Introduction – Digital Commerce 2.0

Digital commerce is centred on the better use of the vast amounts of data created and captured in the digital world. Businesses want to use this data to make better strategic and operational decisions, and to trade more efficiently and effectively, while consumers want more convenience, better service, greater value and personalised offerings. To address these needs, Internet and technology players, payment networks, banks and telcos are vying to become digital commerce intermediaries and win a share of the tens of billions of dollars that merchants and brands spend finding and serving customers.

Mobile commerce is frequently considered in isolation from other aspects of digital commerce, yet it should be seen as a springboard to a wider digital commerce proposition based on an enduring and trusted relationship with consumers. Moreover, there are major potential benefits to giving individuals direct control over the vast amount of personal data their smartphones are generating.

We have been developing strategies in these fields for a number of years, including our engagement with the World Economic Forum’s (WEF) Rethinking Personal Data project, and ongoing research into user data and privacy, digital money and payments, and digital advertising and marketing.

This report brings all of these themes together and is the first comprehensive strategic playbook on how smartphones and authenticated personal data can be combined to deliver a compelling digital commerce proposition for both merchants and consumers. It will save customers valuable time, effort and money by providing a fast-track to developing and / or benchmarking a leading edge strategy and approach in the fast-evolving new world of digital commerce.

Benefits of the Report to Telcos, Other Players, Investors and Merchants

For telcos, this strategy report:

Shows how to evaluate and implement a comprehensive and successful digital commerce strategy worth up to c.$50bn (5% of core revenues in 5 years)
Saves time and money by providing a fast-track for decision making and an outline business case
Rapidly challenges / validates existing strategy and services against relevant ‘best in class’, including their peers, ‘OTT players’ and other leading edge players.

For other players including Internet companies, technology vendors, banks and payment networks:

The report provides independent market insight on how telcos and other players will be seeking to generate $ multi-billion revenues from digital commerce
As a potential partner, the report will provide a fast-track to guide product and business development decisions to meet the needs of telcos (and others) that will need to make commensurate investment in technologies and partnerships to achieve their value creation goals
As a potential competitor, the report will save time and improve the quality of competitor insight by giving a detailed and independent picture of the rationale and strategic approach you and your competitors will need to take

For merchants building digital commerce strategies, it will:

Help to improve revenue outlook, return on investment and shareholder value by improving the quality of insight to strategic decisions, opportunities and threats lying ahead in digital commerce
Save vital time and effort by accelerating internal decision making and speed to market

For investors, it will:

Improve investment decisions and strategies returning shareholder value by improving the quality of insight on the outlook of telcos and other digital commerce players
Save vital time and effort by accelerating decision making and investment decisions
Help them better understand and evaluate the needs, goals and key strategies of key telcos and their partners / competitors

Digital Commerce 2.0: Report Content Summary

Executive Summary. (9 pages outlining the opportunity and key strategic options)
Strategy. The shape and scope of the opportunities, the convergence of personal data, mobile, digital payments and advertising, and personal cloud. The importance of giving consumers control. and the nature of the opportunity, including Amazon and Vodafone case studies.
The Marketplace. Cultural, commercial and regulatory factors, and strategies of the market leading players. Further analysis of Google, Facebook, Apple, eBay and PayPal, telco and financial services market plays.
The Value Proposition. How to build attractive customer propositions in mobile commerce and personal cloud. Solutions for banked and unbanked markets, including how to address consumers and merchants.
The Internal Value Network. The need for change in organisational structure in telcos and banks, including an analysis of Telefonica and Vodafone case studies.
The External Value Network. Where to collaborate, partner and compete in the value chain – working with telcos, retailers, banks and payment networks. Building platforms and relationships with Internet players. Case studies include Weve, Isis, and the Merchant Customer Exchange.
Technology. Making appropriate use of personal data in different contexts. Tools for merchants and point-of-sale transactions. Building a flexible, user-friendly digital wallet.
Finance. Potential revenue streams from mobile commerce, personal cloud, raw big data, professional services, and internal use.
Appendix – the cutting edge. An analysis of fourteen best practice and potentially disruptive plays in various areas of the market.

Summary: Opportunities exist for operators to support third-party businesses in Customer Profiling, Marketing offers, ID & Authentication, Network QoS, and Billing, Payments & Collection. However, our in-depth research among senior execs in ‘upstream’ industries (e.g. retail, media, IT, etc.) and telcos shows that poor communication of the telecoms value proposition and slow implementation by operators is frustrating upstream customers and operators alike. Our new analysis identifies strategic customer segments for telcos building new ‘Telco 2.0’ business models, key obstacles to overcome, six real-world implementation strategy scenarios, and strategic recommendations for telcos. (March 2012, Executive Briefing Service, Transformation Stream.)

Below is an extract from this 29 page report, kindly commissioned and sponsored by Openet and independently produced by Telco 2.0. Openet developed the initial research concept and scope. The research, analysis and the writing of the report itself was carried out independently by STL Partners.
Members of the Telco 2.0 Executive Briefing service can download this report in full in PDF format here.
Alternatively, to download this report for free, join our Foundation 2.0 service (details here) by using the promotional code FOUNDATION2 in the box at the bottom of the sign-up page here. Once registered, you will be able to download the report here.
We’ll also be discussing our findings at the EMEA Executive Brainstorm in London (12-13 June, 2012).
To access reports from the full Telco 2.0 Executive Briefing service, to submit whitepapers for review for inclusion in this service, or to find out more about our services please email contact@telco2.net or call +44 (0) 207 247 5003.

Preface

This research has been designed to explore how valuable new telecoms solutions could be for third-party companies (a key part of Telco 2.0), as well as to evaluate the barriers to effective implementation. Third-parties (upstream customers) and operators were interviewed to explore their thoughts in this key strategic area for the telecommunications industry.

Executive Summary

Headline Conclusions

Opportunities exist for operators to support third-party businesses in Customer Profiling, Marketing offers, ID & Authentication, Network QoS, and Billing, Payments & Collection.
Poor communication of the telecoms value proposition and slow implementation by operators is frustrating upstream customers and managers within operators themselves.
There are four upstream customer segments. Two of these are particularly important for the operators to address when developing go-to-market approaches:
Enthusiasts who need full-service Telco 2.0 solutions now;
Non-believers who need to be educated on the value of telecoms enabling services and convinced of operators’ ability to implement.
There are few material barriers to developing solutions except operators’ inability to implement effectively:
Although lack of cross-operator solutions and regulatory impediments are considered significant in Europe and the US.
There are four key reasons for the slow implementation by operators:
Reason 1: Insufficient investment by operators in services and service enabler platforms.
Reason 2: Financial metrics which do not encourage investment in new business models.
Reason 3: Inability to pin down the optimal timing for investment in new business models.
Reason 4: A prisoners’ dilemma over whether to collaborate or compete with other operators and with upstream customers when implementing solutions.

For the complete recommendations, detailed conclusions and full analysis, please download the report by following the instructions at the top of this page.

Introduction, Objectives and Methodology

The research consisted of interviews with 26 major corporations that use telecoms networks to deliver services to consumers including players from advertising, media, financial services and retail (upstream customers or ‘third-party’ companies). Interviewees where senior managers who were responsible for the provision of services via digital channels and thus were familiar with the challenges and opportunities they faced in this developing market segment. Additionally, STL Partners interviewed senior managers from 16 major mobile and converged communications service providers (see Figure 1 below for more details on participants).

The objectives of the research were to determine:

What Telco 2.0 (enabling) services would upstream customers like to see from communications service providers?
What are the most common use cases and attractive commercial models for such services?
What are the current barriers to realising the Telco 2.0 opportunity and what needs to be done to overcome these barriers?

Figure 1: Interviews conducted with players from telecoms and adjacent industries

Source: STL Partners

Interviews were 30-60 minutes in length and largely qualitative in nature. Some quantitative questions were asked so that the relative attractiveness of Telco 2.0 solution areas and the size of implementation barriers could be evaluated. The interviews were also designed to uncover differences in perspective between:

Operators and upstream customers;
Upstream customers from different industry groups – Advertising, Media, Financial services and IT;
Operators from different geographic regions – Europe, North America, Middle East and North Africa (MENA) and Asia Pacific (APAC).

Interviews were conducted with senior decision-makers and influencers and, to ensure discussions were full and frank, the content of interviews has not been attributed to individual companies.

Report Contents

Introduction
Real potential value in Telco assets but implementation proving difficult
Defining the opportunity areas
Strong overall alignment across all eight areas between operators and upstream customers
Averages hide variations in upstream customer responses
Operators consistent about opportunities apart from Identity & Authentication solutions
Telco ability to implement is seen by all as the key barrier…
…although operators in Europe and US also see lack of cross-operator solutions and regulation as key barriers
Four upstream customer segments require different solutions from operators
Operator segment mix looks very different to upstream
Why are operators finding implementing Telco 2.0 so hard?
Reason1: Insufficient investment by operators in services and service enabler platforms
Reason 2: Financial metrics which do not encourage investment in new business models
Reason 3: Inability to pin down the optimal timing for investment in new business models
Reason 4: A prisoners’ dilemma over whether to collaborate or compete with other operators and with upstream customers when implementing solutions
Conclusions and recommendations

Report Figures

Figure 1: Interviews conducted with players from telecoms and adjacent industries
Figure 2: Broad alignment on opportunity areas from operators & upstream customers
Figure 3: Upstream customers – variation even within industry sectors for specific Telco 2.0 solution areas
Figure 4: Perceived lack of telco interest in developing new solutions for upstream customers
Figure 5: Regional differences in operator opportunity sizing for Identity & Authentication solutions
Figure 6: Telco operational and organisation limitations seen as the biggest barrier to success
Figure 7: Regional differences in perception of key barriers to Telco 2.0 implementation
Figure 8: Upstream customer segments
Figure 9: Telco go-to-market approaches for upstream customer segments
Figure 10: Telco segments – Telco 2.0 could be valuable but can it be realised?
Figure 11: An historical lack of investment in services by operators threatens voice, messaging and newer Telco 2.0 solutions
Figure 12: Current operator metrics discourage investment in new business models
Figure 13: New business model investment timing dilemma
Figure 14: The prisoners’ dilemma
Figure 15: Six Telco 2.0 implementation strategies
Figure 16: Value-creating and value-destroying approaches
Figure 17: Geography determines the most important Telco 2.0 implementation strategies

To access this report:

The 29 page Telco 2.0 Report can be downloaded in full in PDF format by members of the Telco 2.0 Executive Briefing service here.
Additionally, to give an introduction to the principles of Telco 2.0 and digital business model innovation, we now offer for download a small selection of free Telco 2.0 Briefing reports (including this one) and a growing collection of what we think are the best 3rd party ‘white papers’. To access these reports you will need to become a Foundation 2.0 member. To do this, use the promotional code FOUNDATION2 in the box provided on the sign-up page here. Your Foundation 2.0 member details will allow you to access the reports shown here only, and once registered, you will be able to download the report here.
We’ll also be discussing our findings at the EMEA Executive Brainstorm in London (12-13 June, 2012).
To access reports from the full Telco 2.0 Executive Briefing service, or to submit whitepapers for review for inclusion in this service, please email contact@telco2.net or call +44 (0) 207 247 5003.

About Openet

Openet is a leading provider of Service Optimization Software (SOS) tailored to meet the evolving needs of communications service providers, or CSPs, including wireless, wireline and cable network operators. Openet’s integrated, high-performance software solutions provide real-time policy management, rating, charging and subscriber data management solutions to enable real-time, contextual network resource allocation and monetization decisions based on information about the end user and the service being used. CSPs use Openet’s SOS solutions to enhance quality of service, create a more personalized end user experience, develop new business models and dynamically control network resources. Openet’s SOS solutions are used by more than 80 customers in 28 countries. For more information, please visit www.openet.com.

Organisations interviewed for the report: Televisa, BBC, Intuit, Google, Tesco, MTV, Intel, TiVo, Sling, Ogilvy, Fox, Omnicom, Microsoft, Visa, Barclaycard, Ultraviolet, PRS, American Express, MasterCard, CitiGroup, On Live, Warner Bros, MEF, Gap, Salesforce, AT&T, Verizon, Sprint, Deutsche Telekom, Du, Teliasonera, Orange, Everything Everywhere, Turkcell, Qtel, Etisalat, Singtel, Axiata, Telekom Indonesia, TIM, Tele2.

Tag: MasterCard

Digital Commerce 2.0: New $50bn Disruptive Opportunities for Telcos, Banks and Technology Players