OPTIMUS
Disruption Along the Wireless
Value Chain
October, 2000
“If you you’re not confused, you do’t know what’s
going on!”
Jach Welch
“If you think you are in control, you’re not going fast
enough!”
Mario Andretti
So, how do you feel today?
DISRUPTION ACROSS INDUSTRIES
“NEW TECHNOLOGY” CHANGING THE BASIS OF COMPETITION
IMPACT OF DISRUPTIVE TECHNOLOGIES
UPTAKE OF NEW TECHNOLOGIES
Percentage of Ownership
Average Capacity (MB)
10,000
Telephone
(1876)
93.9%
100
90
Mobile
Internet
(2000E)
25.0%
80
1,000
70
100
50
40
10
1975
1980
1985
1990
1995
70
60
50
40
30
30
20
20
10
10
0
1
90
80
Cell Phone
(1983)
24.4%
PC
Internet
(1975)
(1991)
20.0%
26.0%
60
100
1
10
0
20 30 40 50 60 70
120
Number of years (year 1=year invented)
Source: Clayton Christensen, The Innovator’s Dilemma.
New technologies are often the source of fundamental changes in
market position.
DISRUPTION ACROSS INDUSTRIES
THE WIRELESS INDUSTRY
UPTAKE OF VARIOUS TECHNOLOGIES WORLDWIDE
Subscribers (mm)
3 Year CAGR
1,200
Wireless 19%
1,000
800
600
400
Mobile internet (1) 64%
200
M-commerce (2) 132%
0
'98
'99
'00
'01
'02
'03
'04
Source: Goldman Sachs Estimates, Cluster Analysis. (1) Based on GS US market projections and projected US share of world market (18%).
(2) Based on GS Estimates, Roper Starch Worldwide trends on commerce penetration as a share of online penetration.
Wireless and its extensions will face greater pressure than almost any
industry.
DISRUPTION IN WIRELESS
IMPACT OF BANDWIDTH EXPANSION
Mobile
e-commerce
 One-click
transactions
 Navigational aids
3.0
2.75
2.0
2.5
Wireless
Different flate
Voice
on usage
10 kbps
115 kbps
GSM/TDMA
GPRS
14.4 kbps
64 kbps
XXX One
15-95B
Wireless
Internet
115/384
kbps
EDGE
144 kbps
1XRTT
Wireless
Multimedia
384 (512)
kbps wide
area
(2 Mbps)
local
WCDMA
2.4 Mbps
HDR
 AOL
Mobile
Information
 Email
99/00
00/01
 Online auction
bidding
 Instant messaging
 Stock trading
 Travel
reservations
 Travel updates
and bookings
Mobile Voice
Commercial
 Voice
 Yellow Pages
PAST
98/99
 Events-driven
transactions
TODAY
 Locationspecific
transactions
2001-2002
01/02
New technologies will allow for the appearance of innovative products...
DISRUPTION IN WIRELESS
IMPACT OF BANDWIDTH EXPANSION
CONTENT
VALUE
“BEST IN CLASS”
“MORE
OF THE
SAME”
“LAGGARD”
2G
2.5G
3G
…and there will be more and more room for differentiation. In order to
guarantee a leading position in the future what should mobile operators
start doing now?
DISRUPTION IN WIRELESS
PLAYERS AND THE VALUE CHAIN
CONTENT & PORTAL
APPLICATIONS
& ENABLERS
 Application
developers,
commerce
and mobile
Internet
enablers
CONTENT &
COMMERCE
 Content
players,
including
aggregators,
news, games,
and other
types of
content
ACCESS
MOBILE
ISP
 Internet
service
provider
gives
connection
to mobile
Internet
NETWORK
ACCESS
 Wireless
Transport
Network
and
connection
to
customer
ENABLERS
DISTRIBUTION
 Resellers
of mobile
services
CONSUMER
DEVICE
MANUFACTURERS
 Makers
of
mobile
devices
In the old value chain, roles where clearly defined and boundaries
somewhat respected.
DISRUPTION IN WIRELESS
PLAYERS AND THE VALUE CHAIN
CONTENT & PORTAL
APPLICATIONS
& ENABLERS
 Application
developers,
commerce
and mobile
Internet
enablers
CONTENT &
COMMERCE
SPECIALISE
D
PORTAL
 Pure content
creators,
including
news, games,
and other
types of
content
 Application and
content
packagers
focused in
one area or
interest
ACCESS
GENERALIST
PORTAL
 General
interest
application and
content
packagers
MOBILE
ISP
 Internet
service
provider
gives
connection
to mobile
Internet
NETWORK
ACCESS
 Wireless
Transport
Network
and
connection
to
customer
ENABLERS
DISTRIBUTION
 Resellers
of mobile
services
CONSUMER
DEVICE
MANUFACTURERS
 Makers
of
mobile
devices
As opportunities become more evident and attractive players start
reaching out beyond the boundaries of their former spaces
DISRUPTION IN WIRELESS
AVAILABLE OPTIONS
CONTENT & PORTAL
CONTENT &
COMMERCE
APPLICATIONS
& ENABLERS
GENERALIST
PORTAL
SPECIALISED
PORTAL
ACCESS
MOBILE
ISP
NETWORK
ACCESS
ENABLERS
DISTRIBUTION
EXAMPLE
CONSUMER
DEVICE
MANUFACTURERS
In order to secure portal power, Optimus will have to compete for the
customer ownership… but ownership is not guaranteed, as customer
options increase and competition intensifies.
DISRUPTION IN WIRELESS
CURRENT SITUATION
COMPETITORS
DEFENDERS
OPERATORS AS INCUMBENTS
Other
Operators
 Voice Services Provision
 Network Ownership
 Installed Customer Base
OPERATORS AS COMPETITORS
COMPETITORS
OPPORTUNITIES
Content &
Commerce
 Data Content
 Voice Content
 Commerce
Voice Services
 Unpenetrated
Population
 New Voice
Opportunities
- Wholesale
- Carrier VAS
Operators have critical areas of DEFENSE and ATTACK.
DISRUPTION IN WIRELESS
KEY ISSUES
ANALYSIS
ATTACK
DEFENSE
 Can we leverage off our
wireless assets to enter
adjacent value chains?
 Will others leverage off their
assets to enter our value
chain?
ACTION
 Where do we focus?
 How do we act?
 What is at greatest risk?
 How do we defend?
In order to take action in all these issues, operators will need to rethink
themselves, their organisation and business model
DISRUPTION IN WIRELESS
ORGANISATION DRIVERS
TODAY (2000)
ACCESS
VALUE
BALANCE
Optimus
clients
TOMORROW (2005)
CONTENT
ACCESS
CONTENT
VALUE
VALUE
Non-Optimus
clients
BUY ACCESS AND GET CONTENT
ACCESS
VS
CONTENT
ACCESS
CONTENT
ACCESS
CONTENT
BUY CONTENT, ACCESS IS A COMMODITY
Business is driven by “access
business” rules
Business is driven by “content
business” rules
THE 3G MOBILE OPERATOR
THE GAP
INTERNET
COMPANY
TRADITIONAL MOBILE
OPERATOR
Business Model:
• The main revenues of a TMO come from traffic and
VAS
• Other sources of revenues are monthly fees,
activation fees and incoming interconnection tariffs
Key success factors:
• Technical capabilities (coverage and network
quality)
• Targeted marketing
• Competitive commercial offers
ACCESS DRIVEN
ORGANISATION
• TMO have been focused on acquiring new customers
and generating traffic.
• Segment-oriented approach has resulted in more
complex structures, with little flexibility but with
higher accountability
Business Model:
• In a pure Internet company the main revenues
come from VAS, e-commerce commissions and
referrals and on-line advertising
• In those internet companies that provide access, it
could be the main source of revenue
GAP
Key success factors:
• Speed to market
• Content management
• Personalised marketing
• Customer profiling
• Virtuous cycle generation (content - visits)
CONTENT DRIVEN
ORGANISATION
• Successful IC are focused on content
management and on reducing production cycles
to shorten time to market.
• This has resulted in more flexible and flatter
structures that promote creativity at all levels
CONCLUSIONS
• Latest and future technological disruption in telecoms will completely
reshape not only telecommunication companies but also every single
industry in the economy
• Traditional firms carry the weight of their own heritage and that’s what
makes them so fragile in the “new economy” battle field
• Mobile operators have an enormous challenge ahead meaning that they have
to learn how to manage a content driven business while getting most
revenues from access
• They also need to figure out how to shape “new economy” companies out of
“old economy” carcasses
• And finally they need to learn that their competitors are no longer other
operators only but they could also be independent portals and Internet
players, credit card issuers, media companies, banks, car manufactures etc.