In most cases, the management structures of mobile network operators have yet to grasp the value proposition of the “Internet of Things” as they have been historically hyper-focused on competing according to who can offer the lowest price for handling megabytes. But in the IoT age this is an entirely unsustainable business model. As people, processes, data and things are integrated digitally, it requires a greater amount of operational efficiency – what we call the “digitization of business.” If MNOs hope to succeed in the new era, they will need to embrace the opportunities that lie within this digitization.
Benefits of digitization
While the reasons to digitize business can vary according to an individual MNO’s business objectives, there are a few key benefits that apply across the board.
New business model development
Digitizing business allows for the migration from a hardware-based model to a service-based model with things like microbilling, which can monetize tiny packets of service and can be applied to big, high-value assets, such as cars and buildings, health care and more. This model will be even more relevant for “millennials” as they expect digital offerings, further driving the proliferation of IoT. This new IoT model addresses three of the most important areas to enterprises: safety and security, customer relationship management, and asset relationship management.
Enhanced demand matching to serve the market of one
Digitization also speeds up the decision timeframe, covering proposition, pricing and distribution. It enables supply to better match demand, such as the speed with which a fast fashion retailer such as Zara can adjust its supply chain to meet changes in local demand. It also allows pricing to adjust to demand levels and respond to very local supply demand shifts, such as food vendors cutting sandwich prices at the end of the day. These are all manifestations of a digital business model that uses data to make better decisions.
Greater operational efficiency
Although enhanced operational efficiency is required to properly digitize a business, it’s also one of the key outputs as well. For example, look to lean manufacturing, pioneered by the Japanese automotive industry. Carmakers today can order steel and, within hours, an engine block rolls off the production line. They’re able to do that because they have superior visibility into every node of their supply chain. This type of efficiency is achievable by any enterprise today, including MNOs, partly by digitizing business.
Partnering and the ‘technology stack’
There are five main layers in the IoT technology stack that enable business:
1. Data access: This requires sensors, either physical devices or a probe in a network.
2. Data management: Data must be first gathered from a probe over a network.
3. Data repositories: Where the data is federated out to analytics players and service providers.
4. Analytics/service providers: Vertical specialists in their markets: automotive, insurance, manufacturing, FMCGs, etc.
5. Data consumption: Rendering the data via a user interface so that the enterprise and its end users can consume the information and make timely, well-judged decisions.
All of these layers need to be defined, procured, configured and integrated before successful results can be attained. As the connectivity component is by far the most commoditized part of the value proposition, MNOs have rightly identified a need to migrate along the value chain.
However, most technology companies approaching this space now feel the need to own every component in the technology stack. Their primary instinct is to buy this ability just as MNOs have acquired telematics service providers to service the automotive space. But that’s just not how IoT works – it’s a partnership play. It is all about taking data to the core players in different industries. There are specialist data analytics players in a variety of industries – from health care to manufacturing – that can help. For a network or systems integrator to attempt to own them will be a turn-off as they lack specific vertical experience.
The other problem is that this approach of buying everything leaves MNOs terribly exposed to the rapid pace of change in the IoT space. The speed of innovation in data analytics and the services wrapped up with that is exponentially greater than the speed of change in analogue business models. To conduct the due diligence, complete the acquisition and effect the business integration takes three years, with a good wind. By then the industry has moved on out of sight.
Opportunity lies on the horizon
MNOs are uniquely placed between the remote devices and applications on a back-end infrastructure and have the heritage of delivering service to the consumer, based on connecting a remote device. Rather than buying capabilities, it would make more sense for MNOs to focus on building their capability in servicing the end-user and collecting and processing the data. From there, MNOs can market this capability to vertical service providers. The real challenge is how to migrate to a service-based model and focus on where the value is.
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