Faced with the emergence of the motor car, every smart early-20th-century blacksmith had to ask himself three questions: How many of my customers will trade their horses for cars? How soon? And should I fight, adapt, or admit defeat? The pace of innovation at the start of the 21st century means that similar dilemmas now confront many industries—and none more so than Europe’s landline telephone-operating business. How many of its customers will trade landline for mobile telephones? How soon? And what should be the industry’s response?

Fortunately, dynamic simulation modeling should make it possible for managers to frame and pursue winning strategies by experiencing the future before it really happens.

Upward mobility

If mobile operators continue to penetrate European markets at the current staggering rate, by the end of the year 2000 at least half of the population in most of them will have at least one mobile telephone. If current growth rates were to continue, mobile penetration would reach the saturation point within two or three years (Exhibit 1).

The eventual result—declining growth in demand for handsets—is only one of the problems mobile operators face. Intensifying competition is another. Regulators are granting licenses to start-ups and opening existing...