Digital trust and the api economy

2. © 2017 TM Forum | 2 Content  Executives’ views on ecosystems (global survey)  The power of digital platforms  CSPs as platform companies  The value of APIs  The importance of digital trust  How consumers are trusting companies (global survey)

3. © 2017 TM Forum | 3 Ecosystems seen as inevitable 90% of executives globally believe ecosystems will change their organization’s primary activities or focus areas Executives across all regions concur that ecosystems will change their organization’s primary activities or focus areas Telecom 92% Global cross-industry executive survey (n = 2,151, telecom executives 197) > full report available mid 2017

4. © 2017 TM Forum | 4 Changing the way business is conducted Traditional value chains are fragmenting Disruption reflects a fundamental change in the way business is conducted 55%global executives feel traditional value chains are being replaced Industries are converging 51%global executives feel the boundaries between industries are blurring New ecosystems are emerging 56%global CEOs believe engaging in ecosystems is the single most effective way to access new markets and new geographies

5. © 2017 TM Forum | 5 Ecosystem benefits vs. costs Net positive impact of ecosystems to the bottom line Average impact on revenue 12.6% Average impact on costs 10.9% 1.7pp more revenue than costs Many executives said that costs of embracing ecosystems outweigh the benefits, but executives from outperforming organizations believe ecosystem benefits outweigh costs Executives from outperforming organizations

6. © 2017 TM Forum | 6 Expanding organizational revenues 54% more 69% Outperformers 45% Underperformers 46% Outperformers 14% Underperformers Outperformers embrace partneringEcosystems grow revenues 229% more of executives from outperforming organizations actively encourage new types of partnering arrangements of executives from outperforming organizations believe ecosystems will help expand organizational revenues by more than 10% Executives of outperforming organizations embrace ecosystems faster and more comprehensively

7. © 2017 TM Forum | 7 Optimistic vs less-optimistic industries -12,0 -8,0 -4,0 0,0 4,0 8,0 12,0 16,0 ITservices Banking Telecom Transportation M&E C&P Industrialproducts Automotive Healthcare Financialmarkets Lifesciences Consumerproducts E&U Retail Insurance Travel Consumerelectronics Total sample Outperformers Overall average Outperforming organizations vs. overall summary by industry Profitability by industry (in pp) Expectedreturnsfrom ecosystemengagement Executives of top organizations in banking, healthcare, life sciences, travel among others, are especially optimistic Telecom

8. © 2017 TM Forum | 8 Expected and unexpected ecosystem gains Businesses embrace ecosystems because they anticipate benefits from participation and engagement But the innovation unleashed through ecosystems can also produce new opportunities that may not have even been considered in their absence Benefits from ecosystems can therefore be magnified – what we call dynamic (unexpected) innovation Ecosystems yield planned and unexpected gains1 An edge of unexpected gains over expected gains (revenues) Production Possibility Frontier Output 2 Output1 Source [1]: Production Possibility Frontier http://www.tutor2u.net/economics/reference/production-possibility-frontier Ecosystems create opportunities unattainable in their absence

9. © 2017 TM Forum | 9 Improve expected outcomes Pursue new opportunities • Enablement of new types of business models • New ways of engaging for both participants and customers • New ways to monetize products and services creating new value not existing before Irrespective the role having in ecosystems, businesses can improve expected outcomes Embrace ecosystems’ strategic potential • Access to new capabilities that they would otherwise have difficulty obtaining • Improved access to new markets, new geographies, new segments • New offerings by combining new and different combinations of assets Reduce engagement cost • Improved productivity by up-/reskilling employees through ecosystems • Increased effectiveness and impact of innovation by embracing open cultures • Increased agility beyond what many business could achieve alone

10. © 2017 TM Forum | 10 Roles in ecosystems Experience provider Asset provider Process provider Platform provider  Manage customer relationship  Develop customer-centric products and services  Advance marketing, sales, R&D  Provision physical assets for production or supply chain  Manage physical assets  Integrate asset usage and planning  Manage processes around shared services, functions or activities  Manage service level agreements  Optimize process efficiency  Provide an integrated environment to support ecosystem operations  Create market across the network  Promote and manage alliances Participants can play any or all of four distinct roles in ecosystems

11. © 2017 TM Forum | 11 Executives want to create own platforms 52% of global executives want their organization to create a platform for customers and/or partners But uniqueness drives higher value! Survey responses suggest that most organizations want to be (also) platform providers 57% of TELECOM executives want their organization to create a platform for customers and/or partners

12. © 2017 TM Forum | 12 Top 15 born-on-the-internet (mostly) platform companies Market value ±15x ±2x ±2x ±2x 70% unicorn startups are platform companies Rank Company 2017* ($B) Market Value 2016 ($B) Revenue Rank Company 2004 ($B) Market Value 2004 ($B) Revenue 1 Apple 746 215.6 1 eBay 62 3.3 2 Google 594 90.3 2 Yahoo! 45 3.6 3 Amazon 429 136.0 3 IAC Interactive 37 4.2 4 Facebook 415 27.6 4 Yahoo! Japan 36 1.1 5 Tencent 289 21.9 5 Google 30 3.2 6 Alibaba 281 15.7 6 Apple 17 6.9 7 Priceline 86 10.7 7 Amazon 14 8.3 8 Naspers 82 5.9 8 Rakuten 8 0.4 9 Uber 68 6.5 9 Monster 3 0.8 10 Baidu 62 10.2 10 WebMD 2 0.1 11 Netflix 62 8.8 11 Index 2 0.4 12 Salesforce 59 8.4 12 Shands 2 0.2 13 PayPal 53 10.8 13 NCSoft 2 0.3 14 JD.com 49 37.5 14 NHH 1 0.3 15 Yahoo! 45 5.2 15 For-side.com 1 0.1 TOTAL 3320 611 TOTAL 262 33 Green = Not in Top 15 in 2004 Red = Gone or not in Top 15 in 2017*May 2017

13. © 2017 TM Forum | 13 Serving an extended ecosystem of partners As platform provider, CSPs open core capabilities to all digital players Device and component (sensors, medical devices, etc.) providers Applications, content, API providers, platform providers IoT, ecosystem market makers (e.g. health companies, transport organizations, etc.) IoT, ecosystem integrators Agility and reduced costs through micro- services/APIs

14. © 2017 TM Forum | 14 APIs can unlock new growth opportunities API’s extend the reach of a company’s core assets , allowing them to be shared, reused or even resold as a new source of revenue 90% revenue through APIs 60% revenue through APIs 50% revenue through APIs 1.4B APIs calls per Day 13B API calls per Day >300 API mashups "Gen D" enterprises are: 1.8xmore likely to use APIs than their peers 2.8x more likely to report that APIs given them increased reach 2.0x as likely to find that APIs increased agility and speed 2.6x as likely to find that APIs deliver benefits through partners

15. © 2017 TM Forum | 15 Improving business value with APIs IBM Watson API ecosystem Over the last 12 months: • # developers using Watson APIs up more than 300% • # large enterprises engaged has doubled. • # people touched by Watson already ± 1 billion impact study • 674% ROI • Payback < 1 year • 25-35% faster TTM for partner/ public developers consuming APIs API connect Weather data APIs • A cloud-based service handling 26B API calls/day • Cognitive apps combining Watson and TWC APIs • Developers can use APIs into their apps through Bluemix In addition to increased revenue, the API model results in increased reach, agility, faster time to market and strengthening integration with partners/developers

16. © 2017 TM Forum | 16 CSPs still need to improve deploying APIs 45% more 63% Outperformers 40% Telecom Execs 56% Outperformers 40% Telecom Execs 58% Outperformers 40% Telecom Execs 58% more 40% more Outperforming companies extensively share APIs with external parties, something CSPs still need to improve My organization uses APIs extensively to share data with partners My organization APIs are open to any parties that fulfill minimal criteria My organization APIs are used exclusively by specific partners

17. © 2017 TM Forum | 17 Capture a good share of the market at large As platform provider, CSPs can capitalize on:  network effects  economies of scale  market trust / brand reach  capturing innovations  emerging businesses / startups  high levels of security and privacy that only CSPs can provide By moving to a platform API-based business model, CSPs can benefit from the ’Market at Large’ and enable a new wave of sustainable growth

18. © 2017 TM Forum | 18 A privacy obligation GSMA chief says mobile industry has privacy “obligation” Mobile World Live, May 10, 2016 Mats Granryd, director general of the GSMA warned that mobile operators must keep the protection of subscriber privacy at the front of their thinking, with new challenges already on the horizon. IoT and big data pose “monumental” risk for operators Mobile World Live, May 10, 2016 Futurist Patrick Dixon warned that “you have the biggest target for criminal activity that the world has ever seen”. Dixon said, “While there is a clear potential for financial damage through cyber security and fraud, perhaps the bigger issue is the damage that can be done to the brand.” CSPs have a trust established brand, but are also the biggest targets for criminal activity and through this there is potential for brand damage

19. © 2017 TM Forum | 19 Are we reaching a tolerance threshold for trust? 3% 5% 25% 25% 42% Not critical at all Not so important to know Important to know Very important to know Very critical to know People want to know that their personal data is kept private and secure Global consumer survey: 42 countries n = 20,745 How critical is it for you to know that your provider keep your personal data private and secure

20. © 2017 TM Forum | 20 Globally digital trust has decreased in last 3 yrs In the last years, consumer’s trust in companies has decreased globally, but less for CSPs; in most emerging countries surveyed trust in CSPs has even grown CSPs for each country -23% -22% -21% -18% -17% -15% -14% -14% -13% -13% -12% Change in digital trust in last 3 years Type of organization CSPs Video streaming players Device manufacturers Financial organisations Online retail stores Search engine companies Pay TV providers Physical retail stores App developers Social media companies Digital unicorns

21. © 2017 TM Forum | 21 CSPs’ trust brand: a tremendous opportunity -41% -41% -39% -36% -34% -34% -34% -33% -33% -31% -30% 30% 21% 24% 33% 34% 32% 30% 32% 30% 45% 40% Somewhat to very Uncomfortable Rather to very Comfortable CSPs Financial organisations Device manufacturers Pay TV providers Video streaming players Physical retail stores Search engine companies Online retail stores App developers Digital unicorns Social Media companies The survey shows that CSPs have a trust advantage over OTT and most other players, globally they are second only to banks/credit card companies Because of their trust position CSPs are well placed to become a platform curator, and to add value by providing service composition along with assets as connectivity, knowledge about their customers, analytics/cognitive capabilities, reliability, quality assurance and more People’s trust in companies with their personal data

22. © 2017 TM Forum | 22 Ready or not? Ask yourself these questions • How will your organization exercise its distinctive assets to its advantage in digital ecosystems? • In what ways can your enterprise plan for growth, given the greater opportunities that partnering in digital ecosystems makes possible? • How can you form relationships with newer, nontraditional industry participants to provide the digital relationship and customer experience that today’s digital customers demand? • Are your strategies and initiatives to increase trust in line with the monetization opportunities in your market?

23. © 2017 TM Forum | 23 Thank you Rob van den Dam Global Telecom Industry Leader IBM Institute for Business Value rob_vandendam@nl.ibm.com www.ibm.com/iibv Click on pictures for free access to reports

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