1) Traditional telco business models are challenged by new ecosystems-driven competition from OTT players like WhatsApp and WeChat that offer alternative services. 2) Telcos need to reinvent themselves from singular networks optimized for connectivity to modular structures that leverage ecosystems to diversify and drive new revenue from services. 3) A modern telco approach focuses on fostering innovation beyond networks by providing APIs, developer tools, and value-added services to ecosystems rather than competing directly with platforms.

1. Economic Models for
Reinventing Telco
Telco Innovation with APIs
Andreas Constantinou VisionMobile
@andreascon @visionmobile
Apigee
Bala Kasiviswanathan
@apigee
@BalaK

2. @apigee @VisionMobile
@BalaK @andreascon

3. groups.google.com/group/api-craft

4. slideshare.net/apigee

5. youtube.com/apigee

6. Agenda
 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

7. A New Playing Field for Telcos

8. The new rules of the game in mobile
telecom mobile computing
share of needs,
attention & wallet
4 apps 750,000+ apps
(phone, text, contacts, camera) (encompassing all user needs)
service
telco mobile platforms
distribution
basis of reliability & scale choice & flexibility
competition of networks of services
business
models proven & predictable new & unpredictable
Source: VisionMobile

9. The domino effect in the telecom industry
apps challenge telco core services
hundreds of thousands of apps replace telco VAS
3
2
iOS, Android
1
broke the walls of
walled gardens
Source: VisionMobile

10. OTTs compete with telcos for control, not for profits
Content
Ads Ads
Distribution
Connectivity
Access
software
licensing
Screen
Devices
retailing
User
denotes company’s core business

11. OTT competition with telco is asymmetric
Core product Complement
asymmetry
A product where a A product consumed
business generates with the main product
profits
OTT products Complement
asymmetry
Consumer electronics, high-speed mobile
on-line advertising, e- Internet access
commerce…
Telcos cannot compete with OTTs – they are in a different business

12. The developer is the key in the app economy
App Consumer
App Developer API
App API
Team Systems
User

13. The 5 ingredients of a successful ecosystem

14. Traditional financial tools fail predictably in the
conditions of uncertainty
1. select wrong projects due to
fundamental unpredictability
Source: HBR, “Innovation Killers”
How Financial Tools Destroy Your Capacity to Do New Things
by Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih

15. Traditional financial tools fail predictably in the
conditions of uncertainty
1. select wrong projects due to
fundamental unpredictability
2. disregard
cost of doing nothing
Source: HBR, “Innovation Killers”
How Financial Tools Destroy Your Capacity to Do New Things
by Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih

16. Traditional financial tools fail predictably in the
conditions of uncertainty
1. select wrong projects due to
fundamental unpredictability
3. marginal cost
analysis is biased
against investments
in new capabilities
2. disregard
cost of doing nothing
Source: HBR, “Innovation Killers”
How Financial Tools Destroy Your Capacity to Do New Things
by Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih

17. Now the good news -
mobile is a booming market

18. … but telcos need to re-invent themselves

20. Before Structure: the singular telco
•Optimised for
large scale
99,999% reliability 2 reliable delivery
of few
connectivity
services at large
scale
network
1 distribution and retail
telephony
messaging
Designed as a billing
connectivity user identity
business with high authentication
CAPEX and OPEX consumer intelligence
3
take-all-or-nothing: services are
tightly coupled to the network
Source: VisionMobile

21. After Structure: the modular telco
Untapped potential
Distribution business
Disrupted by alternatives with
asymmetric business models
Services business
Profit pressure due to
“prisoner's dilemma”
Connectivity business
Source: VisionMobile

23. Before
Ecosystems approach: compete
Legacy telcos compete with platforms head-on
e.g. LiMo, Vodafone360, RCS-e

24. After
Ecosystems approach: leverage
The modern telco leverages ecosystems
 foster innovation
 diversify into new customer base & businesses
 subscriber loyalty
 drive usage

26. Before
Innovation focus
Legacy telcos innovate in networks:
EDGE, WCDMA, HSPA, HSPA+, LTE, LTE-Advanced

27. After
Innovation focus
Modern telcos add value to ecosystems beyond access
e.g
 local presence
 digital / physical distribution
 consumer insights
 user ID
 billing, voice APIs

29. Before
Developers
Legacy telcos see developers as a source of revenue
 high barriers to entry
 stringent processes
 lock-in relationships
 risk transfer to developers

30. After
Developers
Modern telco:
 Developers are value-added resellers
 Apps are shops
 APIs are contracts

32. Before Voice
Legacy telco sees voice as telephony
Based on 19th century assumptions on technology
and user needs

33. After Voice
Modern telco sees voice as API
feature phones smartphones web
voice = device voice = app voice = API

34. “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 Christensen
Professor, Harvard Business School

35. Questions?

36. THANK YOU
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