In my last blog post, Towards 5G – Introduction, I introduced the evolution of LTE from a 3GPP perspective, the 5G PPP initiative, and on-going R&D projects aimed at adding value and shape to future wireless systems. In this post,  I want bring your attention to innovations in business models, explain why they matter, and how we can respond to the challenges.

First, let’s start with a plot that shows the general wireless business trends in the last two or three years:

Basically, in data dominant networks like LTE, we see a massive increase in data traffic but revenue is not keeping up with growth in demand (or even worse, declining). To better understand the situation, we need to consider the lower revenue per user in saturated markets as well as the global recession.

To face this challenge we need innovative ideas on two fronts:

  1. Business models
  2. Technology

In this blog post, I want to talk about the first point – business models. We’ll visit the second front, technology, in some later posts (the subject is also discussed in some of our other recent posts

[1] [2]).

First, let’s define the term “business model”. I like the definition from Alex Osterwalder:  a business model describes the rationale of how an organization creates, delivers, and captures value [3]. This is a pretty open definition, isn’t it? To make sure that we speak the same language, Alex introduces “The Business Model Canvas” [4] [5]. It’s a one-page tool, in which we find the nine elements that constitute any business model:

Why does this matter? Let’s consider a statement from Stephan Elop, Nokia’s former President and CEO: “Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem”. With that being said, it is not sufficient to be innovative on the product level, a organization needs to be innovative on the business model level.

Take mobile network operators as an example. Notice that they have started unbundling their businesses [6]. Why? Because they realize that their key asset is no longer the network itself, but very often their brand, which includes the network infrastructure, customer relationships,  content, and/or strategic partnerships (e.g. with banking sector).

The evolution of such business models might serve as an example for equipment manufactures. Operators like KPN and Vodafone have the outsourced the operation and maintenance of some of their networks to equipment manufactures. Think economies of scale – by running multiply networks across the globe, equipment manufactures like NSN, Ericsson and others can operate at a lower cost. An example of such a business model might look like this:

Another direction of the evolution can be seen with content providers. This innovation can be spun around new services and media content. A good example of this approach is Cyfrowy Polsat (one of the biggest TV operators in Poland ). They were the first to launch an LTE network in Poland and later acquired another major operator: Polkomtel. The big space for business models like this is machine-to-machine (M2M) and the Internet of Things (IoT). You can see how Telefonica is pointed in this direction [7].  An example business model for content providers might look like this:

Business model innovation is not a necessity for only mobile operators. Every single player within the telecom ecosystem, whether they be a silicon chip provider, an equipment manufacturer, or even a university, needs to go through its own process of innovation.

Ok, let’s stop here. I now want to ask you a simple question: “How can Nutaq help you face these challenges?”

Let me conclude with one of my favorite quotes from Thomas Walson, founder of IBM: “The way of succeed is to double your failure rate“. This is exactly what a model-based design approach is all about. This is what rapid prototyping is all about. You save time and money, because you can verify your own algorithms at the earliest stages of your design. Thanks to the Model-Based Design Kit [8], you can design, simulate, test, debug and deploy your design from within the Simulink graphical environment without needing to write any VHDL or C code.

To discuss your ideas and be up-to-date with the latest 5G developments, join the Towards 5G LinkedIn group, a group dedicated to professionals involved in the research of post-4G wireless systems.

References

[1] Massive MIMO – Part 5: The need for practical prototyping and implementation[2] Accelerating SDR prototyping with GNU Radio: Using Nutaq’s PicoSDR OFDM reference design as an example[3] http://alexosterwalder.com/[4] The Business Model Canvas – poster: http://www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf[5] Business Model Canvas explained in less than 3 minutes: https://www.youtube.com/watch?v=QoAOzMTLP5s[5] How to define an innovative business model in a fast and easy way: The Business Model Canvas[6] Business Model Generation, Alex Osterwalder (page 62-63)[7] M2M Telefonica: https://m2m.telefonica.com/[8] Model-Based Design Kit:  http://www.nutaq.com/software/model-based-design-kit