Business & Industry Transformation, an opportunity for a new business practice

The world – including business, industry, markets, consumers, economies, and the demographic landscape – is changing at a rapid pace. Everything is changing due to globalization, free movement of capital and social factors. In the last decade, new economic powers have emerged, challenging established structures. New corporate giants have emerged too, taking over new market spaces. Industries have been transformed by disruptors’ business models (take the music industry for example). Today, your most important competitor may not even exist in your industry yet. There is massive competition between industries.
Think that Google, Facebook, and Twitter are less than 15 years old (Google recently celebrated its 15 years anniversary). The internet has radically changed our lives. It all started with fixed-network and dial-up services and the best is yet to come with mobile broadband networks in the era of the Networked Society.

The question is what’s next and how do we get there? Do we master the ongoing change process or are we just going with the flow? Are we going to reproduce the same economic concept of open-ended consumption or are we still able to change the course towards a model with more societal development that tackles fundamental social problems while still creating economic value.

By the end of this decade, we will be more than 8 billion humans on this planet. According to our recent Mobility Report, there are over 6.4 billion mobile subscriptions worldwide today, with 130 million new net additions coming in the first quarter of 2013. The economic model we have today is not sustainable. We must start seriously redefining it!

Considering its broad impact on the business landscape and the resulting transformation of industry, the Networked Society represents a tremendous opportunity for a new business practice. It has never been so easy and so ‘cheap’ to start up a new business. Through the increasing number of connected devices, combined with high-performance mobile broadband infrastructure and cloud technology, a large amount of data is now available for processing. This information is helping to prevent disasters, fight poverty, and empower women in poor countries. The sky really is the limit for sustainable business innovations that generate profits for shareholders while at the same time creating significant value for society.

Thankfully, we are starting to see, here and there, initiatives that are driving change towards this mindset. Here are a few examples:

• The shared value initiative spearheaded by Harvard professor, Michael E. Porter.

• A number of institutions have started providing MOOC (Massive Open Online Course). Both MIT and Harvard joined forces to launch the not-for-profit, edX, a free and open online platform. You can imagine the impact that this initiative would have on student communities in Africa. Students who historically couldn’t even afford to join an African school, suddenly can follow a curriculum at one of the most prestigious school on earth. And all of it for free! And all over a mobile broadband network.

• The Coca-Cola Company with partners, NGOs and companies, launched a water purification system housed within the community center to help provide communities in need with access to safe drinking water and other basic necessities. Through this commitment, they aim to deliver 500 million liters of safe drinking water, while promoting greater local development in communities that need it most.

• And finally, Ericsson has made the commitment to step up efforts to meet the Millennium Development Goals. This is based on a strong belief that ICT can make this happen and is happening through a multitude of actions and collaborations. Here are just a few:

• Together with Refugees United, we have developed an application for mobile phones that help to find missing loved ones who have been separated by conflict or disaster – sometime for years.
• Another example is Ushahidi, a website that was developed using crowd sourcing to map reports of violence that occurred in 2008 in Kenya following the country’s 2007 elections.
• Active participation in UN Broadband commission with co-writing the report on Transformative Solutions for 2015 and beyond.

These examples are just a few of the reasons I truly believe that the Networked Society can be a driver of economic growth and societal development in this all communicating world.

This post has been published simultaneously on the Ericsson Networked Society Blog.

Amsterdam bicycles make the city smarter

From its humble beginnings as a 13th-century fishing village, Amsterdam today is a major hub for business, tourism and culture and has a long and well-respected tradition in the arts. In this post I’ll talk about some of Amsterdam’s ambitious plans for making urban life smarter.

A little history about Amsterdam: In 1323, the city owned the exclusive right to import beer from Hamburg while at the same time the herring trade grew rapidly allowing fishermen to increase profits. In 1602, the Dutch East India Company was founded which the city owned a majority share in. The 17th century was a period of unprecedented prosperity during which Amsterdam underwent massive urban development resulting in, among other things, its famous canal system. Art also flourished during this time and the number of artists, art dealers, as well as the amount of art produced, grew enormously. Amsterdam had become a thriving cultural city, producing masters such as Rembrandt van Rijn, Johannes Vermeer and Jan Steen.

Today, Amsterdam is a metropolis of more than 800,000 inhabitants (excluding the suburbs) with nearly 12 million international tourists visiting the city in 2012. It is also a smart city, where fiber, broadband and LTE networks are widely deployed and where anyone can enjoy free Wi-Fi access anywhere in the city.

Many initiatives for making the city smarter have been launched in recent years. One of them is the Amsterdam Smart City (ASC) spearheaded by the Amsterdam Economic Board, the City of Amsterdam and various private business interests. It’s a partnership between businesses, government, research institutions and the citizens of Amsterdam to develop the Amsterdam Metropolitan Area into a smarter city.

ASC connects the needs and wishes of users, residents, government and business and provides a platform for testing innovative products and services. By establishing the Amsterdam Metropolitan Area as an urban living lab, ASC has made it possible for businesses to test and demonstrate innovative products and services.

Many of these projects have already been launched. One of the most original is Ring-Ring. Amsterdam is known for its biking tradition (there are more bicycles than inhabitants in the city) and cyclists make a significant contribution to city health, clean air, social interaction, improved accessibility and a more pleasant public space. Ring-Ring rewards every cyclist for each kilometer cycled! With an innovative technique, the smartphone app counts all the cycled kilometers (Fkm) automatically. Each Fkm = € 0.10. The Fkm that are saved can be redeemed, using the app, at a Ring-Ring affiliated connected business, which are good for making purchases or for getting discounts on products or services.

This is a great example of innovation – empowered by ICT, technology and people – in order to reduce carbon emission and make the city life much better.

This post has been published simultaneously in the Ericsson Networked Society blog as well.

Here’s how ICT makes Jakarta gets smart

With a population of about 9.6 million, Jakarta is the largest city in Indonesia as well as its capital. It’s the country’s economic, cultural and political center and is experiencing rapid urbanization even in the peripheral areas. It’s the most populous city in Southeast Asia and is the tenth-largest city in the world. In short, it’s a megacity – full of hope, optimism, generosity and cultural diversity. In this post, I’d like to take a closer look at how ICT is helping to make Jakarta a smart city as well.

In 2010, the Indonesian telecom market hit its saturation point. With 278 million subscribers, Indonesia is the 4th largest mobile market in the world and the world’s top-ten 3G market. The rapid adoption of smartphones has pushed mobile operators to become key players in the internet sector. By 2015, it is foretasted that smartphones will represent around 40 percent of all handsets in Indonesia. Mobile operators are pushing data services with big advertising budgets – a move that has been helped by declining device and subscription prices.

Like most megacities, Jakarta is struggling to meet the transportation needs of its people. Frustration with Jakarta’s traffic congestion is a daily discussion point for Jakartans. First-time visitors are confronted with the problem the moment they leave the airport. A taxi driver told me once that the average car speed in the city is less than 10 km/h.

Many initiatives are already ongoing to tackle transportation and traffic problems. Of course, additional investment in transportation equipment and infrastructure is needed but these problems can often be solved, or at least mitigated, by providing real-time visibility into traffic elements in order to dynamically optimize existing transportation resources and inform users of the state of traffic in the city.

But who can provide and process this large volume of dynamic data other than ICT sector? With a widespread mobile broadband network, an information system could dynamically push location-based information to city dwellers and commuters as part of a smart mobility ICT solution. However, Jakarta citizens and commuters also need to be engaged, informed and held accountable for this change as well.

Another interesting case is power supply availability. Electricity is not evenly distributed throughout Jakarta. Street vendors use illegal and dangerous electricity connections while working at night. The state electricity company, PLN, is piloting a new program where street vendors can buy small, affordable amounts of electricity through a coin-operated device. When they run out, they can top up with another coin, like using a pay phone. By adding M2M features to the device, PLN will be able to operate its smart wireless device remotely and collect usability information in real-time.
However, a smart city isn’t just about ICT and technology. it’s also about human and social capital, and about educating the urban population. To be successful, a smart city initiative must be a inclusive and democratic program that is embraced by Jakarta’s citizens. That is how citizens can together shape their future.

From an ICT and business perspective, big data analytics, cloud-based services, and M2M-enabled services that intelligently provide real-time inputs will adequately provide smart ICT solutions. New business models between utility and technology providers can be developed to offer these integrated services. Funding mechanisms will be needed and governmental and public-private partnerships are probably the most suitable project models.

Jakarta, the smart city, is a very promising market for service providers. It’s a city that will rely on these providers’ ability to innovate and tap into each other’s industries while taking on multiple roles in the ecosystem.

This post is also published here on the Ericsson Networked Society Blog.

Book review: The End of Competitive Advantage!

What do Nokia, Kodak, Blackberry have in common? Both thought that their competitive advantage was there to stay for ages, but did not see the ongoing changes in the market and the related industry.

Interesting book from a smart lady!
Author McGrath argues that businesses must stop basing their strategies on the idea of sustainable competitive advantage, because competitive advantage is dead! says McGrath. Instead, businesses should focus on pursuing short-lived opportunities with speed and decisiveness.

Today, the most important competitor you have may not even exist in your industry. Industries face massive competition from different industries.The book was based on a series of case studies considering world’s largest companies. Only 8% of world’s largest companies could sustain 5% growth for 5 years in a row. Only 10 companies had been able to sustain 10% growth over year.Tsingtao, ACS, Indra, Atmos Energy, Infosys, Cognizant, Yahoo Japan, KRKA, Factset and HDFC Bank.Why?

McGrath recommends  a new playbook for strategy as summarized below:

1 - Continuous Reconfiguration
Businesses have to be good at executing the traditional stuff but they also have to be in a state of continuous reconfiguration. Be aware of, hypersensitive to, the environment around you.
Verizon – often spooked analysts by discarding existing highly profitable business units and focusing on longer term growth areas. Has paid off in long terms as others have stuck with existing businesses that eventually fail.
Pallet manufacturer and distributor Brambles found supermarkets has major issue with handling of e.g. soft fruit. Developed packages that are picked and packed into trays directly. Reduces handling significantly and gets product to market faster. Don’t think of themselves as a pallet distributor, see themselves as solving logistic challenges for customers.

2 - Healthy disengagement
How do you recognize when things need to change before it is too late to do something about it?

3 - Deft resource allocation
Powerful people control where the resources go in businesses. They tend to be senior within companies and want to support the status quo – Blackberry’s vast spend on relaunch of BB10 for example. The allocation of resources for the future has to be separated from the people who control the existing profitable lines.

4 - Innovation Proficiency
Innovation today has to happen faster and more routinely than at times in the past. It cannot be episodic.

5 - New leadership mindset
More open, candid. “Don’t bring me any surprises” “Don’t bring me problems, bring me solutions”. It means the executives only hear about the stuff that really matters when it is obvious to everyone. People in the executive suites need to be more willing to embrace uncertainty and surprises.

Mobile broadband + emerging markets = disruptive innovations

see my article published here 

Circular economy in smart city Rotterdam, the Netherlands

The circular economy is a new concept for building a new economy that’s regenerated by design. Nothing is lost, everything is transformed. Moving away from linear transformation process, based on ‘Take-> Make->Dispose’ to a circular process where waste becomes input.  What is the relation with the city of Rotterdam? This post introduces a case of circular economy vision in the city of Rotterdam; and is also a call for discussion and idea sharing around this topic with the readers and the Networked Society ecosystem members.

Erasmus Bridge Rotterdam 

Rotterdam is a charming, young, dynamic and international city. It is the home of internationally acclaimed renaissance humanist Desiderius Erasmus that has given his name to a popular European education program. Rotterdam is a world city and a world port, where more than 30% of Europe import/export goods transits. The port of Rotterdam is the most important industrial cluster and the largest logistics hub in Europe. It hosts many corporates headquarters and/or regional hubs. Rotterdam is also a smart city, where fiber, broadband and LTE networks are largely deployed. Anyone can enjoy free WiFi access everywhere in the city and a variety of services are offered on mobile devices. 

Many initiatives for building a smarter Rotterdam are launched from public and private sectors and are supported by the city council. Innovations -empowered by ICT- in healthcare, transportation are surging and encouraged in order to make Rotterdam city life easier. 

Because of the fragile geological state of the Netherlands (below sea level and permanently under threat of flooding), the Dutch people have developed - earlier than anyone else - the awareness about mother nature and its ecosystem. They have embraced sustainable technologies and practices, and now use ICT to reduce carbon emissions and industrial waste. 

One the most ambitious, groundbreaking and visionary project driven by the port of Rotterdam –truly the heartbeat of the city of Rotterdam - is the strategic vision of implementing the circular economy framework to this gigantic industrial cluster by 2030.This strategy is a call for all ICT players and the Networked Society ecosystem to take part in this activity, and spot the opportunities; by providing innovative ICT solutions and business models across all industries domains; fleet management, smart grids for electricity, bio-based industry, etc.

Many consulting companies are already on the starting blocks to provide their expertise and services.Ericsson, with its global professional services organization, its global network of consultants, its cutting-edge sustainable portfolio and its global footprints in ICT solutions can be a strong partner that can deliver great values to the port of Rotterdam 2030 vision.

Blue Ocean Strategy in the Networked Society – European Operator, Part I

The European operator operates in a saturated market with over 140% mobile penetration, with highly competing operators who provide telephony, internet, TV, broadband, cloud and M2M services. The market includes many active MVNO’s competing fiercely on price and putting a lot of pressure on incumbent operators. A price war and increased use of OTT services added to a very demanding customer base using multiple devices makes the market extremely competitive.
This is what is called a Red Ocean market.

 The Red Ocean Strategy Canvas looks as follows:

 1. Price: Competitive prices are offered by all operators. MVNO’s are very aggressive offering prices below market’s standard; which oblige incumbents to follow and adjust their offerings.

 2. Services portfolio: Internet access, TV, Voice & Video calls, SMS/MMS are the main revenue streams. Operators are still heavily charging for calls and SMS. On the other hand, OTT services are eating up some of these SMS/Voice revenues. Operators are trying to stop this intruded competition by offering packages with free SMS and/or free minutes.

3. Network performance: The QoS is an important differentiator, and operators are investing more and more in 3G and the development of the new LTE network. As long as the mobile traffic demand will continue unabated, network investments will continue as well.

4. OSS/BSS investment: Operators are investing in the BSS because of the increased numbers of new services and new devices.

 5. Brand: Another important differentiator; operators promote their offerings and brand through costly marketing campaigns in different Medias. They also started to be more active in the social media.

 6. International calls: are still charged expensively, but for how long?

 7. Handsets subsidies & SIMonly (or BYOD): In order to attract and lock new subscribers, operators are still subsidizing handsets. At the same time, in order to counter MVNO’s –who offer BYOD (Bring Your Own Device) – most of them offers what they call SIMonly package.

 8. Cloud services: Mainly backup services are offered to lock in subscribers.

9. Different tariff plans: Many different tariff plans for different services and for different countries.

 10. M2M: Still in its infancy but most of the operators pretend to have an M2M offering for different business domains.

And here is the Red ocean strategy canvas:

Red ocean - European operator

Blue Ocean Strategy in the Networked Society – Asian Operator #2

 In the precedent post, I created the Strategy Canvas for the Red Ocean of the Asian operator. In this post we will see how applying Blue Ocean Strategy within the Networked Society will affect the operator’s business, strategy and marketplace.

The ERRC grid looks like this:



Asian operator ERRC grid

•  Pay As You Go: The consumers want to control their spending and because I am proposing to introduce bundles of buckets. This should be eliminated.
• Different Tariff plans: The high number of different tariff plans should be eliminated and replaced by simpler bundled tariff plans. This will lead to reduced operations in the BSS and hence increased cost savings.

Reduce

• National Roaming charges are still high while in other market consumers only pay a single access charge. The regulator should remove these national roaming charges in order to stimulate voice traffic.
• Some of the services are not really adding value to customers; most of them are standard telecom supplementary or sms-based services.

Raise

• Services portfolio: Increase and diversify the portfolio based on consumers needs, behaviors and spending patterns.
• Network performance: This will improve customer satisfaction, reduce churn with a high quality network.
• Coverage: reach a large number of (sub-) urban and rural populations to increase customer reach, customer satisfaction and sales. This will require additional investments in the radio network. This investment should be easily justified by new customers’ acquisition.
• Consumers Intelligence: understanding the consumer’s needs is key for future growth opportunities. Ericsson ConsumerLab can provide valuable input for strategic decisions, through its extensive research on consumer behavior. According to the recent Personal Information Economy report from Ericsson ConsumerLab, more than 44% of the study respondents would let companies use their information to personalize offers, and 41% would let companies use personal info to improve or develop new products. Hence the increase of Consumers Intelligence.

Create

• Bundled plans: This will provide the ‘segmented’ consumers a targeted offering and at the same time provide the means to sell new data services (3G & 4G network are deployed in every region of the country) and fight the so-called over-the-top internet services providers. At the same time, it provides a suitable solution to the cost control drive of the subscribers in this market.
• Innovation: this is an important opportunity for competitive differentiation in this marketplace. To develop value propositions beyond simple voice and data plans, for the growing enterprise marketplace (companies from different industries are connected in the Networked Society), for the non-served rural population and the growing sub/urban addressable market. Cloud computing is an integral part of the Networked Society. Cloud offerings will improve traffic volumes but also drive higher ARPU by moving up the value chain and selling integrated offerings of connectivity, infrastructure and software-as-a-service. These offerings will create longer-term loyalty with customers and increase customers’ stickiness and create a new marketplace.
• Innovative business models: Explore new revenue streams by testing innovative business models to address customers’ needs. In the Networked Society, telcos have the opportunity to become core ICT providers by creating network-centric business through data centers or service-oriented developments. In the Networked Society, different customers from different industries are connected. This totally new marketplace needs to be addressed, served and supported. Tremendous opportunities for growth ahead indeed that will require innovative business models to cater to this increasing demand.
• Cost control: Mobile traffic demand will continue unabated and the need for continued investments in the radio access network, the backhaul, the core and the OSS/BSS will increase. Operating the legacy platforms and services in parallel with the new network introduces significant costs in the network, OSS, BSS and overall service operations. Cost reduction can be achieved with network outsourcing. Ericsson is the world leader in Managed Services. Ericsson operates large multi-vendor networks and related business processes—such as provisioning, network engineering, applications management, field maintenance, network optimization and spare parts management.

And here is the Blue Ocean Strategy Canvas:

Blue Ocean Strategy applied to Telco’s in the Networked Society

Blue Ocean Strategy applied to Telco’s in the Networked Society

I recently wondered why we shouldn’t apply Blue Ocean Strategy to Telco’s within the Networked Society; it is obviously about transforming, rebuilding and creating new market space. So I have decided to give it a try and I must confess that it is a tedious task; a challenge I should say, to do it outside my working time. In this first post I will set the scene and lay down my assumptions. In the coming posts I will elaborate more in details on the results.

Which operator did I choose? It did not take me too long to make a choice. I thought I should better select interesting Telco’s, operating in dynamic and challenging markets. I have decided to take two mobile operators from different part of the world; because the market requirements are different, the competitive factors are different, the competitive forces are different, the consumers and their behaviors are different. Their strategy should be different too. I have selected one Asian and one European (could very well be North American) mobile operator.

Before I start with setting the stage, I would like to briefly tell something about Blue Ocean Strategy. Professors W. Chan Kim and Renée Mauborgne have written one of the best-selling business strategy book of all time: Blue Ocean Strategy. Both teach business strategy & Management at the Blue Ocean Strategy Institute at INSEAD. Blue Ocean Strategies have been applied to Circus (Cirque du Soleil), Wine (Yellow tail), Gaming (Nintendo Wii), Airline (Southwest) and other industries.

The reader is required to have some basic knowledge of Blue Ocean Strategy.

Let’s set the scene now!

The Networked Society

What are the main characteristics of the Networked Society?
      i.        A highly performing Mobile Broadband network with LTE, heterogeneous network
and Wi-Fi. Radio coverage everywhere you go.
     ii.        A variety of connected devices with a variety of services and products serving a variety of industries.
    iii.        A cloud ecosystem providing a multitude of services easy and ready to use, to manage and to configure.

Blue Ocean Strategy approach

Due to time constraints I will not pursue the full blown Blue Ocean Strategy steps and will not use all of its available tools. I will limit this exercise only to two tools, the Strategy Canvas and the ERRC grid.

Let’s start defining the Red Ocean of the selected Asian operator.

Market background

My Asian operator operates in a very large and saturated telecom market, with highly competing operators; providing telephony services, Internet and broadband services. Operators compete fiercely on price; value-cost tradeoff means a lot in this market. A price war added to a declining ARPU makes the market extremely competitive and my operator situation relatively vulnerable. It is clearly a Red Ocean market.

The Strategy Canvas
Let have a look at the competitive factors in order to create the diagnosis for the as-is market situation and plot them into the Strategy Canvas.

1.    Price: Due to a highly competitive market the price is very low.

2.    Services portfolio:  Voice & Video calls, SMS, MMS and ringtones are the main revenue stream. Video calls are not widely used because of high price and bad QoS.

3.    Network Performance: The Quality of service is not good due to ongoing 3G network deployment.

4.    Coverage:  The mobile infrastructure is still not fully operational, and this affects coverage.

5.    Broadband services: All competitors are offering this service but the quality is still not good enough.

6.    Pay as you go: is offered by all operators.

7.    Roaming: Roaming charges are still relatively high.

8.    Different tariff plans: Many different tariff plans for pre/post paid subscribers

9.    Value added services: different supplementary services are offered in bundles or charged for separately.

10.  Media & Music downloads: low penetration due to high price.

And here is the Red Ocean Strategy Canvas. It provides a weighted snapshot of the competitive factors and a high level diagnostic of the market where my Asian operator is competing in.

In the next post, we will see how the application of Blue Ocean Strategy will define the Blue Ocean Strategy Canvas and create the Eliminate/Reduce/Raise/Create grid within the Networked Society.

Why Telco’s are investing heavily in Cloud Computing?

In my precedent post - where I have analyzed the impact of Cloud computing technology on Telcos - I came to the conclusion that this impact was three fold:  Value chain, Operating Model & the need of strategic alliance.

3fold impact

“…Telecom operators are making a land grab for physical assets in order to sell virtual goods. Acquisitions and investments totaling almost US$8 billion were executed in the first six months of 2011, according to Informa’s Telecom Cloud Monitor 1H11 published on July 29^th 2011…”

Telecom Cloud purchase and build - Informa Telecom Cloud Monitor 1H11

Why are operators investing so heavily in Cloud assets? The answer is simple: they have to! They have no choice. The telecom and IT barriers are broken and in front of them the Over-The-Top players are becoming greedy and are investing the Telecom domain/market; the telcos have to restructure their business models and reorganize in order to avoid the disruption threats in the horizon.

Cloud Partnering - Informa Telecom Cloud Monitor 1H11

In North America, Telecom operators are becoming leading Cloud providers through acquisitions and investments. But are Telecom operators getting their strategy right? Are acquisitions and investments enough?


Or will they substitute dumb pipes with dumb clouds?

To be continued…

Book review: The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business

Book title: The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business

• ISBN-10: 1422172813
• ISBN-13: 978-1422172810

Author: Rita Gunther McGrath
review here 

Read this book description  (excerpt from amazon.com)

Are you at risk of being trapped in an uncompetitive business?
Chances are the strategies that worked well for you even a few years ago no longer deliver the results you need. Dramatic changes in business have unearthed a major gap between traditional approaches to strategy and the way the real world works now.

In short, strategy is stuck. Most leaders are using frameworks that were designed for a different era of business and based on a single dominant idea—that the purpose of strategy is to achieve a sustainable competitive advantage. Once the premise on which all strategies were built, this idea is increasingly irrelevant.

Now, Columbia Business School professor and globally recognized strategy expert Rita Gunther McGrath argues that it’s time to go beyond the very concept of sustainable competitive advantage. Instead, organizations need to forge a new path to winning: capturing opportunities fast, exploiting them decisively, and moving on even before they are exhausted. She shows how to do this with a new set of practices based on the notion of transient competitive advantage...