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Andreas Constantinou@andreasconBala Kasiviswanathan @BalaK

Economic Models for Reinventing Telco

Telco Innovation with APIs

@BalaK

@VisionMobile@apigee

@andreascon

groups.google.com/group/api-craft

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How should Telcos deal with the challenges of today’s ecosystems-driven competition?

The new basis of competition

The asymmetric business models

The price of doing nothing

The modular telco

How telcos can leverage ecosystems

Agenda

A New Playing Field for Telcos

The new rules of the game in mobile

mobile computing

750,000+ apps(encompassing all user needs)

telecom

4 apps(phone, text, contacts,

camera)

new & unpredictableproven & predictablebusiness models

share of needs,attention & wallet

basis of competition

choice & flexibilityof services

reliability & scaleof networks

Source: VisionMobile

servicedistribution mobile platformstelco

The domino effect in the telecom industry

Handset OEM

VAS

Vo

ice

and

SM

S

iOS, Android broke the walls of

walled gardens

apps challenge telco core services

hundreds of thousands of apps replace telco VAS

1

23

Source: VisionMobile

OTTs compete with telcos for control, not for profits

Content

Distribution

Connectivity

Screen

User

Access

Devices

Ads

softwarelicensing

retailing

Ads

denotes company’s core business

OTT competition with telco is asymmetric

ComplementOTT products

Telcos cannot compete with OTTs – they are in a different business

high-speed mobile Internet access

Consumer electronics, on-line advertising, e-

commerce…

ComplementCore product

A product consumed

with the main product

A product where a business generates

profits

asymmetry

asymmetry

API Team

AppUser

App Developer API

The developer is the key in the app economy

Systems

App Consumer

The 5 ingredients of a successful ecosystem

14

Source: HBR, “Innovation Killers”How Financial Tools Destroy Your Capacity to Do New Thingsby Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih

Traditional financial tools fail predictably in the conditions of uncertainty

1. select wrong projects due to fundamental unpredictability

15

Source: HBR, “Innovation Killers”How Financial Tools Destroy Your Capacity to Do New Thingsby Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih

Traditional financial tools fail predictably in the conditions of uncertainty

1. select wrong projects due to fundamental unpredictability

2. disregard cost of doing nothing

16

Source: HBR, “Innovation Killers”How Financial Tools Destroy Your Capacity to Do New Thingsby Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih

Traditional financial tools fail predictably in the conditions of uncertainty

1. select wrong projects due to fundamental unpredictability

2. disregard cost of doing nothing

3. marginal costanalysis is biased

against investmentsin new capabilities

Now the good news -

mobile is a booming market

… but telcos need to re-invent themselves

5

Before Structure: the singular telco

•Optimised for reliable delivery of few connectivity services at large scale

networkdistribution and retailtelephonymessagingbillinguser identityauthenticationconsumer intelligence

large scale99,999% reliability

1

2

3take-all-or-nothing: services are tightly coupled to the network

Designed as a connectivity business with high CAPEX and OPEX

Source: VisionMobile

After Structure: the modular telco

Services business

Connectivity business

Distribution business

Profit pressure due to “prisoner's dilemma”

Disrupted by alternatives withasymmetric business models

Untapped potential

Source: VisionMobile

4

Before Ecosystems approach: compete

Legacy telcos compete with platforms head-on

e.g. LiMo, Vodafone360, RCS-e

AfterEcosystems approach: leverage

The modern telco leverages ecosystems

foster innovation

diversify into new customer base & businesses

subscriber loyalty

drive usage

3

BeforeInnovation focus

Legacy telcos innovate in networks:

EDGE, WCDMA, HSPA, HSPA+, LTE, LTE-Advanced

AfterInnovation focus

Modern telcos add value to ecosystems beyond access

e.g

local presence

digital / physical distribution

consumer insights

user ID

billing, voice APIs

2

Before Developers

Legacy telcos see developers as a source of revenue

high barriers to entry

stringent processes

lock-in relationships

risk transfer to developers

After Developers

Modern telco:

Developers are value-added resellers

Apps are shops

APIs are contracts

1

Before Voice

Legacy telco sees voice as telephony

Based on 19th century assumptions on technology

and user needs

After Voice

feature phones smartphones web

voice = device voice = app voice = API

Modern telco sees voice as API

“I think, as a general rule, most of us are in markets that are booming. They are not in decline.

Even the newspaper business is in a growth industry. It’s not in decline. It’s just their way of thinking about the industry that is in decline.”

Clayton ChristensenProfessor, Harvard Business School

telecom

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