Tag: LBS

Strategic Overview: Time for a New Telco 2.0 Vision

Introduction

Telecoms operators worldwide are pursuing strategies to achieve four general goals:

  • Core Competitiveness – to enhance and grow their success in established telecoms markets
  • Achieving Transformation – to lower costs and enable greater agility in their core business
  • Implementing Innovation – to employ key innovations in the core business and grow new types of revenues
  • Disruption – addressing disruptive threats and opportunities arising from and in adjacent markets and industries

The following is a summary of highlights of our recent analysis and an outline of further research planned against each of these themes. It is intended to provide readers with a summary, starting point and guide to our research as they address the themes, and includes a preamble for our latest vision of ‘Telco 2.0’ – the shape of future telcos.

Theme #1: Core Competitiveness – Telecoms Markets and Competitive Strategies

Background

STL Partners has covered the changing context of global telecoms markets for the last nine years. The broad story is that voice and messaging revenues are in decline, and that while data revenues are generally growing, they aren’t growing fast enough to replace the lost revenues.

Figure 1 – The pressure to defend existing telecoms revenues and build new ones

Source: STL Partners

Core Competitiveness: Research Highlights

In addition to slowing the decline in voice and messaging, operators need the best strategies to grow data, as well as new approaches to manage costs and deliver new value (covered in the subsequent sections of this paper). On this front:

Next Steps on Core Competitiveness

STL Partners is planning analysis including:

  • The impact of digital customer experience on customer behaviours and value creation
  • What strategies have demonstrably added value to telecoms operators?

Theme #2: Achieving Transformation – Re-organising the Core and Building Innovative Businesses

Background

Following on from our work on the Telco 2.0 Transformation Index, benchmarking the strategies of five major operators, in 2015 STL Partners has researched ‘Agility’, a key objective of change in the core business, and how to build innovative new businesses.

Figure 2 – The Telco 2.0 Agility Framework

Source: STL Partners, Agility Report

Transformation: Research Highlights

Next Steps on Telco 2.0 Transformation

STL Partners is planning analysis including:

  • What does ‘Telco 2.0’ mean today – what should a future telco look like?
  • How do recent developments in the application of new business models, technology, and organisational change unlock faster transition to new Telco 2.0 businesses?

Theme #3: Implementing Innovation in the Core – IoT, 5G and the Cloud, NFV and Future Networks

Background

IoT (the Internet of Things), 5G, and NFV (Network Functions Virtualisation) are three acronyms that at first glance seem unrelated. Yet underlying all three is that the boundaries between IT and network technologies in telecoms are starting to blur at an increasing rate. This is a highly significant trend in the industry.

Figure 3 – Improvements in the performance of generic hardware and software are starting to blur the IT/Network boundary

Source: Intel, STL Partners NFV Report

Core Innovation: Research Highlights

All in all, we see this underlying change as highly significant in terms of the structure and strategy of the telecoms industry. It will both more effectively enable new business models for telcos, enable new competition for them, and disrupt existing industry structures among telcos. It will also disrupt technology and software players partnering with telcos. It is therefore a critical strategic need to understand how this is likely to play out, and the strategies most likely to lead to success in this new world.

Next Steps on IoT, Cloud and the Future of the Network

STL Partners is planning analysis including:

  • The role of Cellular networks in the IoT
  • How the network revolution will unlock business model change
  • The impact of new software-based approaches on future of telecoms 

Theme #4: Disruption – Addressing Adjacent Threats and Opportunities

Background

Regular readers of our research are likely to be familiar with our original and market leading analysis of the internet players and major disruptors of the telecoms market, such as Dealing with the Disruptors: Google, Apple, Facebook, Amazon and Microsoft (2011) and our ongoing Dealing With Disruption in-depth research stream.

Research Highlights: Disruption

Although our article on the implications of Google’s MVNO attracted significant interest among our readers, disruption is no longer perceived as solely a threat to telcos, as evidenced by interest in analysis on:

Next Steps on Disruption

STL Partners is planning analysis including:

  • Further detailed case studies on leading telcos acting as disruptors, including new success stories in advertising and location services
  • China’s other disruptors (e.g.s Baidu, Xiaomi) and rising stars
  • Ongoing analysis of the strategies of Microsoft, Google, Apple, Amazon and Facebook

Conclusion: time for a new ‘Telco 2.0’ vision

STL Partners believes that three major practical outcomes resulting from progress across these themes are now combining to create a unique opportunity for telcos to evolve and take advantage of new markets.

New business models are starting to deliver

It is increasingly clear which new business models can be successful for telcos, and the pressure on the existing business model is no longer theoretical, it is a matter of substantial reality for most if not all telcos. The most advanced telcos have been trying out new models and some winning examples are emerging in the areas of content, enterprise ICT and B2B2C enablers.

A new virtualised technological platform will enable new ways of working

The emergence of SDN and NFV is creating a technological platform that is much more capable of delivering and supporting the agility required to deliver and sustain new businesses and new network propositions at speed than the traditional network/IT split. This will radically change both the operator and vendor industry landscape over the next few years.

In addition, and combined with the likely shape of 5G as a technology to further reduce mobile network latency, the future technological ‘shape’ of telcos looks like a highly distributed ICT infrastructure placing huge and computing resources very close to most customers. This will create many different business opportunities for telcos and not least in the delivery of content, enterprise ICT, and digital commerce.

It is becoming clearer how to organise and manage the change

The management and organisational techniques to create and sustain digital businesses are no longer a complete mystery, even though they are still evolving. And there is an increasing body, if not yet a ‘critical mass’, of people in the telecoms industry willing and able to embrace these approaches.

Time for a new ‘Telco 2.0’ vision

We believe that telcos (and their partners) that harness these insights will be best placed to maximise value creation in the future, and our research and consulting services are designed to help telecoms industry clients achieve success faster and more effectively in this future. To this end, we will shortly be setting out a new vision for ‘Telco 2.0’ – what a telecoms operator should be to create maximum value in the future, and how to get there.

Alibaba & Tencent: China’s Digital Disruptors (Part 1)

Introduction

The latest report in STL’s new Dealing with Disruption in Communications, Content and Commerce stream, this executive briefing is the first part of a two part report analysing China’s leading digital disruptors and their likely impact outside their home country. The report explores whether the global leaders in digital commerce – Amazon, Apple, Facebook and Google – might soon face a serious challenge from a company built in China.

Part 1 analyses China’s two largest digital ecosystems – Alibaba, which shares many similarities with Amazon, and Tencent, which is somewhat similar to Facebook. This executive briefing considers the intensifying arms race between these two groups in China, their international ambitions and the support they might need from telcos and other digital players.

Both Alibaba and Tencent are potential competitors for telcos in some markets and potential partners in others. For example, like Amazon, Alibaba has a fast growing cloud computing business. (STL recently analysed why Amazon Web Services is so much more successful than many telcos’ cloud offerings, see: Amazon Web Services: Colossal, but Invincible?).

Like Facebook, Tencent has become a leading provider of digital communications in direct competition with telcos’ voice and messaging services. STL explored how telcos could respond to the rise and rise of Facebook in our recent report: Facebook: Telcos’ New Best Friend?

Part 2 of our report on China’s digital disruptors will cover Baidu, China’s answer to Google and the anchor for a third digital ecosystem, and the fast-growing smartphone maker, Xiaomi, which has the potential to build a fourth major ecosystem. Part 2 will also take a close look at DJI, the drone manufacturer, which is well worth watching for its mid-to-long term potential to create another major ecosystem.

Sizing up China’s disruptors

When it comes to disruption, China is a special case. Offering an enormous domestic market largely insulated by regulation, this vast country is proving to be fertile ground for Internet companies that may ultimately be able to mount a credible challenge to the big four globally – Amazon, Apple, Facebook and Google.

These four U.S.-based disruptors have used the scale and talent available in their home market to become leading digital commerce players globally, limiting the mindshare and market share available to other players. Moreover, Apple and Facebook, in particular, are carving out a strong position in digital communications, challenging telcos’ traditional dominance of this sector.

Greater competition among the Internet ecosystems would be in the strategic interests of many telcos, media companies and banks, as they seek to shore up their revenues and relevance. To that end, they could selectively encourage digital commerce and content companies that have gained sufficient scale in China to go global and compete with the U.S. giants.

In an ideal world, there might be a dozen or so major Internet ecosystems competing for a share of the worldwide digital commerce market. That would put individual telcos and other specialist players in the digital ecosystem, such as banks and media companies, in a stronger negotiating position, potentially enabling them to capture more of the value being created in the fast growing digital economy. For example, if Tencent were to mount a serious challenge to Facebook, telcos could potentially earn a commission for promoting one service over the other. Telcos could preload Facebook’s WhatsApp messaging service or Tencent’s WeChat on the handsets they distribute or they might zero-rate access (not charge for data traffic) to either service in their markets.

Similarly, if Baidu could build effective international search and content services in competition with Google, the latter may have to pay higher commission to companies that supply it with traffic. If Google faced more competition in the digital advertising market, media companies’ sites may have to pay less commission to advertising brokers. In the smartphone market, if Xiaomi were to weaken Apple’s grip on the high-end, telcos’ might be able to negotiate better margins for distributing Apple’s handsets or enabling iPhone users to temporarily subscribe to their networks when travelling abroad.

Greater incentives to expand outside China

China’s economy is on course to grow about 7% this year, according to government figures, down from the double-digit growth at the turn of the decade. As a result, its leading disruptors are increasingly treading on each other’s toes in China and have a greater incentive to expand internationally. Although the obvious move for China’s domestic Internet companies it to initially target Greater China, nearby Asian markets and the Chinese diaspora, some have much broader ambitions. Alibaba, in particular, has significant traction in other major middle income countries, notably Russia. And the world’s leading drone maker DJI is making major inroads into the U.S. and Western Europe – the heartland of Apple, Google, Amazon and Facebook.

Today, there are three major Internet ecosystems in China, headed by Alibaba, Tencent and Baidu respectively. Globally, these three players are in the top ten public Internet companies in terms of market capitalisation (see Figure 1). Moreover, Tencent has forged an alliance with JD.com, the fourth largest publicly-listed Chinese Internet company.

The first part of this report covers Alibaba and Tencent, asking whether either company is strong enough to pose a serious threat to Amazon, Facebook or Google on the global stage.

Figure 1: China is home to four of the world’s most valuable publicly-listed Internet companies

Source: Morgan Stanley, Capital IQ, Bloomberg via KPCB

Alibaba – digital commerce behemoth

Whereas most consumers in Western Europe and North America have heard of Amazon.com, many might associate Alibaba with folklore, rather than digital commerce. Yet Alibaba Group Holding Ltd. claims to be the world’s largest online and mobile commerce company in terms of gross merchandise volume (the value in US dollars of the products and services sold through its marketplaces). Although it is incorporated in the Cayman Islands, the Alibaba Group’s principal executive offices are in Hangzhou in China.

Founded in 1999 by its charismatic, combative and somewhat unpredictable executive chairman Jack Ma, Alibaba undertook the world’s largest initial public offering in September 2014. It raised USD 25 billion, which it has used to fund an ongoing acquisition spree.

Why Alibaba is important

With a market capitalisation comparable to that of Amazon and Facebook, investors clearly believe Alibaba is set to be a major player in the global economy. That belief is fuelled by the fact that Alibaba:

  • Runs several world-leading digital marketplaces
  • Is growing fast at home and abroad
  • Is assembling a major digital entertainment portfolio
  • Has acquired dozens of promising Internet companies
  • Is affiliated with one of China’s leading online payment services

 

  • Introduction
  • Executive Summary
  • Sizing up China’s disruptors
  • Alibaba – digital commerce behemoth
  • Why Alibaba is important
  • Alibaba’s business models
  • Likely impact outside China
  • Threats facing Alibaba
  • Tencent – a playbook for Facebook?
  • Why Tencent is important
  • Tencent’s business models
  • Tencent’s likely impact outside China
  • Threats to Tencent
  • Conclusions and implications for telcos
  • Alibaba and Tencent are very strong companies…
  • … but they both need strategic partners
  • Implications for telcos
  • STL Partners and Telco 2.0: Change the Game

 

  • Figure 1: China is home to four of the world’s most valuable publicly-listed Internet companies
  • Figure 2: Alibaba’s six major digital marketplaces
  • Figure 3: Alibaba has seen heady growth this decade
  • Figure 4: One of Alibaba’s recent investments was in MomentCam
  • Figure 5: Alipay helps Chinese consumers buy from overseas merchants
  • Figure 6: AliExpress sells a wide range of Chinese goods to the world
  • Figure 7: Alibaba’s UC Browser is widely used on Android smartphones
  • Figure 8: Comparing Alibaba and Amazon R&D over time
  • Figure 9: Alibaba’s mobile sales are rising rapidly
  • Figure 10: Almost half of Alibaba’s revenues are now generated by mobile services
  • Figure 11: Alibaba’s overall monetisation rate is slipping
  • Figure 12: Tencent runs three of the top five OTT communications services
  • Figure 13: Tencent claims leadership in digital content in China
  • Figure 14: Tencent sometimes leads Facebook
  • Figure 15: Tencent’s investment and partnership strategy
  • Figure 16: Tencent’s five years of fast growth
  • Figure 17: Tencent remains heavily reliant on online gaming revenues
  • Figure 18: Some of the use cases targeted by Tencent’s online payment portfolio
  • Figure 19: Tencent’s Red Envelope promotion was hugely successful
  • Figure 20: Both Alibaba and Tencent have seen strong growth in net income

Telco 2.0: Making Money from Location Insights

Preface

The provision of Location Insight Services (LIS) represents a significant opportunity for Telcos to monetise subscriber data assets. This report examines the findings of a survey conducted amongst representatives of key stakeholders within the emerging ecosystem, supplemented by STL Partners’ research and analysis with the objective of determining how operators can release the value from their unique position in the location value chain.

The report concentrates on the Location Insight Services (LIS), which leverage the aggregated and anonymised data asset derived from connected consumers’ mobile location data, as distinct from Location Based Services (LBS), which are dependent on the availability of individual real time data.

The report draws the distinction between Location Insight Services that are Person-centric and those that are Place-centric and assesses the different uses for each data set.

In order to service the demand from specific use cases as diverse as Benchmarking, Transport & Infrastructure Planning, Site Selection and Advertising Evaluation, operators face a choice between fulfilling the role of Data Supplier, providing the market with Raw Big Data or offering Professional Services, adding value through a combination of location insight reports and interpretation consultancy.

The report concludes with a comparative evaluation of options for operators in the provision of LIS services and a series of recommendations for operators to enable them to release the value in Location Insight Services.

Location data – untapped oil

The ubiquity of mobile devices has led to an explosion in the amount of location-specific data available and the market has been quick to capitalise on the opportunity by developing a range of Location-Based Services offering consumers content (in the form of information, promotional offers and advertising). Industry analysts predict that this market sector is already worth nearly $10 billion.

The vast majority of these Location Based Services (LBS) are dependent on the availability of real time data, on the reasonable assumption that knowing an individual’s location enables a company to make an offer that is more relevant, there and then.  But within the mobile operator community, there is a growing conviction that a wider opportunity exists in deriving Location Insight Services (LIS) from connected consumers’ mobile location data. This opportunity does not necessarily require real time data (see Figure 9). The underlying premise is that identification of repetitive patterns in location activity over time not only enables a much deeper understanding of the consumer in terms of behaviour and motivation, but also builds a clearer picture of the visitor profile of the location itself.

Figure 1:  Focus of this study is on Location Insight Services
Focus of this Study on Location Insight Services

  • As part of our Telco 2.0 Initiative, we have surveyed a number of companies from within the evolving location ecosystem to assess the potential value of operator subscriber data assets in the provision of Location Insight Services. This report examines the findings and illustrates how operators can release the value from their unique position in the location value chain.

Location Insight Services is a fast growing, high value opportunity

The demand is “Where”?

For operators to invest in the technology and resources required to enter this market, a compelling business case is required. Firstly, various analysts have confirmed that there is a massive latent demand for location-centric information within the business community to enable the delivery of location-specific products and services that are context-relevant to the consumer. According to the Economist Business Unit, there is a consensus amongst marketers that location information is an important element in developing marketing strategy, even for those companies where data on customer and prospect location is not currently collected.3

Figure 2: Location is seen as the most valuable information for developing marketing strategy
Location is seen as the most valuable information for developing marketing strategy

Source: Mind the marketing gap – A report from Economist Business Intelligence Unit

Scoping the LIS opportunity by industry and function

In order to understand the market potential for Location Insight Services, we have considered both industry sectors and job functions where insights derived from location data at scale improve business efficiencies. Our research has suggested that Location Insight Services have an application to many organisations that are seeking to address the broader issue of how to extract the benefits concealed within Big Data.

A recent report from Cisco concentrating on how to unlock the value of digital analytics suggested that Big Data has an almost universal application and

“Big Data could help almost any organization run better and more efficiently. A service provider could improve the day-to-day operations of its network. A retailer could create more efficient and lucrative point-of-sale interactions. And virtually any supply chain would run more smoothly. Overall, a common information fabric would improve process efficiency and provide a complete asset view.” 

Our research suggests that the following framework facilitates understanding of the different elements that together comprise the market for non-real time Location Insight Services.

The matrix considers the addressable market by reference to vertical industry sectors and horizontal function or disciplines.

We have rated the opportunities High, Medium and Low based on a high level assessment of the potential for uptake within each defined segment. In order to produce an estimate of the potential market size for non-real time Location Insight Services, STL Partners have taken into account the current revenue estimates for both industry sectors and functions.

Figure 3:  Location Insight Market Overview (telecoms excluded)
Location Insight Services Market Taxonomy

Report Contents

  • Preface
  • Executive Summary
  • Location data – untapped oil
  • Location Insight Services is a fast growing, high value opportunity
  • Scoping the LIS opportunity by industry and function
  • Location Insight Services could be worth $11bn globally by 2016
  • Which use cases will drive uptake of LIS?
  • Use cases – industry-specific illustrations
  • How should Telcos “productise” location insights services?
  • Operators are uniquely placed to deliver location insights and secure a significant share of this opportunity
  • What is the operator LIS value proposition?
  • Location insight represents a Big Data challenge for Telcos.
  • There is a demand for more granular location data
  • Increasing precision commands a premium
  • Meeting LIS requirements – options for operators
  • What steps should operators take?
  • Methodology and reference sources
  • References
  • Appendix 1 – Opportunity Sizing
  • Definition
  • Methodology

 

  • Figure 1: Focus of this study is on Location Insight Services
  • Figure 2: Location is seen as the most valuable information for developing marketing strategy
  • Figure 3: Location Insight Market Overview (telecoms excluded)
  • Figure 4: The value of Global Location Insight Services by industry and sector (by 2016)
  • Figure 5: How UK retail businesses use location based insights
  • Figure 6: Illustrative use cases within the Location Insights taxonomy
  • Figure 7: How can Telcos create value from customer data?
  • Figure 8: Key considerations for Telco LIS service strategy formulation
  • Figure 9: Real time service vs. Insight
  • Figure 10: The local link in global digital markets
  • Figure 11: Customer Data generated by Telcos
  • Figure 12: Power of insight from combining three key domains
  • Figure 13: Meeting LIS Requirements – Options for Operators

Customer Experience 2.0: NFC, the next mobile revolution? (STL Presentation)

Customer Experience 2.0: NFC, the next mobile revolution?,
Presentation by Daniel Gurrola, VP Consumer Mobile Strategy, Orange. NFC should be a platform for a new generation of applications and services that will transform the industry.
Presented at EMEA Brainstorm, November 2011.		 Fall of the Telco Empire?

Download presentation here.

Links here for more on New Digital Economics brainstorms and Strategy 2.0 research, or call +44 (0) 207 247 5003.

Example slide from the presentation:

Full Article: Google vs Telcos, Tale of the Tape

Our research report, The Two-Sided Telecoms Market Opportunity outlines in detail how operators can achieve growth by adopting a two-sided business model. We’ve invested a huge amount of time and effort in sizing the opportunity for operators a.) by capability (Identity, Authentication, Security + Advertisng, Marketing, Business Services + E-Commerce + Off-line Order Fulfilment + On-line Order Fulfilment (content delivery) + Billing & Payments + Customer Care) and b.) by vertical industry. This helps us not only show how and why operators should tackle this opportunity (the usual strategic focus of our research), but also demonstrate the potential size of the pot.

Google%20vs%20Operators.png

We discuss the different functions of 2-sided platforms in the report and then look at Google, Amazon, Monster, iTunes, Betfair and AP Moller-Maersk in detail, pulling out appropriate lessons for telco operators. In this article we explore Google and, in boxing parlance, who measures up better in the ‘tale of the tape’…

Many people feel that Google will merrily extend its dominance of web search into voice and messaging and mobile advertising. However, new analysis suggests that telcos have some clear advantages for building competitive platforms…if they can exploit them.

Google is interesting because many people feel that it is ‘game-over’ for the operators and Google will merrily extend its dominance of web search into other areas, including voice and messaging and mobile advertising. In the report, we take a fresh look at Google:

  • What it has achieved and why
  • Its skills and assets
  • Its current strategy

Operators and Google both make noises about being cosy partners. But we all recognise that they will also compete in a big way going forward.

Those interested in boxing may notice that the pictures above are of Mike Tyson (Google) and the unfancied British heavyweight Danny Williams (Telco operators). They are taken from a world heavyweight contest in 2004 in Louisville. The assumption of most people at the time was that even a Tyson in decline would brush Williams aside. Instead, Tyson was knocked out in the 4th round. Now, we are not suggesting that the same will happen in the battle between Google and and the operators but we do feel that the operators have plenty of weaponry IF they can use it. And Google thinks this too. This is from the IPO prospectus in 2004 and still holds true today:

We face competition from other Internet companies, including web search providers, Internet advertising companies and destination web sites that may also bundle their services with Internet access.
In addition to Microsoft and Yahoo, we face competition from other web search providers, including companies that are not yet known to us. We compete with Internet advertising companies, particularly in the areas of pay-for-performance and keyword-targeted Internet advertising. Also, we may compete with companies that sell products and services online because these companies, like us, are trying to attract users to their web sites to search for information about products and services.

We also compete with destination web sites that seek to increase their search-related traffic. These destination web sites may include those operated by Internet access providers, such as cable and DSL service providers. Because our users need to access our services through Internet access providers, they have direct relationships with these providers. If an access provider or a computer or computing device manufacturer offers online services that compete with ours, the user may find it more convenient to use the services of the access provider or manufacturer. In addition, the access provider or manufacturer may make it hard to access our services by not listing them in the access provider’s or manufacturer’s own menu of offerings. Also, because the access provider gathers information from the user in connection with the establishment of a billing relationship, the access provider may be more effective than we are in tailoring services and advertisements to the specific tastes of the user. (Our bolding). See the full prospectus here.

Rather than walk you through the case study on Google, we have uploaded in slide format: