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Breakthrough Insights Value Creation Leads Levers for Value Capture Spheres of Action Outlook Notes
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Member of
ICT Convergence:Consolidation or Shakeout Stage!
Guy Alain Djopmo Komguep
London - January 24th, 2008 Think forward
Designing Future Business
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Foundation:1954 Diebold1977 DETECON
Restructuring:2002 Detecon International GmbH
Turnover 2006:EURO 148 million 650 consultants
Shareholder:T-Systems Enterprise Services GmbH
Offices in Germany:Bonn (HQ), Dresden, Eschborn, Munich
International locations:Abu Dhabi, Bangkok, Johannesburg, Mexico City, Beijing, Reston, Riyadh, San Mateo, Singapore, Zurich
Detecon’s global presence ensures the international success of our clients.
To have an impact, you have to be there
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Know-how und Do-how
Fact-based quantitative analyses provide the foundation of our work
On-site integration of our do-how expertise for the development of strategies and implementation processes
Clear Commitments
Independent evaluation
The client is our partner: Joint teams and knowledge transfer
Our success can be measured
ICT Talents
Experienced staff with multi-cultural competence in the global ICT markets
Implementation of complex ICT projects which demand the combination of commercial, technological and legal expertise
Global Reach
3500 successfully completed management and technology projects in 106 countries
Universal quality standards and worldwide knowledge transfer through the networking of our consultants in Global Competence Teams
Global activities, know-how und ‘do-how’ expertise in ICT markets characterize our consultancy services.
The experience of more than 3500 projects
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Content
1. Breakthrough Insights
2. Value Creation Leads
3. Levers for Value Capture
4. Spheres of Action
5. Outlook Notes
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No standards
Regulatory issues
Technology was not ready
Driven by network standpoint
Niche focus, high price and low competition
Yesterday
Breakthrough Insights
Mature standards
Regulatory framework enhancements
Technology readiness
Users demand seamless services
Mass market, low price and high competition
Today
Starting point of Information and Communication Technologies convergenceFixed-Mobile Convergence was already a hot topic a decade ago in the Telco‘s industry, which was driven more by the network perspective rather than the end-user perspective.
$? „Many lie questions were on the table“ „Business opportunities are available“
?
?
$ € £
¥
฿
¢
إ.د
रुपय
R
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ICT Convergence Lifecycle - Snapshot 2007
Breakthrough Insights
Take-off phase and Growth stages include economies of scale and learning benefits
Consolidation and shakeout stages embrace economies of scope and merger and acquisition advantages
During the stabilization phase, established players perceive network externalities effects as well as buyer lock-inprofits
During these different phases the product line move from ICT convergence to multi-sector convergence
Rationale
The pace of ICT convergence in western European markets tremendously differs with regard to regulatory framework, competitive edge and market responsiveness.
Western European markets dynamics
Take off Growth Consolidation Shakeout Stabilization
• Germany• Netherlands• Switzerland
• Sweden• Danemark• Norway
• Portugal• Greece
• France• Spain• Italy
FMS FMC Triple Play Quadruple Play Living cities
• UK
Number ofcompetitors
Time
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Positioning paths in the value chain
Taxonomy of ICT Convergence
Breakthrough Insights
With respect to local marketing requirements and Telco’s strategies, ICT convergence initiatives can be realized at different levels across the valued-chain business entities.
Single Number, Voicemail
Bundled Services
Service Delivery Platforms
Single Bill
One End-User Tariff
Convergent Charging
IP Multimedia Subsystem
Multi Access Edge
Metro Aggregation
Network Convergence
Service Convergence
Tariff Convergence
Hybrid Devices
Multifunctional Microchip
Integrated Power Supply
Device Convergence
Unique Brand, CRM
One POS, Cross-Selling
Common Distribution
Marketing Convergence
NetCo ServCo SalesCo
1 2 3 4 5
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Customer Premises Equipment with Symbian or Microsoft operation system?
Standard or proprietary Service Delivery Platforms?
IMS versus UMA in the core network?
Backhaul including metro aggregation and legacy systems?
Question marks
Value Creation Leads
Technology prism
Technology choice In the realm of ICT convergence, the Telco player should align its technology strategy with the predefined business strategy.
Sustainable CAPEX
OPEX rationalization
Churn rate downsize
Competitive customer acquisition costs
Technology opportunity costs
Sunk costs
Economic rents
Value proposition Technology AValue proposition Technology B
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Value Creation LeadsStrategic alliance
Strategic alliance framework – Triple Play offering
Legal Framework Incentives
Content Provider function: Innovation leadership Content creation and protection Service branding Content licensing Ensure interoperability
User Protection Governance
Fixed Operator role: Understanding user demands Broadband access Business model Technology choice Branding, Pricing, Distribution
FixedOperator
BroadcastCarrier
CPEVendor
Content Provider
CPE Vendor role: Terminals readiness Fostering standards Sharing investments Economy of scale
Broadcast Carrier function: Content aggregation Content transport Setting standards Business cooperation
Regulatory Bodies
Players in the ICT arena should contractually joint efforts to achieve lasting business development through synergies, expenses sharing and technology transfer.
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Value Creation Leads
The stretched-T strategy: slim at the bottom, wide at the top!
Involve the customer in your market lifecycle is the crux of customer advantage. Thus understand usage, psychographics, culture, purchasing and benefit patterns is key.
SoHo = Small Offices / Home OfficesVSE = Very small EnterprisesSME = Small and medium EnterprisesLE = Large EnterprisesMNC = Multinational Corporations
Differentiation !
Efficiency ! • Optimal OPEX• Modular platforms• One network• Outsourcing
• Tailored segments • Stickiness creation• Viable offerings
Consumer Business
Network
Services
Sales and Marketing
Kids Youth Families Seniors SoHo VSE SME LE MNC…
Intrinsic customer segmentation
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Brand positioning fundamentals
Brand awareness, point of difference, relation to inherent products and active loyalty should be continuously managed. Avenue
Within the context of ICT and multi-sector convergence, it is essential to manage brand as total customer experience across the psychological benefits, functional and economic benefits.
Bottom line
Levers for Value Capture
Customer perception cues
Brand equityBuilding strong brands offers Telco players attractive avenues to insulate themselves from competition and commoditization pressures.
RelationshipWhat about you and me?
ResponseWhat about you?
MeaningWhat are you?
Identity Who are you?1
2
3
4Resonance
Judgments Feelings
Performance Imagery
Salience1
2
3
4
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Orange Livebox versus Neuf Box
Levers for Value Capture
Between Orange Live box and Neuf box the point of parityis the functional benefit: both offers Internet, Telephony and Television utility
Orange, key point of difference, aims at increase the consumption opportunities with new livebox releases: Livebox Pro, Livebox premium
To gain new market share and build psychological benefits, Neuf offers home installation service and pursue and aggressive marketing communication strategy
Analysis
The Telecom French market faces a shakeout stage with regard to ICT convergence, thus successful players should move from competitive edge to customer advantage…
Pioneer and Follower brand preference -Case study of the French market
Pioneer
Follower
• Co-branding• France Telecom assets• Technology innovation• Psychological benefits
Orange Livebox advantage (France)
• Customer service• Less sunk costs• Buyer loyalty
Neuf Box advantage (France)
Market Share
Dissimilarity of brand Extension
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Value based pricing
Value Quantification of ICT Convergent Offerings
Levers for Value Capture
Numerous players in western Europe and USA tend to reduce the competitive reference value price, this could lead to significant market failures.
Positive Differentiation
Value
Competitive Reference
Value
Negative Differentiation
Value
Total Economic
value
Ease of use Cost efficiency Always best connected Customer education After-sales services Reliability and security
Legacy systems Emerging competitors Technology used Standard functions Alternative solutions
Willingness To Pay
Subsidies Switching costs Risks (e.g. guarantee)…
suitable price setting zone
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Raising Price, Increasing Volume, or Lowering Cost?
“Price Volume Cost” impact analysis
Spheres of Action
Analyze the economic value of ICT convergence offerings to the customer and compute all source of savings or increased revenues is essential to succeed.
Base Case 1% increase in price(with no loss in volume)
1% increase in volume(no change in price)
1% decrease in costs
Sales = 100CGS = 70
Sales = 101CGS = 70
Sales = 101.0CGS = 70.7
Sales = 101CGS = 69.3
GM = 30SGA = 20
GM = 31SGA = 20
GM = 30.3SGA = 20.0
GM = 30.7SGA = 20.0
Operating profit = 10 Operating profit = 1110% gain over base case
Operating profit = 10.33% gain over base case
Operating profit = 10.77% gain over base case
Business acumen note
It is smart to increase price rather than decrease cost and moreover increase volume, however the customer should be compensated with additional value.
As long as the costs > 50% of sales, a cost decrease is always better than an equivalent volume increase; vice versa when the costs < 50% of sales.
CGS: Cost of Good Sold; GM: Gross Margin; SGA: Service, General and Administrative expenses
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Strategic value disciplines
Spheres of Action
Provide ICT products or services that uniquely meet customer needs with constant quick response
Key benefit: Psychological, 2nd benefit: Functional E.g. Video on Demand via IPTV
Customer Intimacy
Points of difference focusSustaining and widening customer advantage requires constant search for unique value proposition and new benefits.
Provide reliable and convenient ICT products or services at competitive prices
Key benefit: Economic, 2nd benefit: Functional E.g. Home Zone services
Operation Excellence
Offer customer cutting-edge ICT products and services superior to competition and innovative
Key benefit: Functional, 2nd benefit: Psychological E.g. Apple iPhone
Product LeadershipProduct Leadership
OperationExcellence
Communication Provider
CustomerIntimacy
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In a nutshell
Outlook NotesTake awayService bundling is the easy part of the journey toward ICT convergence. The real transformation lies at regulatory, techno-economic, organizational and marketing level.
1. Align technology choice with smart business strategy is essential to leverage the economicreturn of ICT convergence.
2. You can not push the pebble with one finger! set up strategic alliances with pioneer partners to gain customer advantage and focus on your core competences.
3. Build strong, enduring and profitable brand through the pursue of psychological and functional benefits. (Competitive advantage = Consideration ; Customer advantage = Commitment)
4. Close to customer intimacy value discipline, product leadership and operational excellence are the mix-ingredients for lasting profit.
5. Nominal price increase and variable costs’ decrease are more powerful than volume based strategies, especially in mature and saturated western European Telco’s markets.
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Thank you for your kind attention!
Guy Alain Djopmo Komguep Competence Practice Communication Technology Detecon International GmbH
Oberkasseler Str. 253227 Bonn (Germany)
Phone +49 228 700 2826Mobile +49 151 1221 7902Fax +49 228 700 [email protected]
Member of
Detecon International GmbH
Oberkasseler Str. 253227 Bonn · Germany Phone (+49 228) 700-0
Frankfurter Str. 2765760 Eschborn · Germany
Phone (+49 6196) 903-0
Supervisory Board: Reinhard Clemens (Chair)Management Board:
Dr. Klaus Hofmann (Chair), Dieter BrücherRegistered at: Court of Bonn HRB 2093
Company location: Bonn
The future‘s looking good