Rebuilding Telco value & control via a two-sided business model

Rebuilding value & control via a 2-sided business model Chris Barraclough, MD, STL Partners/Telco 2.0

Agenda
What is a business model?
Problems with Telco 1.0 business model
New opportunity: Telco 2.0

A business model is the COMMERCIAL architecture of a business: how it makes (or loses) money 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. Service Offering Finance Value Network Technology The marketplace A 5-domain model

The success of a company’s (or collection of companies’) business model is ultimately a function of two factors Value Control +

Telco 1.0 business model is now under pressure in several domains
Low/no growth in end user revenues
More companies sharing revenues and generating costs
More substitute products
Unable to match free
Source: Ballon 2007; STL Partners analysis
More modular technology
Decentralised network intelligence
More punitive regulation
Control Drivers Value Drivers Control & Value Drivers
Less vertical integration
Weaker customer relationships
Value Network Technology Service Offering Finance The Marketplace

Sexy new services paid for by end user will NOT yield continued revenue and profit growth

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… 

Amazon – retailer-cum-platform provider
Pre-2005
Retailer of books and games
Now
Retailer + platform (Amazon Marketplace)

Pre-2005
52,000 SKUs
Now
100,000s of SKUs

Pre-2005
52,000 SKUs
Revenue from end user sales
Now
100,000s of SKUs
New revenue from enabling services to traders

Pre-2005
52,000 SKUs
Profitable but margin squeeze
Now
100,000s of SKUs
Profit underpinned by platform

Pre-2005
52,000 SKUs
Profitable
Best-in-class logistics
Now
100,000s of SKUs
Improved, lower cost logistics (more scale)

Pre-2005
52,000 SKUs
Profitable
Best-in-class logistics
Big consumer base, strong relationships:
E.g. peer reviews
Now
100,000s of SKUs
Improved, lower cost logistics (more scale)
More customers, stronger relationships:
E.g. Premium logistics – Amazon Prime

A new telecoms business model Source: STL Partners Analysis $ $

A successful Telco 2.0 business model restores elements of value and control to the Telco industry
Single platform for multiple industries
Operator remains gateway to end users
Source: Ballon 2007; STL Partners analysis Control Drivers Value Drivers Control & Value Drivers
New revenue source from upstream customers
Services more complementary
End-users add value to platform
More customer intimacy
Centralised intelligence – resides in platform
Unclear – potentially a move into less regulated markets
? Value Network Technology Service Offering Finance The Marketplace

Three things required to bring Telco 2.0 to fruition Source: STL Partners analysis L eadership Skills Collaboration

Three things required to bring Telco 2.0 to fruition Source: STL Partners analysis L eadership Skills Collaboration MY CONTEXT Location Presence On/Off Roaming MY CREDIT Bad debt Demographics Average balance MY PERSONAL DATA MY CONTENT MY IDENTIFIERS MY INTERACTIONS MY RELATIONSHIPS MY DEVICES Name Address Gender Profile Preferences SIM SoftSIM Serial Number Device details Number SIP Number IP Address Pictures Videos Calendar Address Book Bank School Friends Workplace Browsing History .mobi domains QR Codes

Three things required to bring Telco 2.0 to fruition Source: STL Partners analysis L eadership Skills Collaboration

$375 billion opportunity (not guaranteed!) $1,230bn $689bn EU-27 and North American Telecoms Source: STL Partners, Telecoms Two-Sided Business Model Opportunity and Future Broadband Business Models , both published in 2008

Thank You More at www.telco2.net

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Rebuilding Telco value & control via a two-sided business model

by bazza1664 on Nov 24, 2009

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Rebuilding Telco value & control via a two-sided business model — Presentation Transcript