None of the incumbant telecom providers has put into place any Blue Ocean Strategies. Blue Ocean Strategies have made the Circus, Wine, Gaming, Airline, etc. industries exciting again, so why not apply it to the telecom market. The only telecom players, I know of, that implemented some blue ocean strategies are Free in France, GiffGaff in the UK and Freedompop in the USA. So why not do a Blue Ocean Strategy exercise in this blog post.
Here is my strategy canvas:
Traditional operators focus on charging heavily for calls and SMS although lately more and more packages with free minutes are available. International calls however are still charged extremely expensive. Mobile phones are subsidized up to 24 months and as such you need to stay with them for at least this period. Operators spend a lot of their money investing in the roll out and maintenance of their networks. They also have very complex pricing plans and as such need heavy investments in BSS.
MVNOs try to compete on price and most often do not subsidize mobiles. They do not have their own network as such they do not need to invest in it. They offer less tariff plan options. You are often free to change whenever you want. To make up for not subsidizing mobiles, you can get mobile loans which means you have some sort of permanence.
So how would Blue Ocean Mobile do it differently?
In line with Free’s example, call costs should be eliminated, including international costs. Mobiles should not be subsidized but cheap mobile loans should be offered for those that do not bring their own device [BYOD]. Blue Ocean Mobile should focus on LTE and try to win LTE licenses. However instead of doing heavy investments in installing antennas everywhere, Blue Ocean Mobile should only install antenna’s in those areas where few people live but connectivity is required, e.g. major highways. This is in line with Free’s strategy. However unlike Free, the operator’s network should not be built with unreliable WiFi hotspots. Instead specially designed “Personal Antennas” should be sold to everybody who wants one. What is a personal antenna? A personal antenna is a nanocell LTE antenna. A personal LTE antenna in your home that not only gives service to you but also to neighbours and people close to your home. The idea is that you become a sort of mini-LTE ISP to which others can connect. For every KB that gets transferred through your personal LTE antenna, you will get a revenue share. So it is in people’s interest to put the personal antenna in a place where it can service a lot of people and to have a good backbone Internet connection. People should be able to win back their investment in the Personal Antenna in a few months and make money afterwards. This should allow Blue Ocean Mobile to seriously lower their investment in rolling out an LTE network and to get free mouth-to-mouth advertising. Via a software-defined network [SDN] management system all nanocell LTE antennas are controlled by Blue Ocean Mobile.
Since Blue Ocean Mobile is focusing only on data traffic, it should work together with “over-the-top players” to offer a compelling list of services. Ideally Android Phones and the iPhone will use the data network for calling others instead of a circuit network. Customers should have a full range of BYOD management options so small and medium-sized businesses can easily manage the phones of their employees as well as push enterprise applications towards them.
Blue Ocean Mobile should also try to avoid investment in BSS. Tariff plans should be easy with the customer defining how many free megabytes they want to purchase for a fixed monthly fee and a simple extra charge for overage. So instead of operator defined tariff plans, everybody has a personalized tariff plan that they can adjust every day. Calls and SMS are charged based on data traffic not on per minute charges. VoIP solutions is the standard. Blue Ocean Mobile does not have a circuit network or SS7.
Blue Ocean Mobile is also copying the long tail support from Giff Gaff in which customers give support to other customers and are responsible for marketing. Unlike Giff Gaff not only prepaid but also subscriptions are supported. Like Giff Gaff customers get a revenue share when they participate in support or marketing.
Blue Ocean Mobile’s strategy is just very high-level and still needs in-depth analysis but it is an open invitation for innovative people to start applying Blue Ocean strategies to anything they feel in need of disruption.
Maarten Ectors is a senior executive who is an expert in applying cutting edge technologies (like Cloud, Big Data, M2M, Open Hardware, SDN, etc.) and business innovations to generate new revenues. He is currently looking for new challenges. You can contact him at maarten at telruptive dot com.
LTE roll-outs are taking place in America and Europe. Over-the-top-players are likely to start offering large-scale and free HD mobile VoIP over the next 6-18 months. Steeply declining ARPU will be the result. The telecom industry needs new revenue: telecom revenue 2.0. How can they do it?
1. Become a Telecom Venture Capitalist
Buying the number 2 o 3 player in a new market or creating a copy-cat solution has not worked. Think about Terra/Lycos/Vivendi portals, Keteque, etc. So the better option is to make sure innovative startups get partly funded by telecom operators. This assures that operators will be able to launch innovative solutions in the future. Just being a VC will not be enough. Also investment in quickly launching the new startup services and incorporating them into the existing product catalog are necessary.
2. SaaSification & Monetization
SaaS monetization is not reselling SaaS and keeping a 30-50% revenue share. SaaS monetization means offering others the development/hosting tools, sales channels, support facilities, etc. to quickly launch new SaaS solutions that are targeted at new niche or long tail segments. SaaSification means that existing license-based on-site applications can be quickly converted into subscription-based SaaS offerings. The operator is a SaaS enabler and brings together SaaS creators with SaaS customers.
3. Enterprise Mobilization, BPaaS and BYOD
There are millions of small, medium and large enterprises that have employees which bring smartphones and tablets to work [a.k.a. BYOD – bring-your-own-device]. Managing these solutions (security, provisioning, etc.) as well as mobilizing applications and internal processes [a.k.a. BPaaS – business processes as a service] will be a big opportunity. Corporate mobile app and mobile SaaS stores will be an important starting point. Solutions to quickly mobilize existing solutions, ideally without programming should come next.
4. M2M Monetization Solutions
At the moment M2M is not having big industry standards yet. Operators are ideally positioned to bring standards to quickly connect millions of devices and sensors to value added services. Most of these solutions will not be SIM-based so a pure-SIM strategy is likely to fail. Operators should think about enabling others to take advantage of the M2M revolution instead of building services themselves. Be the restaurant, tool shop and clothing store and not the gold digger during a gold rush.
5. Big Data and Data Intelligence as a Service
Operators are used to manage peta-bytes of data. However converting this data into information and knowledge is the next step towards monetizing data. At the moment big data solutions focus on storing, manipulating and reporting large volume of data. However the Big Data revolution is only just starting. We need big data apps, big data app stores, “big datafication” tools, etc.
6. All-you-can-eat HD Video-on-Demand
Global content distribution can be better done with the help of operators then without. Exporting Netflix-like business models to Europe, Asia, Africa, Latin-America, etc. is urgently necessary if Hollywood wants to avoid the next generation believing “content = free”. All-you-can-eat movies, series and music for €15/month is what should be aimed for.
7. NFC, micro-subscriptions, nano-payments, anonymous digital cash, etc.
Payment solutions are hot. Look at Paypal, Square, Dwolla, etc. Operators could play it nice and ask Visa, Mastercard, etc. how they can assist. However going a more disruptive route and helping Square and Dwolla serve a global marketplace are probably more lucrative. Except for NFC solutions also micro-subscriptions (e.g. €0.05/month) or nano-payments (e.g. €0.001/transaction) should be looked at.
Don’t forget that people will still want to buy things in a digital world which they do not want others to know about or from people or companies they do not trust. Anonymous digital cash solutions are needed when physical cash is no longer available. Unless of course you expect people to buy books about getting a divorce with the family’s credit card…
8. Build your own VAS for consumers and enterprises – iVAS.
Conference calls, PBX, etc. were the most advanced communication solutions offered by operators until recently. However creating visual drag-and-drop environments in which non-technical users can combine telecom and web assets to create new value-added-services can result in a new generation of VAS: iVAS. The VAS in which personal solutions are resolved by the people who suffer them. Especially in emerging countries where wide-spread smartphones and LTE are still some years off, iVAS can still have some good 3-5 years ahead. Examples would be personalized numbering schemas for my family & friends, distorting voices when I call somebody, etc. Let consumers and small enterprises be the creators by offering them visual do-it-yourself tools. Combine solutions like Invox, OpenVBX, Google’s App Inventor, etc.
9. Software-defined networking solutions & Network as a Service
Networks are changing from hardware to software. This means network virtualization, outsourcing of network solutions (e.g. virtualized firewalls), etc. Operators are in a good position to offer a new generation of complex network solutions that can be very easily managed via a browser. Enterprises could substitute expensive on-site hardware for cheap monthly subscriptions of virtualized network solutions.
10. Long-Tail Solutions
Operators could be offering a large catalog of long-tail solutions that are targeted at specific industries or problem domains. Thousands of companies are building multi-device solutions. Mobile & SmartTV virtualization and automated testing solutions would be of interest to them. Low-latency solutions could be of interest to the financial sector, e.g. automated trading. Call center and customer support services on-demand and via a subscription model. Many possible services in the collective intelligence, crowd-sourcing, gamification, computer vision, natural language processing, etc. domains.
Basically operators should create new departments that are financially and structurally independent from the main business and that look at new disruptive technologies/business ideas and how either directly or via partners new revenue can be generated with them.
What not to do?
Waste any more time. Do not focus on small or late-to-market solutions, e.g. reselling Microsoft 365, RCS like Joyn, etc. Focus on industry-changers, disruptive innovations, etc.
Yes LTE roll-out is important but without any solutions for telecom revenue 2.0, LTE will just kill ARPU. So action is required now. Action needs to be quick [forget about RFQs], agile [forget about standards – the iPhone / AppStore is a proprietary solution], well subsidized [no supplier will invest big R&D budgets to get a 15% revenue share] and independent [of red tape and corporate control so risk taking is rewarded, unless of course you predicted 5 years ago that Facebook and Angry Bird would be changing industries]…
Over-the-top players are better at understanding how people communicate. New disruptive solutions can undermine traditional enterprise solutions, e.g. PBX versus virtual PBX. Mobile network disruption is possible, e.g. White spaces. Data is exploding due to mobile Internet and especially mobile streaming video. Unknown players in the telecom space 5 years ago are now dominating the industry, e.g. Apple and Google. ARPU’s are melting faster than snow in the sun. IP requires new skills compared to circuits.
All these problems result in one need for telecom operators: new revenues. However existing telecom providers see a more lucrative market in deploying the next generation of network technology: LTE.
If operators want everybody to understand that their new priority is generating new revenues then they need a new term for it. My proposal: telecom revenues 2.0.
Why is it important to have a new term?
Lots of telecom suppliers still think that by virtualizing their existing solutions, e.g. VAS, or by selling some “innovative” rich communication suite that is 3 years behind OTP offerings, they can offer new revenues for the telecom industry. Unfortunately Joyn and other similar solutions are too few too late to make a real difference. We need a lot bolder solutions if telecom operators want to be more than bit pipes. This is where telecom revenue 2.0 identifies those solutions that can bring a new beginning to the telecom industry. It will also clearly identify where R&D budgets should be spend. That is if telecom operators clearly tell their providers that telecom revenue 2.0 will be their second biggest destination of investment after LTE. Operators that think that revenue share will automagically being them telecom revenue 2.0 should think again. Dotcoms are not getting money from Venture Capitalists if their revolutionary service involves telecom operators. The reason is that telecom operators are seen as too difficult to work with and too greedy when it comes to revenue sharing. Investment either in joint R&D or seed capital are needed if telecom revenue 2.0 is to become a reality. The alternative is clear: shrink and be happy to survive as a bit pipe….
Today Friday 13th August 2014, the conglomerate Ericsson Nokia Siemens Alcatel Lucent Networks has filed for bankruptcy protection.
How can it be that only 2,5 years ago the conglomerate consisted of three companies that were employing tens of thousands employees each? Bad management was not the reason for the downfall. Each company was professionally managed and was trying to provide solutions its customers asked for. Their major business was delivering LTE (5G) networks to telecom customers all over the world.
The downfall initiated at the end of 2012 when their customers started to massively launch LTE networks. Subscribers in 2013 noticed that with the new LTE network calls and SMS could be substituted by free VoIP and instant messaging. All of a sudden telecom revenues started plummeting. To make things worse HD digital content distribution moved from broadcasting to streaming, putting heavy loads on the new networks and the associated costs onto network operators. By switching off digital broadcasting, spectrum all of a sudden became less expensive, triggering major accounting adjustments. Several operators went into panic mode and started large-scale consolidations and cost cuts. This triggered a consolidation between the three major telecom solution providers.
Operators never requested their solution providers to help them build new revenue generating solutions until it was too late. Operators were asking for faster, easier to manage and cheaper networks instead. As a clear example of the Innovator’s Dilemma, telecom solution providers focused on what customers requested, not on what customers really needed.
For the telecom industry IP communications, Cloud Computing, Smart Phones, Tablets, Content Streaming, Social Networks were all disruptive innovations that changed the status quo completely and faster than anybody in the industry expected. Consumers changed their behaviour faster than telecom providers anticipated. Dotcoms, then also called over-the-top-players, were a lot more agile than operators and telecom solution providers.
After the introduction of LTE, also the complexity of the telecom industry changed. For the first time networks no longer had services entangled in obscure protocols. Standardized web technology could be used which massively invited IT players to enter into areas that used to be the exclusive playing field of telecom solution providers. Ericsson Nokia Siemens Alcatel Lucent Networks had a company structure build around complex proprietary-standards and solutions. When these could be substituted by off-the-shelf standard-based solutions, services daily prices got divided by four. This rendered the existing players uncompetitive virtually overnight.
February 2012: This post is fictional but unless telecom solution providers start asking their customers how they will generate new revenues with LTE, nothing will stop it from happening…
After speaking with several cloud telephony startups, it looks like telecom operators are like stamp vendors in a world of email dominance. The Innovator’s Dilemma seems to be claiming another victim soon.
CxO’s in existing telecom operators should be really worried. The major telecom cashcows are in danger. Calls and SMS will be substituted by apps like Voxtrot, Skype, etc. Access networks will be under extreme load when heavy smartphone, tablet and M2M usage will become mainstream. Also aggressive bitpipe LTE providers can have a Ryanair effect on the telecom world. Finally business solutions like PBX, etc. look antiquated compared to solutions like Invox, OpenVBX, Ringcentral, etc.
So what should operators do?
First let’s talk about what they should not do. Business as usual is not the ideal strategy. Telecom assets are likely to be substituted in the next 2-3 years, just as location has already been substituted.
Embrace Over-the-Top Player
Only few operators have done so but the best strategy to avoid disruptive competition is to embrace disruptive players. Trying to compete with on-premise equipment against IP-based Cloud-driven PBX-like services is impossible. Allow over-the-top players to offer their solutions to your customers and integrate with your network and your billing systems. Allow end-users a choice of competing solutions.
If you protect your assets from the rest of the world, then over-the-top players will find ways around them. Location has been substituted. There is a lot of effort being put in setting up micro-payment solutions. If operators want to keep an oligopoly on charging and billing then they should urgently open up both assets and make them available at very competitive prices.
Other assets to open up: numbering plans, call forwarding, subscriber data (either via opt-in or via anonymous aggregation), etc.
Assets should be made available with Web 2.0 APIs. New business models like freemium, subscription and advertisement should be put into competition with usage-based subscriptions.
End-users want choice and operators have been traditionally bad at offering it. Nobody wants a Facecopy, Smitter or a LinkedOn. End-users want the original. End-users want to choose themselves between competing products.
Open marketplaces in which developers, partners, end-users, etc. can sell solutions and services that are integrated with the telecom assets, should allow end-users to have an “App-Store”-like experience when they interact with their operator.
The operator should be a business enabler for small companies. Innovative products should be brought in via open communities and partners. The operator offers the infrastructure for small companies to act like global players: e.g. global sales channels, professional support, integrate assets once – deploy globally, etc.
End-users, be it consumers or businesses, need support. Dotcoms have been traditionally limited when it comes to offering phone support. However a lot of people do not feel like writing a web-based support ticket. Here is where operators could excel. Operators could work on building global support communities in which small companies get access to “call centers as a service”, “professional helpdesk as a service”, etc. A 5 people company should be able to offer global support via local certified partners and a common infrastructure that is offered by operators.
Operators as business enablers
Operators will only be able to survive the Innovator’s Dilemma if they start refocusing their businesses. Instead of being a selector of hand-picked high-priced services, operators should move to open markets where competing services are offered by thousands of partners. The operator moves from offering the services to becoming an enabler for others to offer services that are either based on the communication infrastructure but could also not be based on them. Operators have brands, offer trust, offer phone support, have direct sales channels, know the local markets, etc. Global small dotcoms could save enormous investments if operators would open these non-technology assets towards them and enable dotcoms to become global businesses for as small as they are in the beginning…