Ericsson-Impact Project-Final Presentation

BUSINESS MODEL INNOVATION @ Ericsson

TEAM 2 CarlosGu*errezArguello|QingsongKe|ChristophHanser

Ericsson is searching for business models to monetise its automation services for Communication Service Providers.

Ericsson

PROBLEM STATEMENT

Trend & Context

Increasing Connected Devices

Source:EricssonMobilityReport2016

*CAGR:CompoundAnnualGrowthRate

“10 Billon of Devices by 2020 Cellular and NonCellular IoT.”

China Mobile Research Institute

“Industrial Internet adoption (IoT) could boost global GDP more than 15 Trillion by 2030.”

General Electric

“61 percent of world devices will be connected M2M by 2022.”

Machina Research

“59 percent of early adopters reported a significant ROI, with a 28 percent increase.”

M2M Barometer

An Application Programming Interface (API) strategy enables Ericsson to develop a standard platform, which connects the developer community and collaborates with key business partners to provide faster innovative solutions for automation services in the IoT industry.

Ericsson

VALUE PROPOSITION

IOT Value Chain

IOT Landscape

Smart Module CustomerSmart

Object PlatformConnectivity ApplicationsSoftware

Source: www.telecomcircle.com

IOT Value Chain

Value Created Mainly by Platform

Smart Module CustomerSmart

Object PlatformConnectivity ApplicationsSoftware

Device Providers

System Integrators

Operators

Platform Providers

App Providers

5%-10%

15%-20%

15%-20%

10%-20%

30%-40%

Source: www.telecomcircle.com

Current Situation Analysis

Opportunity for Automation Solutions

Ericsson Management Services

Ericsson Operation & Business Support

- Management Performance of Network and IT

- Experience Centric Managed Services

- Assurance of Customer Experience

- Service Enablement

- OSS/BSS

CRM

Network Management

Service Deployment

SLA Management

AUTOMATION

TELECOM PROCESSES

Proposal of IOT Ecosystem

Universal Platform

Software And

Application

Ericsson Platform

Business Partners

Developer

Community - Open Collaboration - Standard Platform - Network Effect - OPEX Model

- Global Solutions - Lower Fees - Larger Volume

Proposal of IOT Ecosystem

Specialised Platform

Software And

Application

Ericsson Platform

Business Partners

Developer

Community - Selected Partners - Specialised Platform - Focus on High Margin - License & OPEX Model

- Customised Solutions - Higer Fees - Smaller Volume

Platform Analysis

Universal Platform VS. Specialised Platform

Universal Platform

+ Global network effect + Community trust + Cost efficient + Faster bug fixes + In-line with Ericsson strategy (3G, 4G, 5G, WiFi, Bluetooth)

– More stakeholders to satisfy – Less control by Ericsson – Legacy can slow updates

Specialised Platform

+ Focus and expertise + Control by Ericsson + Controlled features + Might get more pricing power

– Limitation to certain areas – Limited network effects– More competition

Proposal of IOT Ecosystem

Open Innovation Platform

*CSE:CommonServicesEnBty:Enable,disable,integrateAPI,manageandautomateupdates

Source: www.ericsson.com

Proposal of IOT Ecosystem

Platform Functionality

FlexibilityforNonCellularandCellularIoT

Solutions

MachinelearningArtificialIntelligenceAutomatedModeling

Client1

Client2

Client3

ClientInputneedsandupdates

ClientInputneedandupdates

APIStandardsAccessforDevelopers

NewSolution

Solutions

D1 D2

AutomatedInformationoftheClientneeds

ArtificialIntelligenceStorePreviousSolutionSendSolutionstoNew

ClientsNeeds

Proposal of IOT Ecosystem

IoT Ecosystem and Value Distribution

Business Model

Multi-Stage Model

Building Developer Community Creating Network Effect

Charging fees for SDK (developer’s platform) Charging commission fees per application

Developer Community

Business Partners

Creating corporate agreement with key partners Licensing fees (endorsed by platform)

Industrial Clients

Charging on-demand fees for software Generating consulting and training fees

Incremental revenues from adjacent business

Comparative & Competitive Analysis

Potential Competitors

Fragmented Industry Specialised Platforms

Source:www.iot-analyBcs.comhIp://www.computerworlduk.com/galleries/data/12-most-powerful-internet-of-things-companies-3521713/

Already Built IoT System Potential into IoT Platform Model

Cloud Computing Platform Iaas + Paas Model

New IoT Platform Collaboration with Software

Financial Analysis

Projected IoT Market for Ericsson

Source: https://www.business.att.com/content/article/IoT-worldwide_regional_2014-2020-forecast.pdf * Exclude Revenue from Developers

Financial Analysis

Revenues from IoT Developers

Assumptions: ‣ $25 - Entrance Fee per Developers ‣ 5% - Annual Growth Rate Of Developers ‣ 3% - Application/Developer RatioSource: www.theatlas.com/charts/r16DywD4 http://www.techrepublic.com/blog/software-engineer/app-store-fees-percentages-and-payouts-what-developers-need-to-know/ http://www.techrepublic.com/blog/european-technology/there-are-185-million-software-developers-in-the-world-but-which-country-has-the-most/

RISKS AND LIMITATIONS

No Return Without Risk

‣ High dependence on external stakeholders and community trust

‣ Security issues might slow down deployment of IoT

‣ IoT might be challenged by entrenchment or market fragmentation

‣ Expectation and projections into IoT dynamics might be inflated

Conclusion And Recommendation

‣ Internet of Things (IoT) as growth opportunity ‣ Demand for common IoT connectivity platform ‣ Open API strategy as most promising value proposition ‣ Deployment through developer community building

and strategic alliances ‣ Multi-stage and multi-lateral revenue model ‣ Universal standard instead of specialisation