Software Defined People: How it Shapes Strategy (and us)

Introduction: software’s defining influence

Our knowledge, employment opportunities, work itself, healthcare, potential partners, purchases from properties to groceries, and much else can now be delivered or managed via software and mobile apps.

So are we all becoming increasingly ‘Software Defined’? It’s a question that has been stimulated in part by producing research on ‘Software Defined Networks (SDN): A Potential Game Changer’ and Enterprise Mobility, this video from McKinsey and Eric Schmidt, Google’s Exec Chairman, a number of observations throughout the past year, and particularly at this and last year’s Mobile World Congress (MWC).

But is software really the key?

The rapid adoption of smartphones and tablets, enabled by ever faster networks, is perhaps the most visible and tangible phenomenon in the market. Less visible but equally significant is the huge growth in ‘big data’ – the use of massive computing power to process types and volume of data that were previously inaccessible, as well as ‘small data’ – the increasing use of more personalised datasets.

However, what is now fuelling these trends is that many core life and business tools are now software of some form or another. In other words, programmes and ‘apps’ that create economic value, utility, fun or efficiency. Software is now the driving force, and the evolving data and hardware are by-products and enablers of the applications respectively.

Software: your virtual extra hand

In effect, mobile software is the latest great tool in humanity’s evolutionary path. With nearly a quarter of the world’s population using a smartphone, the human race has never had so much computing power by its side in every moment of everyday life. Many feature phones also possess significant processing power, and the extraordinary reach of mobile can now deliver highly innovative solutions like mobile money transfer even in markets with relatively underdeveloped financial service infrastructure.

How we are educated, employed and cared for are all starting to change with the growing power of mobile technologies, and will all change further and with increasing pace in the next phase of the mobile revolution. Knowing how to get the best from this world is now a key life skill.

The way that software is used is changing and will change further. While mobile apps have become a mainstream consumer phenomenon in many markets in the last few years, the application of mobile, personalised technologies is also changing education, health, employment, and the very fabric of our social lives. For example:

  • Back at MWC 2013 we saw the following fascinating video from Ericsson as part of its ‘Networked Society’ vision of why education has evolved as is has (to mass-produce workers to work in factories), and what the possibilities are with advanced technology, which is well worth a few minutes of your time whether you have kids or not.
  • We also saw this education demo video from a Singapore school from Qualcomm, based on the creative use of phones in all aspects of schooling in the WE Learn project.
  • There are now a growing number of eHealth applications (heart rate, blood pressure, stroke and outpatient care), and productivity apps and outreach of CRM applications like Salesforce into the mobile employment context are having an increasingly massive impact.
  • While originally a ‘fixed’ phenomena, the way we meet and find partners has seen a massive change in recent years. For example, in the US, 17% of recent marriages and 20% of ‘committed relationships’ started in the $1Bn online dating world – another world which is now increasingly going mobile.

The growing sophistication in human-software interactivity

Horace Dediu pointed out at a previous Brainstorm that the disruptive jumps in mobile handset technology have come from changes in the user interface – most recently in the touch-screen revolution accompanying smartphones and tablets.

And the way in which we interact with the software will continue to evolve, from the touch screens of smartphones, through voice activation, gesture recognition, retina tracking, on-body devices like watches, in-body sensors in the blood and digestive system, and even potentially by monitoring brainwaves, as illustrated in the demonstration from Samsung labs shown in Figure 1.

Figure 1: Software that reads your mind?

Source: Samsung Labs

Clearly, some of these techniques are still at an early stage of development. It is a hard call as to which will be the one to trigger the next major wave of innovation (e.g. see Facebook’s acquisition of Oculus Rift), as there are so many factors that influence the likely take-up of new technologies, from price through user experience to social acceptance.

Exploring and enhancing the senses

Interactive goggles / glasses such as Google Glass have now been around for over a year, and AR applications that overlay information from the virtual world onto images of the real world continue to evolve.

Search is also becoming a visual science – innovations such as Cortexica, recognise everyday objects (cereal packets, cars, signs, advertisements, stills from a film, etc.) and return information on how and where you can buy the related items. While it works from a smartphone today, it makes it possible to imagine a world where you open the kitchen cupboard and tell your glasses what items you want to re-order.

Screens will be in increasing abundance, able to interact with passers-by on the street or with you in your home or car. What will be on these screens could be anything that is on any of your existing screens or more – communication, information, entertainment, advertising – whatever the world can imagine.

Segmented by OS?

But is it really possible to define a person by the software they use? There is certainly an ‘a priori’ segmentation originating from device makers’ segmentation and positioning:

  • Apple’s brand and design ethos have held consistently strong appeal for upmarket, creative users. In contrast, Blackberry for a long time held a strong appeal in the enterprise segment, albeit significantly weakened in the last few years.
  • It is perhaps slightly harder to label Android users, now the largest group of smartphone users. However, the openness of the software leads to freedom, bringing with it a plurality of applications and widgets, some security issues, and perhaps a greater emphasis on ‘work it out for yourself’.
  • Microsoft, once ubiquitous through its domination of the PC universe, now finds itself a challenger in the world of mobiles and tablets, and despite gradually improving sales and reported OS experience and design has yet to find a clear identity, other than perhaps now being the domain of those willing to try something different. While Microsoft still has a strong hand in the software world through its evolving Office applications, these are not yet hugely mobile-friendly, and this is creating a niche for new players, such as Evernote and others, that have a more focused ‘mobile first’ approach.

Other segments

From a research perspective, there are many other approaches to thinking about what defines different types of user. For example:

  • In adoption, the Bass Diffusion Model segments e.g. Innovators, Early Adopters, Mass Market, Laggards;
  • Segments based on attitudes to usage, e.g. Lovers, Haters, Functional Users, Social Users, Cost Conscious, etc.;
  • Approaches to privacy and the use of personal data, e.g. Pragmatic, Passive, Paranoid.

It is tempting to hypothesise that there could be meta-segments combining these and other behavioural distinctions (e.g. you might theorise that there would be more ‘haters’ among the ‘laggards’ and the ‘paranoids’ than the ‘innovators’ and ‘pragmatics’), and there may indeed be underlying psychological drivers such as extraversion that drive people to use certain applications (e.g. personal communications) more.

However, other than anecdotal observations, we don’t currently have the data to explore or prove this. This knowledge may of course exist within the research and insight departments of major players and we’d welcome any insight that our partners and readers can contribute (please email contact@telco2.net if so).

Hypothesis: a ‘software fingerprint’?

The collection of apps and software each person uses, and how they use them, could be seen as a software fingerprint – a unique combination of tools showing interests, activities and preferences.

Human beings are complex creatures, and it may be a stretch to say a person could truly be defined by the software they use. However, there is a degree of cause and effect with software. Once you have the ability to use it, it changes what you can achieve. So while the software you use may not totally define you, it will play an increasing role in shaping you, and may ultimately form a distinctive part of your identity.

For example, Minecraft is a phenomenally successful and addictive game. If you haven’t seen it, imagine interactive digital Lego (or watch the intro video here). Children and adults all over the world play on it, make YouTube films about their creations, and share knowledge and stories from it as with any game.

To be really good at it, and to add enhanced features, players install ‘mods’ – essentially software upgrades, requiring the use of quite sophisticated codes and procedures, and the understanding of numerous file types and locations. So through this one game, ten year old kids are developing creative, social and IT skills, as well as exploring and creating new identities for themselves.

Figure 2: Minecraft – building, killing ‘creepers’ and coding by a kid near you

Minecraft March 2014

Source: Planetminecraft.com

But who is in charge – you or the software?

There are also two broad schools of thought in advanced IT design. One is that IT should augment human abilities and its application should always be controlled by its users. The other is the idea that IT can assist people by providing recommendations and suggestions that are outside the control of the user. An example of this second approach is Google showing you targeted ads based on your search history.

Being properly aware of this will become increasingly important to individuals’ freedom from unrecognised manipulation. Just as knowing that embarrassing photos on Facebook will be seen by prospective employers, knowing who’s pulling your data strings will be an increasingly important to controlling one’s own destiny in the future.

Back to the law of the Jungle?

Many of the opportunities and abilities conferred by software seem perhaps trivial or entertaining. But some will ultimately confer advantages on their users over those who do not possess the extra information, gain those extra moments, or learn that extra winning idea. The questions are: which will you use well; and which will you enable others to use? The answer to the first may reflect your personal success, and the second that of your business.

So while it used to be that your genetics, parents, and education most strongly steered your path, now how you take advantage of the increasingly mobile cyber-world will be a key additional competitive asset. It’s increasingly what you use and how you use it (as well as who you know, of course) that will count.

And for businesses, competing in an ever more resource constrained world, the effective use of software to track and manage activities and assets, and give insight to underlying trends and ways to improve performance, is an increasingly critical competence. Importantly for telcos and other ICT providers, it’s one that is enabled and enhanced by cloud, big data, and mobile.

The Software as a Service (SaaS) application Salesforce is an excellent case in point. It can brings instantaneous data on customers and business operations to managers’ and employees’ fingertips to any device. This can confer huge advantages over businesses without such capabilities.

Figure 3: Salesforce delivers big data and cloud to mobile

Salesforce delivers big data and cloud to mobile March 2014

Source: Powerbrokersoftware.com

 

  • Executive Summary: the key role of mobile
  • Why aren’t telcos more involved?
  • Revenue Declines + Skills Shortage = Digital Hunger Gap
  • What should businesses do about it?
  • All Businesses
  • Technology Businesses and Enablers
  • Telcos
  • Next steps for STL Partners and Telco 2.0

 

  • Figure 1: Software that reads your mind?
  • Figure 2: Minecraft – building, killing ‘creepers’ and coding by a kid near you
  • Figure 3: Salesforce delivers big data and cloud to mobile
  • Figure 4: The Digital Hunger Gap for Telcos
  • Figure 5: Telcos need Software Skills to deliver a ‘Telco 2.0 Service Provider’ Strategy
  • Figure 6: The GSMA’s Vision 2020

Telco 2.0: how to accelerate the implementation of new business models

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.) Google's Advertising Revenues Cascade

 

  • 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.

Openet White Paper Cover Image

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

Companies interviewed for this report

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 Logo

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.