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

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How telco operators can add value by adding a two-sided business model to their existing one-sided retail model

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

  1. 1. Rebuilding value & control via a 2-sided business model Chris Barraclough, MD, STL Partners/Telco 2.0
  2. 2. Agenda <ul><li>What is a business model? </li></ul><ul><li>Problems with Telco 1.0 business model </li></ul><ul><li>New opportunity: Telco 2.0 </li></ul>
  3. 3. 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
  4. 4. The success of a company’s (or collection of companies’) business model is ultimately a function of two factors Value Control +
  5. 5. Telco 1.0 business model is now under pressure in several domains <ul><ul><li>Low/no growth in end user revenues </li></ul></ul><ul><ul><li>More companies sharing revenues and generating costs </li></ul></ul><ul><ul><li>More substitute products </li></ul></ul><ul><ul><li>Unable to match free </li></ul></ul>Source: Ballon 2007; STL Partners analysis <ul><ul><li>More modular technology </li></ul></ul><ul><ul><li>Decentralised network intelligence </li></ul></ul><ul><ul><li>More punitive regulation </li></ul></ul>Control Drivers Value Drivers Control & Value Drivers <ul><ul><li>Less vertical integration </li></ul></ul><ul><ul><li>Weaker customer relationships </li></ul></ul>Value Network Technology Service Offering Finance The Marketplace
  6. 6. Sexy new services paid for by end user will NOT yield continued revenue and profit growth
  7. 7. Sexy new services paid for by end user will NOT yield continued revenue and profit growth
  8. 8. Sexy new services paid for by end user will NOT yield continued revenue and profit growth
  9. 9. Sexy new services paid for by end user will NOT yield continued revenue and profit growth
  10. 10. 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… 
  11. 11. Amazon – retailer-cum-platform provider <ul><li>Pre-2005 </li></ul><ul><ul><li>Retailer of books and games </li></ul></ul><ul><li>Now </li></ul><ul><ul><li>Retailer + platform (Amazon Marketplace) </li></ul></ul>
  12. 12. Amazon – retailer-cum-platform provider <ul><li>Pre-2005 </li></ul><ul><ul><li>Retailer of books and games </li></ul></ul><ul><ul><li>52,000 SKUs </li></ul></ul><ul><li>Now </li></ul><ul><ul><li>Retailer + platform (Amazon Marketplace) </li></ul></ul><ul><ul><li>100,000s of SKUs </li></ul></ul>
  13. 13. Amazon – retailer-cum-platform provider <ul><li>Pre-2005 </li></ul><ul><ul><li>Retailer of books and games </li></ul></ul><ul><ul><li>52,000 SKUs </li></ul></ul><ul><ul><li>Revenue from end user sales </li></ul></ul><ul><li>Now </li></ul><ul><ul><li>Retailer + platform (Amazon Marketplace) </li></ul></ul><ul><ul><li>100,000s of SKUs </li></ul></ul><ul><ul><li>New revenue from enabling services to traders </li></ul></ul>
  14. 14. Amazon – retailer-cum-platform provider <ul><li>Pre-2005 </li></ul><ul><ul><li>Retailer of books and games </li></ul></ul><ul><ul><li>52,000 SKUs </li></ul></ul><ul><ul><li>Revenue from end user sales </li></ul></ul><ul><ul><li>Profitable but margin squeeze </li></ul></ul><ul><li>Now </li></ul><ul><ul><li>Retailer + platform (Amazon Marketplace) </li></ul></ul><ul><ul><li>100,000s of SKUs </li></ul></ul><ul><ul><li>New revenue from enabling services to traders </li></ul></ul><ul><ul><li>Profit underpinned by platform </li></ul></ul>
  15. 15. Amazon – retailer-cum-platform provider <ul><li>Pre-2005 </li></ul><ul><ul><li>Retailer of books and games </li></ul></ul><ul><ul><li>52,000 SKUs </li></ul></ul><ul><ul><li>Revenue from end user sales </li></ul></ul><ul><ul><li>Profitable </li></ul></ul><ul><ul><li>Best-in-class logistics </li></ul></ul><ul><li>Now </li></ul><ul><ul><li>Retailer + platform (Amazon Marketplace) </li></ul></ul><ul><ul><li>100,000s of SKUs </li></ul></ul><ul><ul><li>New revenue from enabling services to traders </li></ul></ul><ul><ul><li>Profit underpinned by platform </li></ul></ul><ul><ul><li>Improved, lower cost logistics (more scale) </li></ul></ul>
  16. 16. Amazon – retailer-cum-platform provider <ul><li>Pre-2005 </li></ul><ul><ul><li>Retailer of books and games </li></ul></ul><ul><ul><li>52,000 SKUs </li></ul></ul><ul><ul><li>Revenue from end user sales </li></ul></ul><ul><ul><li>Profitable </li></ul></ul><ul><ul><li>Best-in-class logistics </li></ul></ul><ul><ul><li>Big consumer base, strong relationships: </li></ul></ul><ul><ul><ul><li>E.g. peer reviews </li></ul></ul></ul><ul><li>Now </li></ul><ul><ul><li>Retailer + platform (Amazon Marketplace) </li></ul></ul><ul><ul><li>100,000s of SKUs </li></ul></ul><ul><ul><li>New revenue from enabling services to traders </li></ul></ul><ul><ul><li>Profit underpinned by platform </li></ul></ul><ul><ul><li>Improved, lower cost logistics (more scale) </li></ul></ul><ul><ul><li>More customers, stronger relationships: </li></ul></ul><ul><ul><ul><li>E.g. Premium logistics – Amazon Prime </li></ul></ul></ul>
  17. 17. A new telecoms business model Source: STL Partners Analysis $ $
  18. 18. A successful Telco 2.0 business model restores elements of value and control to the Telco industry <ul><li>Single platform for multiple industries </li></ul><ul><li>Operator remains gateway to end users </li></ul>Source: Ballon 2007; STL Partners analysis Control Drivers Value Drivers Control & Value Drivers <ul><ul><li>New revenue source from upstream customers </li></ul></ul><ul><ul><li>Services more complementary </li></ul></ul><ul><ul><li>End-users add value to platform </li></ul></ul><ul><ul><li>More customer intimacy </li></ul></ul><ul><ul><li>Centralised intelligence – resides in platform </li></ul></ul><ul><ul><li>Unclear – potentially a move into less regulated markets </li></ul></ul>? Value Network Technology Service Offering Finance The Marketplace
  19. 19. Three things required to bring Telco 2.0 to fruition Source: STL Partners analysis L eadership Skills Collaboration
  20. 20. 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
  21. 21. Three things required to bring Telco 2.0 to fruition Source: STL Partners analysis L eadership Skills Collaboration
  22. 22. $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
  23. 23. Thank You More at www.telco2.net

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