Date post: | 04-Dec-2014 |
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VisionMobile@visionmobile
Apigee@apigee
Andreas Constantinou@andreasconBala Kasiviswanathan @BalaK
Economic Models for Reinventing Telco
Telco Innovation with APIs
@BalaK
@VisionMobile@apigee
@andreascon
groups.google.com/group/api-craft
slideshare.net/apigee
youtube.com/apigee
How should Telcos deal with the challenges of today’s ecosystems-driven competition?
The new basis of competition
The asymmetric business models
The price of doing nothing
The modular telco
How telcos can leverage ecosystems
Agenda
A New Playing Field for Telcos
The new rules of the game in mobile
mobile computing
750,000+ apps(encompassing all user needs)
telecom
4 apps(phone, text, contacts,
camera)
new & unpredictableproven & predictablebusiness models
share of needs,attention & wallet
basis of competition
choice & flexibilityof services
reliability & scaleof networks
Source: VisionMobile
servicedistribution mobile platformstelco
The domino effect in the telecom industry
Handset OEM
VAS
Vo
ice
and
SM
S
iOS, Android broke the walls of
walled gardens
apps challenge telco core services
hundreds of thousands of apps replace telco VAS
1
23
Source: VisionMobile
OTTs compete with telcos for control, not for profits
Content
Distribution
Connectivity
Screen
User
Access
Devices
Ads
softwarelicensing
retailing
Ads
denotes company’s core business
OTT competition with telco is asymmetric
ComplementOTT products
Telcos cannot compete with OTTs – they are in a different business
high-speed mobile Internet access
Consumer electronics, on-line advertising, e-
commerce…
ComplementCore product
A product consumed
with the main product
A product where a business generates
profits
asymmetry
asymmetry
API Team
AppUser
App Developer API
The developer is the key in the app economy
Systems
App Consumer
The 5 ingredients of a successful ecosystem
14
Source: HBR, “Innovation Killers”How Financial Tools Destroy Your Capacity to Do New Thingsby Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih
Traditional financial tools fail predictably in the conditions of uncertainty
1. select wrong projects due to fundamental unpredictability
15
Source: HBR, “Innovation Killers”How Financial Tools Destroy Your Capacity to Do New Thingsby Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih
Traditional financial tools fail predictably in the conditions of uncertainty
1. select wrong projects due to fundamental unpredictability
2. disregard cost of doing nothing
16
Source: HBR, “Innovation Killers”How Financial Tools Destroy Your Capacity to Do New Thingsby Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih
Traditional financial tools fail predictably in the conditions of uncertainty
1. select wrong projects due to fundamental unpredictability
2. disregard cost of doing nothing
3. marginal costanalysis is biased
against investmentsin new capabilities
Now the good news -
mobile is a booming market
… but telcos need to re-invent themselves
5
Before Structure: the singular telco
•Optimised for reliable delivery of few connectivity services at large scale
networkdistribution and retailtelephonymessagingbillinguser identityauthenticationconsumer intelligence
large scale99,999% reliability
1
2
3take-all-or-nothing: services are tightly coupled to the network
Designed as a connectivity business with high CAPEX and OPEX
Source: VisionMobile
After Structure: the modular telco
Services business
Connectivity business
Distribution business
Profit pressure due to “prisoner's dilemma”
Disrupted by alternatives withasymmetric business models
Untapped potential
Source: VisionMobile
4
Before Ecosystems approach: compete
Legacy telcos compete with platforms head-on
e.g. LiMo, Vodafone360, RCS-e
AfterEcosystems approach: leverage
The modern telco leverages ecosystems
foster innovation
diversify into new customer base & businesses
subscriber loyalty
drive usage
3
BeforeInnovation focus
Legacy telcos innovate in networks:
EDGE, WCDMA, HSPA, HSPA+, LTE, LTE-Advanced
AfterInnovation focus
Modern telcos add value to ecosystems beyond access
e.g
local presence
digital / physical distribution
consumer insights
user ID
billing, voice APIs
2
Before Developers
Legacy telcos see developers as a source of revenue
high barriers to entry
stringent processes
lock-in relationships
risk transfer to developers
After Developers
Modern telco:
Developers are value-added resellers
Apps are shops
APIs are contracts
1
Before Voice
Legacy telco sees voice as telephony
Based on 19th century assumptions on technology
and user needs
After Voice
feature phones smartphones web
voice = device voice = app voice = API
Modern telco sees voice as API
“I think, as a general rule, most of us are in markets that are booming. They are not in decline.
Even the newspaper business is in a growth industry. It’s not in decline. It’s just their way of thinking about the industry that is in decline.”
Clayton ChristensenProfessor, Harvard Business School
telecom
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