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3rd Millennium Networks & Services: Where's The Money?(1)
Business, Customers and Users Perspective
Tony Houghton, Business Strategy & Technology Advisor
www.tonyhoughton.com
1 Introduction
The coming innovations offered by telecommunications seem to have huge potential. They certainly have huge cost! Yet what will future services 'look and feel' and be like? And what will be the implications on sustainable profit? Or put more simply: Where?s the money?
We start by examining the business and technology uncertainty surrounding 3rd millennium networks and services. As we move towards future multi-channel, multi-service offerings to customers, there appear to be three big inhibitors:
? What are the requirements, as yet unfulfilled to the customer/user, that next generation services would meet?
? What are the business models and revenues associated with these new technologies and services?
? How do Telcos and potential partners (banks, retailers, media, utilities, government) communicate and collaborate to unleash the revenue potential associated with new technology and services?
We then describe how we might reduce this uncertainty with a business, customer and user centred approach based on ?day in the life? user scenarios presented in the form of dynamic visual simulations. These allow complementary experts, Telco and non-Telco, technical and non-technical, to examine potential services and business models, as well as addressing key related issues such as customer service, usability and security, and above all revenue opportunities.
From this is derived a business strategy and associated technology routemap. The business strategy in our example focuses on high value add bundled services such as home or family management. An associated technology routemap describes an increasingly multi-channel customer interaction. This routemap may be taken further to the point where experimental prototype services are created that can then be used as tools to refine the eventual product/service definition. We term this: ?Discovery to Delivery?.
2 Business And Technology Uncertainty
There are a number of potential players competing and/or collaborating over the same or overlapping multi-service, multi-channel playing fields.
For example, the UK government view of the multi-service, multi-channel future is summarised in the document ?Framework for Channel Strategies: delivering government services in the new economy?[1]. It describes:
? Mix of channels: so customers receive a wide range of coherent and efficient services into the home and elsewhere including government, finance, and utilities
? More convenience increases the number of customer interactions and customers use the new electronic channels to complement, rather than replace, existing channels
? Customers will use fully automated channels for simple inquiries, but will want more human interaction for complex transactions
The focus here is on cost effectively facilitating access to a wide range of services. In a similar yet complementary vein, focusing on increasing the range of services, the erstwhile utilities company CENTRICA describes a future of [2]:
? Young customers making international calls
? Gas, electricity, telecoms, credit cards, home loans, plumbing, heating and car recovery
? 15% profit from financial services by 2005
? Move to smart home
Our own work with a well-known bank [3] and also a large housing association [4] tells a similar story. There are many players, Telcos, Banks, Utilities, Retailers, Entertainment, Government, who will be competing for or collaborating in the same overlapping space: Multi-service, multi-channel, value add service bundles. So how will this pan out? Let?s start with the end customer or user by asking: Who Pays?
3 Who Pays?
In traditional Telco business models, it is usually the customer who pays. However, in the new multi-service, multi-channel era, that may no longer be the case for a number of reasons. Firstly, and most obviously the customer can only pay so much. Secondly, perhaps the customer will increasingly expect to receive services ?for free?. But thirdly, as illustrated in the user scenarios, it may well be that the customer will pay for few of the new services or service components. In this case, Who Pays?
To explore ?Who Pays?? Barwise [5] suggests there appear four possibilities:
(1) Customer pays
(2) Customer channel cost reduction
(3) Customer acquisition or retention
(4) 3rd party pays for access to the customer
Let?s examine these in turn:
(1) Customer pays - although we might suspect the truism that customers will expect to pay less and less for a given service, we might ?maximise the value? of the customer by cross selling and/or bundling value added services. So, the basic communications might be ?for free? but the total customer outlay is higher because the customer has bought more services.
(2) Cost reduction - we might discover economies of scale to reduce the unit cost of the transaction i.e. many more customers, or many more transactions per customer. Or it may simply be cheaper for the provider to offer an e-channel.
(3) Customer acquisition or retention ? as we maximise the value of each customer, the value of acquiring and retaining the customer becomes that much greater. Reducing churn to avoid new acquisition cost might be even more important than it is today.
(4) Third party pays for access to the customer ? the most extensive way of maximising customer value might be to establish win-win scenarios with 3rd parties and partners who would pay for access to the customer ? either indirectly by selling on profile information or directly by appearing on the provider?s site or communications device.
4 Who Makes Money?
To explore ?Who makes Money?? an organisation can leverage the user scenario visualisations to focus on their value chain participation and their competitive position [6].
Value Chain
Examining the value chain, various organisations are contenders for providing the same service or service component. For example, the bank, the mobile operator or the utilities company might all be contenders to supply the micro payment, consolidation and billing link of the value chain. But who might be best and/or most likely to succeed?
Competitive Positioning
Consideration of the competitive position would include an organisation?s geographic coverage, customer segmentation, current capability, brand and trust.
Based on the value chain competitive positioning, a given organisation will then decide:
? Which of their own services will they offer as a Retail Branded Service?
? Which of their own services will they offer to others as a Wholesale Whitelabel Service?
? Which services will they buy-in and how will they present them? Under their own brand? Or leveraging the brand of the partner supplier?
Analysing this from a Telco perspective might suggest that communications services will generate a certain revenue. However, there may be considerable extra revenue associated with the provision of both retail and wholesale services and service components such as security, payment systems, location awareness, personalisation, user and terminal interfacing. These have huge platform, scalability and support implications, which play to a Telco's core strengths.
In contrast, a bank might decide to focus on its position as a trusted financial partner and so offer its retail and wholesale finance services together with associated ?trust? services such as security (perhaps bought in from the Telco) and data storage.
However, these are but possibilities. Each bank or Telco has to come up with its own solution. How?
5 User Scenarios & Visualisation
To arrive at the above decisions, the user scenario visualisation approach has proved a valuable point of reference [3,4,7]. The User Scenarios are first and foremost user/customer centric. They are not created to illustrate services or technology. It is the other way round: They serve as a sounding board to examine how potential technology and services might support the user in their daily life, and where we might find that something which will drive people to use and re-use the service and tell others. At the same time, they allow us to consider ?Who Pays?? and ?Who makes Money?? The scenarios can be used by various specialists to examine a case from their own point of view, for example the security implications, the marketing potential, the customer service impact?and so on.
Our approach is to start by writing textual ?day in the life? scenarios. We then bring these to life by creating visual simulations. These range from PowerPoint or Flash (figure 1) to demonstration suites and prototypes. The approach has been used in a wide range of personal and business scenario combinations featuring male, female, young and old, interacting with devices both mobile and fixed.
In this simulation example, our user is a young lady who undertakes a number of activities centred on a future mobile device(s). Adeline (or Ad):
? Receives an ?autotrack? location based service message from her father, who just wants to know she is OK
? Chooses a game to play on her device
? Receives a call from her friend and gives her location on a map in order to meet up
? Sees a video clip on her device as she passes a music shop
? Receives a message from the service provider giving the location of the service providers? shop with a broadband access point from which the music can be downloaded
? Whilst waiting for the download, Adeline observes an associated broadband display with a holiday advert from a third party, and a ?student special? finance, telecom and utilities offer.
? She phones her father and asks for ePocket money to pay a deposit on the holiday
This gives us a visual, concrete way to examine many questions, for example: Who pays for the service in each instant? The daughter? Her father? Or a 3rd party such as the holiday vendor? Who bills? Who provides the security? Who supplies the eWallet?
More generally, we can explore: Who is the overall service provider? Telco? Utility company? Bank? Entertainment organisation? Government? How might they work together? Who will lead on brand? Where?s the money?
From these deliberations, we can pull together a business strategy. We would also of course build on this with other scenarios (personal and business, fixed and mobile, young and old) and other business modelling, experimental and statistical activities. From this, we can then build an associated technology routemap.
In parallel we can explore the customer data and revenue implications associated with the communications and service flows.
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