Disruptive Innovation: The Engine of Bakrie Telecom

Photo by Hendo101

To create a better life for Indonesians by providing them information connectivity”

Bakrie Telecom (BTEL) is the fourth largest and the fastest growing telecommunication company in Indonesia. Its innovative brands include: Esia, Wifone, Wimode, EsiaTel and SLI Hemat 009. BTEL drives its vision through the concept of disruptive innovation. But what is disruptive innovation? It is an attempt to gain competitive advantages over competitors by introducing new products, services and technologies, or targeting a smaller market. It enables groups of consumers to access a product or service that had previously only been accessible to consumers with higher income levels. In 2004, BTEL has 130.000 customers and now it has almost 13 million customers across Indonesia. So the main question is: How does Bakrie Telecom employ the disruptive innovation concept in its business?

  1. BTEL focuses on the niche market rather than the mass market. At the time BTEL entered the market, the incumbent providers only targeted mass market, middle to higher economic groups. They did not realise how profitable the niche market could be. BTEL grasped this opportunity by targeting middle to lower socio-economic groups of consumers, who were cautious to their telecommunication spending, with three sub-segments: first-time users, switchers, and dual-users. By defining its market specifically, BTEL was able to provide what the targeted market really needed.
  2. BTEL challenged the market with aggressive and innovative pricing tactics. In order to fulfill the targeted market needs, BTEL needs to provide the lowest rate in the market. Therefore, its innovation has evolved mainly through utilising the tariff scheme. BTEL differentiates its pricing policy from the competitors by using a pay-what-you-use concept. With this concept, the rate is calculated on the talk time and length of messages used instead of pulses and delivery. BTEL charges 1 Rupiah (US$ 0.000111582) per second for calls and 1 Rupiah per character for messages. Compared to general pricing policy, this concept is more transparent and simpler. In addition, BTEL requires no monthly subscription fees and provides top-ups in various denominations; this pricing policy enables customers to fully control their telecommunication spending. Hence, this has allowed BTEL to marginalise its competitors, because its pricing policy perfectly matched with the characteristics of the targeted market.
  3. BTEL offers simple and affordable products and services with extra value. This is a very effective strategy because other companies tend to offer products and services that are too good, too expensive or too complicated for the niche market. In addition to low call and message rates, subscribers receive other benefits from a variety of affordable handset bundling packages. BTEL offers the cheapest handset at US$ 25 for monochromatic handset, and US$ 35 for polychromatic handset. However, BTEL ensures that consumers do not equate affordability with low quality products and services; they achieve this by offering a thematic handset that focuses on social networking, chatting, music and even religion. Furthermore, it also provides subscribers with a broad range of services, including: ringtones, restricted outcalls and in-calls, international direct-dialing service, wireless home phone and high-speed data service.

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