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Several telecom operators to run into financial problems in the next three years…

November 21, 2014 Leave a comment

In 2017 several telecom operators will run into financial problems, with Vodafone being the most known, unless they start changing today. Why?

The telecom business is a very capital intensive business. Buying spectrum, rolling out the next-generation mobile networks and bringing fiber connections to each home and business is extremely capital intensive. Traditionally operators were the main users of their networks and got large margins on the services that ran on top of them. The truth today is that telecom operators have been completely sidetracked. They no longer have any control of the mobile devices that are used on their networks and neither the services. Data is growing exponentially and is already clogging their networks. A data tsunami is on the horizon. Operators see costs ballooning and ARPU shrinking. There is no way they can start asking substantially more for broadband access. Obama just killed any hope of adding a speed tax on the Internet. The EU wants to kill juicy roaming charges. However the future will be even worse.

New disruptive competitors have entered the market in recent years. Google Fiber is offering gigabit speeds both for uploading and downloading. Youtube and Netflix are generating the majority of Internet traffic in most countries.  Most streaming videos are broadcasted in SD quality. However Netflix is already broadcasting in 4K or ultra high-definition quality on Google Fiber. This means traffic volumes of between 7 to 19GB per hour depending on the codec that is used. Take into account that often different family members can be looking at two or more programmes at the same time. The end result is that today’s networks and spectrum are completely insufficient. Now add the nascent IoT revolution. Every machine on earth will get an IP address and be able to “share its feelings with the world”. Every vital sign of each person in the richer parts of the world will be collected by smart watches and tweeted about on social networks. 90% of the communication that is running inside Facebook’s data centre is machine to machine communication, not user-related communication. Facebook hasn’t even introduced IoT or wearables yet. You can easily imagine them helping even the biggest geek with suggestions on which girl to talk to and what to talk about via augmented reality goggles and with the help of smart watches. Yes it is a crazy example but which telecom marketing department would have given even $1 to Zuckerberg if he would have pitched Facebook to them when it was still known as TheFacebook. It is the perfect example of how “crazy entrepreneurs” make telecom executives look like dinosaurs.

This brings us to the internals on how telecom operators are ran. Marketing departments decide what customers MUST like. Often based on more than doubtful market studies and business plans. In contrast the mobile app stores of this world just let customers decide. Angry Bird might not be the most intelligent app but it sure is a money maker. Procurement departments decide which network and IT infrastructure is best for the company. Ask them what NFV or SDN means and the only thing they can sensibly response is an RFP identifier. Do you really think any procurement department can make a sensible decision on what network technology will be able to compete with Google? More importantly make sure these solutions are deployed at Google speed, integrated at Google speed and scale out at Google speed? If they pick a “Telecom-Grade Feature Monster” that takes years to integrate, then they have killed any chance of that operator being innovative. With all the telecom-grade solutions operators have, why is it that Google’s solutions are more responsive, offer better quality of service and are always available? Vittorio Colao, the Vodafone CEO, was quoted in a financial newspaper yesterday saying Vodafone is going to have to participate in the crazy price war around digital content because BT has moved into mobile. So one of the biggest telecom operators in the world has executive strategies like launching new tariff plans [think RED in 2013], pay crazy money to broadcast football matches, bundle mobile with fixed to be able to discount overall monthly tariffs and erode ARPU even more, etc. If you can get paid millions to just look at what competitors are doing and just badly copy them and dotcoms [the list is long: hosted email, portals, mobile portals, social networks, virtual desktops, IaaS, streaming video, etc.] then please allow me to put your long term viability into question.

So can it actually be done differently. YES, for sure. What if operators would enable customers to customise communication solutions towards their needs. Communication needs have not gone away, if any they augmented. Whatsapp, Google Hangout, etc. are clear examples of how SMS and phone calls can be improved. However they are just the tip of the iceberg of what is possible and what should be done. Network integrated apps via Telco App Stores would give innovators a chance to launch services that customers really like. Hands up who would pay to get rid of their current voicemail? Hands up who really loves their operator’s conference bridge and thinks it is state of the art? Hands up who is of the opinion a bakery is absolute not interested in knowing what its customers think about its products after they have left the shop?

Last week the TAD Summit in Turkey had a very special presentation from Truphone, one of the few disruptive mobile operators in the world. No wonder it won the best presentation award. Truphone, with the help of partners, deployed a telecom solution in minutes that included key components like IMS, SDP, HLR integration, one hundred numbers, dashboards, interactive voice responses, etc. Once deployed, the audience could immediately start calling and participate. All numbers of the people in the audience, their home operator, the operator that sold them their SIM initially, their age and responses to interactive questions were registered and results shown on a real-time dashboard. If the audience would have been in different locations, they could have been put on an interactive map as well. The whole solution took only a few weeks to build with a team of people that all had day jobs. The surprising thing is that it was all build with open source software. It is technically possible to innovate big time in telecom and bring to market new services daily. All at a fraction of today’s cost. The technology is no longer a limiting factor. Old-school thinking, bureaucracy and incompetence are the only things that hold back operators from changing their destiny. Whatever they do, they shouldn’t act like former-Nokia executives in some years and tell the world that Android and the iPhone took them by surprise. Dear mister operator, you have been warned. You have been giving good advise and examples of how to do it better. Now it is time to act upon them…

IoT and personal health

November 9, 2014 Leave a comment

I just saw Eric Dishman’s TED session on “Health care should be a team sport“. I love the idea of providing people with chronicle illness the means to be diagnosed and treated remotely and use big data to learn of a large group of patients with similar issues. Personally this would mean that when my sons have breathing problems we would not have to drag them in the middle of the night to a hospital where they are exposed to many viruses. Instead by measuring their oxygen level and listening to their longs a personalized remote diagnose could be made and some nebulizers or other things administered. At scale all equipment would probably cost less than £200 because Maplin already sells the nebulizer and oxygen level meter for a combined £110. Add another £90 at worst for a stethoscope that can be connected via bluetooth to a smartphone. Now via Hangout a doctor could remotely diagnose the results and even in the future a computer programme. All results of millions of patients would be collected in order to improve treatment. So no need for an expensive hospital in London with a receptionist, nurse and doctor dedicating 2 hours. By just avoiding one hospital night, the whole system would be enormously profitable. Additionally Ubuntu’s Juju can be used to set up all the big data and diagnostic software in minutes in any cloud or server on any place in the world. If other open source solutions are used then the total solution would be in reach for any developing country. There are probably more than one developer whose kids are asthmatic, and would happily contribute time. It sounds like an ideal Gates Foundation or Kickstarter project. If you think you can help please reach out to me because this is not work for me, this is personal engagement.

The next IT revolution: micro-servers and local cloud

Have you ever counted the number of Linux devices at home or work that haven’t been updated since they came out of the factory? Your cable/fibre/ADSL modem, your WiFi point, television sets, NAS storage, routers/bridges, media centres, etc. Typically this class of devices hosts a proprietary hardware platform, an embedded proprietary Linux and a proprietary application. If you are lucky you are able to log into a web GUI often using the admin/admin credentials and upload a new firmware blob. This firmware blob is frequently hard to locate on hardware supplier’s websites. No wonder the NSA and others love to look into potential firmware bugs. They are the ideal source of undetected wiretapping.

The next IT revolution: micro-servers
The next IT revolution is about to happen however. Those proprietary hardware platforms will soon give room for commodity multi-core processors from ARM, Intel, etc. General purpose operating systems will replace legacy proprietary and embedded predecessors. Proprietary and static single purpose apps will be replaced by marketplaces and multiple apps running on one device. Security updates will be sent regularly. Devices and apps will be easy to manage remotely. The next revolution will be around managing millions of micro-servers and the apps on top of them. These micro-servers will behave like a mix of phone apps, Docker containers, and cloud servers. Managing them will be like managing a “local cloud” sometimes also called fog computing.

Micro-servers and IoT?
Are micro-servers some form of Internet of Things. Yes they can be but not all the time. If you have a smarthub that controls your home or office then it is pure IoT. However if you have a router, firewall, fibre modem, micro-antenna station, etc. then the micro-server will just be an improved version of its predecessor.

Why should you care about micro-servers?
If you are a mobile app developer then the micro-servers revolution will be your next battlefield. Local clouds need “Angry Bird”-like successes.
If you are a telecom or network developer then the next-generation of micro-servers will give you unseen potentials to combine traffic shaping with parental control with QoS with security with …
If you are a VC then micro-server solution providers is the type of startups you want to invest in.
If you are a hardware vendor then this is the type of devices or SoCs you want to build.
If you are a Big Data expert then imagine the new data tsunami these devices will generate.
If you are a machine learning expert then you might want to look at algorithms and models that are easy to execute on constraint devices once they have been trained on potentially thousands of cloud servers and petabytes of data.
If you are a Devop then your next challenge will be managing and operating millions of constraint servers.
If you are a cloud innovator then you are likely to want to look into SaaS and PaaS management solutions for micro-servers.
If you are a service provider then this is the type of solutions you want to have the capabilities to manage at scale and easily integrate with.
If you are a security expert then you should start to think about micro-firewalls, anti-micro-viruses, etc.
If you are a business manager then you should think about how new “mega micro-revenue” streams can be obtained or how disruptive “micro- innovations” can give you a competitive advantage.
If you are an analyst or consultant then you can start predicting the next IT revolution and the billions the market will be worth in 2020.

The next steps…
It is still early days but expect some major announcements around micro-servers in the next months…

The next communication challenge: making money with WebRTC

At TADHack some months ago it was clear that SMS and phone calls are out and WebRTC is the new hot technology for developers. Via your browser you can talk to your salesman, doctor and coach. Your browser can be mobile. This means that video calls will be universal as soon as 4G is everywhere. Bad news for operators that will see data on their networks balloon without new revenues. Good news for users that will have a whole new world of communication opening up with voice, video, screen sharing, web apps, etc. all seamlessly integrated.

How can business be generated with WebRTC?

Per minute call billing is out. Unless of course you are talking to a highly paid consultant that charges you by the second or minute. One time payment like mobile apps are only viable if you can embed WebRTC technology in a mobile app, not if you need to support an ongoing business. This means that we need a new subscription model for WebRTC. We need a micro subscription model. Especially for services that will be used on a long term basis, e.g. conference facilities, next generation voice mails, etc. As always operators will be hesitant to cannibalise a juicy per minute business for a low margin 1-99 cents per months subscription service. So are there others that could bill micro-subscriptions? The obvious choice would be cloud providers. They can already do hourly micro billing on monthly cycles hence adding some recurring element would be straightforward. So my prediction is that WebRTC will see operator’s problems accelerate whereby cloud will no longer deliver you only IT solutions but also your communication services.

How to successfully attack a software dinosaur?

We all have “enjoyed” working with some software that was purchased because “You can’t get fired because you bought…”. This software is known for being the industry leader. Not because it is easy to use, easy to integrate, easy to scale, easy to do anything with,… It often is quite the opposite.

So why do people buy it? First of all it is easy to find experts. There are people out there that have been “enjoying” working with this solution for the last 10 years. It is relatively stable and reliable. There is a complete solution for it with hundreds or thousands of partner solutions. People have just given up on trying to convince their bosses on trying something different.

5 steps to disrupt the Dinosaur

Step 1: the basic use cases

The Pareto rule. What are the 80% of the use cases that only reflect 20% of the functionality.

Step 2: the easy & beautiful & horizontally scalable & multi-tenant clone

Make a solution that reflects 80% of these use cases but make it beautiful and incredibly easy to use. Use the latest horizontally scalable backends, e.g. Cassandra. Build multi-tenancy into the software from day 1.

Step 3: make it open source

Release the “improved clone” as an open source product.

Step 4: the plugin economy

Add a plugin mechanism that allows others to create plugins to fill in the 20% use case gap. Create a marketplace hence others can make money with their plugins. Make money by being the broker. Think App Store but ideally improve the model.

Step 5: the SaaS version

Create a SaaS version and attack the bottom part of the market. Focus on the enterprises that could never afford the original product. Slowly move upwards towards the top segment.

The expected result

You will make have a startup or a new business unit that will make money pretty quickly and will soon be the target of a big purchase offer from the Dinosaur or one of its competitors. You will spend a lot less sleepless nights trying to make money this way then via the creation of the next Angry Bird, Uber 0r Facebook clone.

 

Why VCs should no longer invest in mobile apps or social networks…

July 22, 2014 1 comment

The “Yo” app is a clear sign that there is a mobile bubble. If an app that is created in an afternoon and only says Yo gets $1M in funding then you know VCs are running out of good investment options. Also social networks are loosing steam because there are only so many you can be active on.

What should VCs focus on instead?
The answer: enterprise.
If all the UX, mobile, social, engagement, etc. experts of this world would focus their energy on making exciting, beautiful, easy to use enterprise applications and solutions then lots of new billionaires will be around in 3 years.
However enterprise software is hard. It needs to be rock steady, always available, easy to integrate, etc.
So what is the trick?
Easy: use a plugin mechanism and focus on a platform that handles 80% of the use cases with 20% of the features. All other 80% of the features can be added as plugins from external companies. The Accenture’s of this world will come up with plugins that will beat your wildest dreams. Especially if they have an easy way to sell them. Talking about price. Your platform should be open source. It is the only way to avoid the RFP hell. If you want to be compared to SAP, Oracle, Microsoft, etc. solutions then charge at least $1. If you make it open source then procurement has no say. Business managers and solution architects will try your software. They will show their managers solutions based on your software. The director will get involved. As will the CTO. They will all love it. When finally things go to production somebody will say “we need support!” and you can sell them a support contract. This is also the moment to sell them some plugins.
Now make your software super easy to integrate, e.g. via Juju, and make sure the software is scale out. This means that you can just install it on more virtual or commodity machines instead of needing bigger more expensive servers.
Finally in addition you need to add something innovative that other solutions in the same space don’t have and would have a hard time copying.
Use lean methodology to make sure you are building a solution for a real problem. Offer an on-premise version and a SaaS version.
Now you are set to become the next billionaire. At least your chances will be so much bigger than creating yet another mobile app or social network…

How to Survive Digital Darwinism a.k.a. Company Failure Acceleration?

70% of the Top 1000 companies are expected to no longer be around in the next decade. Big companies are not adapting to change. Digital Darwinism does the rest.

What is the reason behind Digital Darwinism?

Why can’t companies adapt to change? The ideal sector to see disruptive innovation at work is the technology sector. Many billions are spend on bringing products to market that fail. Many giants of yesterday are no more. Five smart guys and a dotcom name can make a multi-billion empire tremble.

Often the disrupted are very well managed companies. Companies that have put into place top quality processes. Listened to their customers. They continuously cut costs to offer a compelling quality product. Still along comes a new technology and what looked so great yesterday is called legacy today. Cloud is killing X86 servers, X86 servers killed mainframes, etc.

You can go and read the books about disruptive innovation. However there is a more substantial reason why innovation can kill companies so quickly. In most companies there are three categories of people: the weird, the cost centres and the cool. The weird guys are the techies, the geeks, the nerds, etc. You need them but please don’t let them come out of their cubicle. Every one that is not directly bringing in new revenues goes in the cost centre category, e.g. finance, legal, HR, etc. Some CFOs tried to make the cool group but ended up in jail. The cool gang are all the sales, pre-sales and marketing folks. They do the really hot and difficult stuff. Project managers and solution architects are not doing their job well when projects can not be delivered that have been sold by the cool gang.

If this is the reality in your company then you are likely to have to search for another company in the future. The reason is very simple. If your company does not value technical talent; HR is seen as a cost centre; sales and this quarter are the only things that matters; then there will be nobody to tell top management that the right technical guys are not being hired and that the current solutions are fast becoming legacy.

Disruptive innovations kill old business models. Many sales forces are good at selling established products. Most do a poor job at selling innovative new ideas. Expect every 2 to 10 years to have an innovation that kills your old business model. The technical experts often are the first to see those changes coming. The sales people are the last. The technical expert will tell you Mongo is cool. The salesperson will tell you that Oracle is best bought as an appliance and not through the cloud because of performance reasons. The salesperson can not understand that there are other companies that use Open Source or SaaS to gain marketshare. It looks very bad on your quarterly results if you give your software away or only charge a small bit per month instead of an upfront license.

How can you survive Digital Darwinism?

The main step is to stop organising companies around job functions and to see the value in each job function. Yes you need a sales force that manages the customer relationships and can sell many products. However you don’t need pre-sales, business development and marketing to be part of it. It is much better if you organise the rest of the organisation around product offerings with pre-sales, business development, marketing, finance, operations, delivery, R&D and support all forming part of the same product team. In order to make the best products you need to be able to understand what customers want, how to reach them, how to develop the product, how to price, how to segment and how to support customers. This is the reason early startups are so successful. They don’t have to queue to ask for a project manager to be assigned to their project. Modern organisations are full of queues and buffers. This creates slowness. It is a lot better to make people responsible for a product and combine different people from different groups. As soon as the group reaches 100 people then you have to split. Otherwise they become slow again. But you can split by customer segment, not by job function. Like this it is possible to combine different products that compete against one another in one organisation. Sales will be challenged continuously to learn new things.

Another important point is to hire generalists and people that both understand technology and business. The world moves so fast that any expert will become obsolete in some years. It is better to have generalists that are quick learners.

Failure is the best option for future success. As soon as an organisation realises that they can not win each battle, they substantially increase their chance of winning the war. Failure should be part of all processes.

Finally you need to have the discipline to sell market leading products to others. This is the only way to get overpaid and it guarantees that the rest of the organisation does not fall asleep. People love to become millionaires when their company sells out. Why should only startups have this privilege. Take away the reason why people want to suffer in a 5 people company and you will attract top talent independent of your size.

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