Chris Barraclough: Shareholder Value for Telcos - Telco 2.0 7th Executive Brainstorm
1. Rebuilding value & control via a 2-sided business model Chris Barraclough, MD, STL Partners/Telco 2.0
2. Agenda What is a business model? Problems with Telco 1.0 business model New opportunity: Telco 2.0
3. A business model is the COMMERCIAL architecture of a business: how it makes (or loses) money A 5-domain model The marketplace Service Offering Value Network Technology Finance Source: Faber et al; Designing business models for mobile ICT services, 2001; adapted and developed by STL Partners Note: Each domain breaks down into several inter-related components that make up the overall business model.
4. The success of a company’s (or collection of companies’) business model is ultimately a function of two factors Value Control +
13. Sexy new services paid for by end user will NOT yield continued revenue and profit growth Short term revenue growth only + Medium term capacity & cost issues = Falling margins, lower profits…
58. Unclear – potentially a move into less regulated markets? Source: Ballon 2007; STL Partners analysis
59. Three things required to bring Telco 2.0 to fruition Bad debt Demographics Leadership MY CREDIT MY PERSONAL DATA MY RELATIONSHIPS Address Gender Average balance Skills Name Profile MY INTERACTIONS MY DEVICES Preferences Location Presence SIM SoftSIM Number SIP Number Pictures Videos Bank School Browsing History Collaboration MY CONTENT MY IDENTIFIERS MY CONTEXT QR Codes IP Address Serial Number Device details Calendar Friends On/Off Source: STL Partners analysis .mobi domains Address Book Workplace Roaming
60. $375 billion opportunity (not guaranteed!) EU-27 and North American Telecoms $1,230bn $689bn Source: STL Partners, Telecoms Two-Sided Business Model Opportunity and Future Broadband Business Models, both published in 2008
The ability of the 5 domains of a business model to influence two factors will ultimately drive the success or failure of that business model:Value = value within the value network. Value network = collection of actors in an industry. E.g. Mobile telecoms industry = operators + partners/vendorsControl = amount of control an individual company or collection of companies that do same role can exert on value network. E.g. Mobile telecoms operators have very strong control over mobile telephony market
Currently operators providecore services to individuals within their customer segments (P2P) communications and they collect money from millions of customers in thousands of segments using hundreds of devices. In doing this they have a collection of assets and skills that can be reused to develop new platform services for delivery to upstream customers (like the merchants in amazon model). Operators can be paid for these services by new upstream customer group.Now going to cover what they are and challenges of realising the opportunity…
Lots needs to be done but 3 key things are important:Leadership. Concept has to be embraced at the top of the organisation. New way of making money from new customers using new skills = major shift. Without board level leadership then 2SBM will fail. Encouraging signs = Telco 2.0 exec brainstorm attended by senior commercial players – marketers and strategists from operatorsAction group potential Colao painted very similar vision of future in recent presentationSkills. Mentioned that platform knowledge and information exchange is key to future success. Google = 2-sided master because it can capture and manage data so well. Starting to invade telco space – maps, triangulation, chrome, accounts etc. and most recently opt-in to traffic monitoring service using mobile phone location being offered direct to end user. Operators have lots of assets but others will work around. Value depreciating and operators have to find a way to become very skillful and managing upstream and downstream customer data well (and within privacy laws). 2 options – do anonymously or only use data on transactions that take place within telco (Google model)Collaboration. As mentioned – scale is king. Problem for operators is that none are big enough to dominate on their own as they have network boundaries (defined by regulation and economics). Upstream customers want to reach ALL telco customers not just those on a single network in a single retion. Therefore if they are to develop a large-scale platform for upstream providers, operators are going to have to work together and with partners to overcome this fragmentation. Aggregation services will be key. This could happen via a 3rd-party aggregator like Mblox and Ericsson IPX in premium SMS or it could be via operators collaborating directly as with Zoompass (a JV in Canada between Rogers, Bell Canada and Telus) to provide digital wallet.
