Don’t Assume a Business Model

By | December 14, 2016

As the industry’s network obsession continues unabated – 5G, NFV, IoT – take the time to lift your head up out of the trenches and take a peek outside of the data center to consider what business you’re actually in. Building networks and installing servers to deliver infrastructure are absolutely necessary pursuits, but they aren’t business pursuits they are engineering and operational pursuits. It’s easy to continue on the well-worn path, doing the same things that have been so successful in the past. Upgrade networks, update software, evaluate and evolve new technologies. Those actions have worked for more than a century and as connectivity becomes “an essential human activity” there is every reason to believe that history will repeat itself and the providers of that infrastructure will be nothing more than a regulated utility. And just like other utilities – power, water – innovation will be pushed aside in favor of reliability, maintainability and cost.

A recent Wall Street Journal article entitled, “The Economy’s Hidden Problem: We’re Out of Big Ideas”, lamented the fact that innovation is falling victim to risk aversion, regulations and the basic fact that we’ve solved a lot of the basic problems that humankind has faced. Telecommunications and service providers face the same challenges. The low hanging fruit has been harvested and further advances will take longer, cost more and present more risk. Moving from 4G to 5G isn’t all that risky and combining that connectivity with partner-supplied applications isn’t really too difficult. No, the biggest challenge is becoming a different kind of business. Not a utility but a genuine digital services provider.

What Do You Want to be When You Grow Up?

All the advancements in artificial intelligence, decision support, virtualization and robotics don’t help service providers transform their business models. At the highest level service providers need to determine what tenant services they want to deliver. In a tenant model, which aligns pretty well with how service providers do business, tenants lease space. And for some, being a landlord is enough. As the landlord, a service provider provides access to facilities and ensures that the building is safe and operational, the grass is cut, the snow is removed and that’s it. Tenants are responsible for turning on the power, water, TV, internet, cleaning, shopping and every other service that is associated with life as a tenant. Each tenant does their own thing, establishes a relationship with and pays every supplier individually.

Many landlords have bundled basic services into the rent like heat, water, cable or internet. The building only needs one meter and one account with the supplier. Value-added services are more economical for the landlord to purchase wholesale and tenants are rewarded with convenience, making them more loyal.

But what if tenants could login to an app that lets them schedule maid service, dry cleaning pick up, doggy day care, transportation, grocery delivery or anything else they might need? The services are contracted by the landlord and the fees, which reflect the discount received by the landlord, are paid monthly by the tenants as they use the services. Tenants become so enamored with the simplicity and convenience of the services being provided that they never want to leave!

Communication service providers offer some value added services but that doesn’t make them digital service providers. Differentiation based on network speed is the equivalent of saying, “our apartments are bigger”. It might matter to some, but is nearly meaningless once a tenant moves in. Once a CSP has a customer, the technology is transparent and all that matters is the experience. Once a tenant moves in, if a large apartment has leaky pipes or is always cold, it doesn’t matter that it’s bigger.