telecoms company and Europe's largest tech company developed the Huawei Map Kit, which helped unlock the holy grail for smartphone companies — convincing a vibrant ecosystem of independent developers to build apps for your OS. The Map Kit allowed developers to create apps using Huawei's mapping and location capabilities and this — along with millions in incentives — activated the thousands of developers in research institutes and universities that Huawei had been building relationships with. The result was Huawei's 'App Gallery' (a rival to Google's Play Store with specific regional and language apps) and' Huawei's Mobile Services' (an alternative to Google Mobile Services), which had reached 730 million users by 2021.

3. Positional Moves (Land Grab)

A) Huawei had already been investing in Russia's science and technology base but now moved deeper with a series of more corporate partnerships and acquisitions: A joint venture with Rostec — a state-owned enterprise focused on advanced technology — enabled Huawei to expand its manufacturing and production of smartphones and tablets at a new assembly plant in the Moscow region; they teamed up with Sber (the country's largest bank now re-positioning itself as a tech company) to launch a cloud platform in an attempt to gain ground in country's large, and rapidly growing cloud computing market; and Huawei bundled services with Kasperksy (a globally recognised cyber security firm) to provide security solutions for the cloud both in China and Russia.

B) Huawei, in a deal worth $50 billion, also acquired video surveillance and facial recognition technology patents and the team from a Russian startup — Vocord. While a major partnership with MTS — Russia's leading telecommunications provider — saw Huawei launch the first 5G test zone in Moscow. Although this was not the first 5G test zone in Russia (and Huawei is not the only provider of such network equipment in Russia) this move made Huawei a player in the competitive Russian 5G equipment market. If they can learn how to out-compete their rivals here and be the 'last-man standing' they are in a prime position to take a model of entering and dominating the 5G infrastructure of large developing economies worldwide.

4. Defensive Move (Sale)

Despite the ban Huawei managed to (briefly) surpass its Korean competitor, (Samsung) to become the world's top smartphone maker. But restrictions on chipsets was the killer. Unlike most other players in the market Huawei designed its own chipsets but had to outsource their manufacturing to TSMC. At first the Taiwanese company assured Huawei it would continue to produce their chipsets, but this promise was soon broken as most chipsets are manufactured using US equipment. Huawei was now left without future access to this critical component. Therefore they sold a smartphone sub-brand, (Honor) to another Chinese company, (Shenzhen Zhixin New Information Technology Co) to break their formal link. Honor, now free from sanctions, launched its first 'post-Huawei' phone in early 2021, which was focused on the Chinese market. But the following year launched its Magic 4 series, which included GMS — making it a global competitor.

However, the Huawei Ban continues to spread and (at the time of writing) included more than 1,000 Chinese companies in an non-transparent attempt to hinder China's global digital competitiveness. This has left many companies around the world wondering: "Are we going to be sanctioned next?" So, what has the above map and discussion enabled us to learn from Huawei's moves?

Strategic Insights
Huawei could have retreated into its massive domestic market where the US ban was irrelevant (as Chinese customers don't use GMS) but they saw themselves as a global player. Therefore, they aggressively raised their direct investment in an established market by re-directing resources from markets where Huawei would soon be 'also rans'. Investment was directed into highly-qualified people and they worked collaboratively to turn ideas into technology Huawei needed to survive and thrive. The result of their attacking investments into the right market, people and ideas was not only the rapid development of viable, alternative technologies but also the creation of a model for scaling up in large developing economies that Huawei can deploy globally.

Huawei also needed to completely rethink their approach to sourcing the technology their mobile devices need but they avoided the mistake of attempting to build everything themselves. They utilised the power of open source by building its new OS on the open Linux platform and focused instead on stimulating an ecosystem of developers to act as a massive, out-sourced innovation team. If they had tried to go it alone Huawei's progress would have been slow and even more expensive in the long-run as their propriety technology would have made partners pause to consider (quite legitimately) whether they were getting locked in to a new technology standard they didn't need. But, by using 'open technology' instead, Huawei avoided developers' lock-in concerns and were able to cultivate an active community of international developers creating ever more apps for its Gallery. They are now starting to enjoy positive network effects (the value of their technology increases as more users join) not just in China, but internationally as well — where they want to play.

Huawei also sought to capture future market spaces. They entered the highly-competitive Russian cloud market and will sharpen their gameplay there over the coming years, whilst avoiding direct competition with the American behemoths, (like AWS). But it's in 5G that Huawei is looking to dominate future real estate. Locked out of Western markets (due to fears raised about security) Huawei is looking to also dominate Russia's advanced 5G market. If they can out-compete rivals here they will have a compelling proposition to offer other developing countries who wish to make a large leap into the technological future with a leading utility supplier. The 'Huawei Ban' may have cut the Chinese technology behemoth off from the West but it has led the deepening of Sino-Russian science and technology partnerships. This is enabling Huawei to adapt and develop new propositions by attacking markets, building alliances, making land grabs and strategic divestments. And, like another famous large company from the East who innovated their way out of crisis when their core market crashed, this approach to strategy — focusing simultaneously on multiple wheres in order to uncover new sources of value — has enabled Huawei to not only survive a "life or death battle" but, as we'll see below, to start thriving as well.
Huawei's Future Moves
The Economist reported that Huawei had "run out of stock of its specialist chips in early 2021 and [would] have to scramble to find an alternative [which would] be cumbersome and costly". This would kill its ability to compete in the mobile device industry. But, as we saw above, Huawei is focusing instead on 5G, cloud and also the Internet of Things (IoT) — technologies that do not require the most advanced chipsets. This is why, despite the dire predictions, Huawei returned to the global stage in March 2023 as the biggest exhibitor at the Mobile World Congress in Barcelona. Huawei had to work around multiple U.S. Trade sanctions and get through three years of COVID restrictions that had hindered its global ambitions, but now they are back, with cloud services and 5G technologies and are "set on wooing customers from Europe, Latin America, Africa and other Asian countries — in other words, anywhere but the U.S.".

Pivoting from their massively popular mobile devices to cloud services and 5G communications for corporate clients is the 'new normal' for Huawei — if the world deals you lemons, make lemonade. Huawei still has a long way to go to play catch up in the cloud, especially against the leading U.S. Players, but the Chinese are positioning themselves as the default alternative for large economies under the threat of sanctions. But in 5G Huawei is now the global leader. They have moved from merely selling 5G base stations to telecom carriers into a newer, growth market of using 5G technology to help companies go digital and "the opportunities in B2B are significantly larger than the B2C stuff". For example, Huawei has set up a mining business group dedicated to using 5G technologies to automate mines meaning they are differentiating their offerings around the services they provide making it increasingly difficult for others to compete on the technology itself, which is increasingly an invisible enabling component end users care little about.

Going forward "Latin America and Africa will be key markets" for Huawei as they look to leverage their experiences in a non-western economy like Russia's. But it's Huawei's dominance in 5G and IoT that will enable the company to also occupy the key future landscape of 'smart cities' — a destination many cities globally are striving for. There is move around the world to designing cities with technological components that can help solve the problems of residents. Those cities in the Global South, with few legacy investments can jump straight to the next horizon — like Kenya did with smartphones. This looks like a major move for Huawei going forward.

Perhaps the most intriguing path in Huawei's future though is connected to those dire predictions from the likes of the Economist about China being cut off from the most advanced chipsets and needing to scramble to find alternatives, which would take a long time. Recently, some reports suggest that China has already "figured out how to make 7nm [advanced] chips" — and may have done so as early as 2021 — and they're well on the way to achieving a ""true 7nm process" that includes both scaled logic and memory bitcells". Some are even expecting developments in 5nm chips by 2024-5. China is also now "leading the world in building new chip factories, a step toward achieving more self-sufficiency in semiconductors that could eventually make some buyers reliant on China for many of the basic chips now in short supply." This suggests Huawei with soon be immune from crippling effects of US sanctions.

Not only did Huawei pivot into 5G and cloud, which has opened up options for it in the areas of smart cities and digitally-transformed organisations, but they have not closed the door to re-entering the mobile device market either. With Honor able to access advanced chipsets and able to run on either Android or Harmony OS, using either Google Mobile Services and the Play Store or Huawei's Mobile Services and App Gallery there is little to prevent them going after their share of the global market. As the U.S. government continues to sanction economic around the world there is likely to be more large captive (and rapidly developing) markets that could be keen on an alternative to the U.S. digital world. At this point, depending on how China wants to play the game, they could also flood the market with 14nm+ chips that their large chip foundries are producing to commoditise this segment. This would bring prices down globally and cause massive downward pressure on the share price of U.S. chip makers like Intel. Could this ultimately be Huawei's revenge — served cold?

If you'd like to have something similar done for your organisation and the challenges you're facing get in touch and talk to us about getting a Second Opinion.

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