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IoT Success Strategies for Communications Service Providers
1.
IOT SUCCESS STRATEGIES FOR COMMUNICATIONS SERVICE
PROVIDERS OPENOPTIMISTIC UNSTOPPABLE
2.
Copyright © 2017
Accenture All rights reserved. THE INTERNET OF THINGS IS HERE – AND EXCITEMENT IS RISING Communications Service Providers are forecasting tremendous benefits from the internet of things (IoT), both for their revenue expectations and for society as a whole. The excitement is justified: as providers of key connectivity – between sensors, devices, data centers and people – CSPs will be integral to the proliferation of the “internet of everything”. A NEW REPORT FROM THE WORLD ECONOMIC FORUM AND ACCENTURE SAYS: The IoT is forecast to add $14 trillion of economic value to the global economy by 2030. Increasing bandwidth and data usage could generate an additional $65 billion in operating profits for telecommunications companies. 2
3.
Copyright © 2017
Accenture All rights reserved. 3 SO - WHAT’S THE DRAWBACK? For Communications Service Providers, commercial success from the IoT is by no means assured. Much of this potential new connectivity revenue will have low profitability and low Average Revenue per User (ARPU). Unless CSPs make fundamental changes to service offerings and business models, other companies will be reaping the benefits. Offer solutions and services to customers rather than just products and connectivity. Create the right operational focus and partner choices Implement more sophisticated customer support strategies Excel in product and service design, brought to market at speed Reshape business models and sales team profiles. BOTTOM LINE RESULTS AND INCREASED BRAND VALUE WILL FOLLOW. CSPs NEED TO EXPLOIT OPPORTUNITIES TO DELIVER SERVICES ACROSS THE IOT VALUE CHAIN.
4.
Copyright © 2017
Accenture All rights reserved. 4 THE IoT COST OF SERVICE CHALLENGE The proliferation of Low Power Wide Area Networking (LPWA) for IoT connections will cannibalize the existing cellular connections business (2G, 3G and 4G with higher ARPU). CSPs are optimistic on LPWA, but in general they have not articulated the economics and profitability of this scenario. To compensate for low ARPU per connection, CSPs will need to drive for significant volumes of connections to equal former revenues and returns. Meanwhile, there will be other challenges: Increased competition from other technologies and competitors who now have much lower barriers to entry THESE ARE CRITICAL QUESTIONS WHEN, FOR EXAMPLE: THE COST OF HANDLING ONE CUSTOMER SERVICE ISSUE THROUGH A CALL CENTER COULD BE MORE THAN THE PROFIT MARGIN ON THE ACCOUNT FOR THE YEAR. Re-shaping and scaling CSP operations (supply chain, provisioning, servicing, billing) to serve IoT customers effectively Creating optimum customer experience to safeguard growth and retention
5.
Copyright © 2017
Accenture All rights reserved. 5 SHAPING AND SCALING SOLUTIONS BEYOND CONNECTIVITY The IoT market is attractive, but connectivity services only constitute a small portion of the rewards. To really take advantage of the IoT, CSPs must figure out how to offer more. They must choose the right focus areas, capitalizing on their core strengths to ensure a competitive, differentiated product to a crowded market. Then embrace rapid prototyping to move offers from concept to market at speed. KEY QUESTIONS: 1. Which industries and verticals to target to maximize ROI? 2. How best to leverage the growing ecosystem to support this? 3. How to make the cultural and operational switch from product to solution, effectively enabling sales and service delivery? 4. How to build a new base of stakeholder relationships, managed by sales teams that have moved beyond their old comfort zone?
6.
Copyright © 2017
Accenture All rights reserved. 6 SUCCESSFUL CSPs ARE FUNDAMENTALLY RETHINKING THEIR STRATEGY The largest opportunities lie in providing the suite of consumer and enterprise applications and services that enable IoT to become a reality. According to a new report from the World Economic Forum and Accenture, the figures look promising: The market opportunity from enterprise services could be more significant: Potential of an additional $100 billion in operating profits across the industry by 2025. Of this, network operators and device manufacturers could together capture up to 15% of the market for consumer IoT services This would mean an operating-profit uplift of $23 billion Up to $75 billion in operating profits across consulting, implementation and operational services.
7.
Copyright © 2017
Accenture All rights reserved. 7 DISRUPT, OR BE DISRUPTED Open platforms are the key to success in the digital economy. They enable businesses to move away from the traditional linear relationship models with suppliers and customers, to one that is more dynamic and fluid, one that easily connects an entire value chain through well-designed APIs (application program interfaces), and thus empowers new operating and revenue models, sometimes across industries. When platform providers build ecosystems around their core business, the ecosystem members use the platform to create innovative services for the platform provider’s customers, and bring their own customers too. While tech companies that are born digital have long understood the power of platforms, there is very little evidence that CSPs are taking radical steps to embrace this transformational power to capture new growth opportunities. They now face a stark choice: disrupt or be disrupted — and many are doing both at the same time. The technology exists today to launch and operate platforms, as well as the platform-based business models and the strategies they enable. Industry players need to relinquish control over supplier and customer relationships, thinking and acting in a whole new way. TECHNOLOGY CHANGES ARE ONLY THE BEGINNING: A PLATFORM BUSINESS MODEL REQUIRES A COMPLETE CHANGE IN CULTURE AND MINDSET, PROCESSES, GOVERNANCE AND LEADERSHIP STYLE.
8.
Copyright © 2017
Accenture All rights reserved. Move at speed to a platform based approach with focus on technology, operational excellence and innovation, to reduce costs and to maximize the profitability of each connection. (e.g. automation, robotics in provisioning, billing, customer service, etc.). 8 STARTING THE TRANSFORMATION: SIX STEPS FOR CSPs Build robust ecosystems and partner communities to develop connectivity sales channels. Crucially, embed connectivity within partners’ solutions through new business models (specifically platform ecosystems), differentiated propositions and connectivity management platforms. Consider customer support. It’s just not realistic that CSPs will be able to cost- effectively offer traditional levels of customer service, onsite support, etc. on a $1 per-year connection. Look at self-serve options and automation. Consider overall support models for the IoT business. Build end-to-end solutions into products. Do this through ecosystems and partners, white labelling and mergers and acquisitions. Consider new business models associated with white labelling partner products and services. Don’t just sell connectivity, sell the outcomes it delivers to its users. Value-based selling isn’t just for big B2B deals these days. Consumers think that way too; make them offers to meet those expectations. Enable more strategic sales forces to sell business solutions. 1 2 3 4 5 6
9.
Copyright © 2017
Accenture All rights reserved. CONCLUSION The IoT market is moving at high speed. Winners and losers will be apparent in the next two years. Traditional, long-tail product development is obsolete here; CSPs will need rapid transformation, prototyping and delivery. Successful CSPs will identify and exploit opportunities to move across the whole IoT value chain, employing a platform business model to offer more ‘solutions’ that deliver a tangible outcome to customers. That's the path to getting a worthwhile slice of the enormous potential revenues on offer. 8
10.
Copyright © 2017
Accenture All rights reserved. AUTHORS PAUL LALANCETTE Global IoT Specialized Sales Lead Accenture Digital JAMES PAUL Digital Business Integration Consultant Accenture Digital PHILIP VANN Global Managing Director, Connected Devices & Embedded Software Accenture Digital FRANCESCO VENTURINI Global Managing Director Accenture Communications & Media Industry Group 9
11.
Copyright © 2017
Accenture All rights reserved. ABOUT ACCENTURE Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions – underpinned by the world’s largest delivery network – Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 401,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com/communications CONTACT US commsindustry@accenture.com @AccentureComms
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