49
telco companies from a shareholder value perspective (i.e., share price performance and market capitalization), thus confirming the assumption that when value rapidly migrates across industries and between firms, proactively substituting key elements of the primary business model provides a better fit with the new value landscape rather than launching secondary business models in parallel (Hacklin, Björkdahl & Wallin, 2018).
Based on the systematization of various product-related digitization initiatives, the research offers a taxonomy of digital products and services pioneered by telecom players outside their core connectivity business.
In addition to the above, the research discusses hypothetical value creation mechanisms for digitization and business transformation initiatives and suggests a directional approach for the assessment of their financial impact.
From a practical perspective, managers of telecom companies may use research deliverables (i.e., initiatives categorization and digital products taxonomy) as a conceptual framework, collection of ideas, and blueprint for developing their own organizations' digital strategies.
The research comes with several limitations:
• It gives a snapshot of various current digitization strategies and initiatives, but as the practice and theory evolve, proposed categorizations and typologies may need to be further expanded and aligned with the new situation.
• It is based on information in the public domain and does not provide insights into initiatives being contemplated by telco operations beyond their public
disclosures.
• It does not provide enough insights into specific factors that determine the
51 regarding different levels of digital technology mastery and business model readiness)
• It does not cover key success factors for implementing various digitization strategies and initiatives.
• It does not answer the question of which digitization strategies and initiatives are the most successful from a financial and value creation perspective.
Future research propositions partially come out of the current research limitations and may cover such aspects as relationship between pursued digitization strategies and market and financial performance; external and internal factors, determining selection and choice of digitization strategies and initiatives; key success factors and prerequisites for digital transformation implementation, mechanisms of value creation and approach to the assessment of digitization and business transformation financial impact.
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Appendices
Appendix A
Table 1. Selected definitions of business model concept
Author, year Definition Paper citing the
definition Timmers, 1998 The business model is "an architecture of the
product, service and information flows, including a description of the various business actors and their roles; a description of the potential benefits for the various business actors; a description of the sources of revenues" (p. 2).
Hedman & Kalling, 2003
Amit & Zott, 2001;
Zott & Amit, 2010
The business model depicts "the content, structure, and governance of transactions designed so as to create value through the exploitation of business
opportunities" (2001: 511). Based on the fact that transactions connect activities, the authors further
evolved this definition to conceptualize a firm's business model as "a system of interdependent activities that transcends the focal firm and spans its
boundaries" (2010: 216).
Hedman & Kalling, 2003; Morris, Schindehutte, &
Allen, 2005; Zott &
Amit, 2007, 2008;
Santos, Spector, &
Van Der Heyden, 2009; Bock, Opsahl, & George, 2010
Chesbrough &
Rosenbloom, 2002
The business model is "the heuristic logic that connects technical potential with the realization of economic value" (p. 529).
Chesbrough, Ahern, Finn, & Guerraz, 2006; Chesbrough, 2007a, 2007b;
Teece, 2007, 2010
Magretta,
2002 A business model is a "concise representation of how an interrelated set of decision variables in the areas of venture strategy, architecture, and economics are addressed to create sustainable competitive advantage in defined markets" (p.
727). It has six fundamental components: Value proposition, customer, internal
processes/competencies, external positioning, economic model, and personal/investor factors.
Calia, Guerrini, &
Moura, 2007
Johnson, Christensen,
& Kagermann, 2008
Business models "consist of four interlocking elements, that, taken together, create and deliver value" (p. 52). These are customer value
proposition, profit formula, key resources, and key processes.
Johnson &
Suskewicz, 2009
Casadesus-Masanell &
Ricart, 2010
"A business model is . . . a reflection of the firm's realized strategy" (p. 195).
"A business model articulates the logic, the data and
other evidence that support a value proposition for the customer, and a viable structure of revenues and costs for the enterprise delivering that value" (p. 179).
Hurt, 2008; Baden-Fuller & Morgan, 2010
Gambardella &
McGahan, 2010
Source: Zott, C., Amit, R., & Massa, L. (2011).
Table 2. Components of e-business model
Author, year 1st order theme(s) 2nd order theme(s) Mahadevan,
2000 • Value stream for partners and buyers network (identifies the value proposition for the buyer, sellers, and market makers and portals in an Internet context)
• Revenue stream (a plan for assuring revenue generation for the business)
• Logistical stream (addresses various issues related to the design of the supply chain for the business)
Stewart, & Zhao,
2000 Profit stream (includes the revenue stream and cost structure)
• Customer selection
• Value capture
• Differentiation and strategic control
• Scope
• Price
• Connected activities
• Implementation
• Capabilities
• Sustainability Afuah & Tucci,
2001 • A system made of
components, linkages between components, and dynamics
• Customer value (the extent to which the firm's offer is distinct or has a lower cost than its competitors')
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• Revenue sources (Where do the dollars comes from?
Who pays what value and when? What are the margins in each market, and what drives them? What drives value in each source?) Alt &
Zimmerman, 2001
• Mission
• Structure
• Processes
• Revenues
• Legal issues
• Technology
Mission:
• Goals, vision, value proposition Structure:
• Actors and governance, focus Processes:
• Customer orientation, coordination mechanism Revenues:
• Source of revenues, business logic
Applegate, 2001 • Concept (describes an opportunity)
• Capabilities (define the resources needed to turn concept into reality)
• Value (measures the return to investors and other stakeholders)
Concept:
• Market opportunity, product and service offered,
competitive dynamic, strategy for capturing a dominant position, strategic options for evolving the business
Capabilities:
• People and partners, organization and culture, operating model, marketing sales model, management model, business development model, infrastructure model Value:
• Benefits returned to
stakeholders, benefits returned to the firm, market share and performance, brand and reputation, financial performance
Rappa, 2001 • Sustainability
• Revenue stream
• Cost structure
• Value chain positioning Osterwalder,
2004 • Value proposition
• Customer segments
• Partners' network
• Delivery channel
• Relationship
• Value configuration
• Capability
• Cost structure
• Revenue stream Bonaccorsi,
Giannangeli, &
Rossi, 2006
• Products and services delivery
• Customers
• Costs structure
• Income
• Network (structural aspects)
• Network externalities
Brousseau &
Penard, 2006 • Costs
• Revenue stream
• Sustainable income generation
• Goods and services production
• and exchanges
• Pricing strategies
• Relationships (demand and supply)
• Network externalities
Source: Zott, C., Amit, R., & Massa, L. (2011).
Figure 1. Sources of Value in E-business
Source: Amit, R., & Zott, C. (2001).
63
Figure 2. Digital Business Model Design Process
Source: Sathananthan, Hoetker, Gamrad, Katterbach & Myrzik, 2017 Figure 3. Digital Business Model Innovation Loops
Source: Sathananthan, Hoetker, Gamrad, Katterbach & Myrzik, 2017
Figure 4. Three Waves of Technologies
Source: Lamoureux, L. Doing digital right.
Figure 5. Primary Business Uses of Technologies across 3 Waves
Source: Lamoureux, L. Doing digital right.
65
Table 3. Three Digital Eras
First digital
(pre-2000) Second digital
(2000-2015) Third digital (2016 and Later)
Key Technologies • Mainframes
• Programming Languages
• Commercial Software
• Personal Computers
• Second
• Mobile
• Analytics
• Cloud
• IoT
• Machine Learning
• Natural Language Processing
• Machine Vision
• Robotics Business uses
(Product, Process, Customer)
• Management and Transaction Systems
• Personal Productivity
• E-Commerce
• Mobile Commerce
• Online Presence
• Analytics
• Customer Apps
• Automation of Physical Processes
• Automation of Clerical
Processes
• Digital-Embedded Products
• Connected Products
• Predictive Analytics
• Improved Customer Journey Business outcomes • Efficiencies • Revenue
Protection
• Profitability Improvements
• Market Valuation Increases
• Better Products Driving More Revenue
• Cost Reductions
• Improved
Customer Loyalty
• Market Valuations Increases Source: Lamoureux, L. Doing digital right.
Table 4. Digital Providers and Primary Users
First digital Second digital Third digital Primary Providers
of Digital Tech companies, like
• IBM
• Intel
• Microsoft
• Apple
• Dell
1st Digital, plus interInternetice and E-commerce
companies, like
• Amazon
2nd Digital, plus digital product and service providers, like
• Tesla
• GE
• Established companies Primary Users of
Digital • Established
companies • Consumers • Established companies
• Consumers Source: Lamoureux, L. Doing digital right.
Figure 6. Framework for Digital Transformation
Source: Lamoureux, L. Doing digital right.
67
Figure 7. Building Blocks of Digital Transformation
Source: Digital Transformation Framework - Ionology - 7 Principles. (2018). Retrieved from https://www.ionology.com/digital-transformation-framework/
Figure 8. Digital transformation conceptual diagram
Source: (Gong & Ribiere, 2021)
Figure 9. Building blocks of digital transformation process
Source: (Vial, 2019)
Table 5. Main characteristics of digital transformation strategies
Source: (Tekic & Koroteev, 2019)
69
Appendix B – Summaries of Telco operators’ digitization and business
transformations initiatives China mobile
Has 3 distinguished business lines/ markets: "Customer" (C); "Home" (H)/
Business (B)" and "New" market ("China Mobile Limited - Investor Relations >
Business Review", 2022).
Separately reports "digital transformation revenue" which stood at 21.2% of service revenue as of 2021 and contributed ~60% to service revenue growth.
The Company makes an emphasis on transition from providing "connectivity and data traffic" services to providing "connectivity, computing force and ability" services.
Innovative business largely consists of following pillars:
- Digital content (video streaming, music, cloud games, cloud VR)
- Mobile authentication and Internet finance (credit purchase platform, wallet)
- Smart home
- Smart IoT industrial solutions (mining, factory, grid, metallurgy, port, hospital, surveillance, precise positioning) and 5G industry applications - Mobile cloud storage (private and industry clients)
Extensive focus on development of "computational capabilities" and
optimizing internal processes, infrastructure, and efficiency through utilization of AI and Big Data.
Bharti Airtel
Claims "building integrated digital ecosystem to solve customer problems through digital services at scale" to be an essential element of their strategy ("Bharti Airtel", 2022)
Digital services split into 2 segments:
- Consumer (video streaming and OTT content, music, digital payments with an additional authentication, customer self-care app for purchasing airtime credits)
- Enterprise services (Advertising, Security and surveillance, Cloud, IoT)
Relies on strategic partnerships with external players such as Mastercard, Amazon Prime video, Disney, Lionsgate, AWS, Google Cloud VMware, Verizon (for BlueJeans).
Focuses on deploying digital solutions that enhance connectivity, efficiency, and productivity of internal workforce in particular in retail (digitized payment collections) and network field force (platform with tools for tracking and managing requests, tasks and alerts).
Another key digital initiative is creating a digital network-planning, deployment, operations and quality. Other forms of digitization, like compulsory electronic invoicing from vendors, and end-to-end digitized approval process are being pursued.
Reliance Jio
Reliance, whose core businesses are in oil refining and petrochemicals,
launched the telecom operator in 2016 using super cheap subsidized 4G data plans and incentives to gain market share. ("Jio jolt to India’s broadband market", 2022)
Currently mobile operations are combined with ecommerce platform and digital services underpinning group's brick-and-mortar retail business.
The company has grown into India's largest telecom operator by users with 388m subscribers and is pushing ahead with new ventures from an ecommerce platform to digital payments and even a videoconferencing service, JioMeet.
In 2020 Facebook has invested $5.8 bln; Google $4.5 bn in Jio Platforms ("Jio becomes Facebook’s biggest investment", 2022).
Since investing in Jio, Facebook has integrated Reliance's platform JioMart into WhatsApp to connect customers with local retailers selling groceries and essentials.
Google plans to work with Jio to produce new low-cost smartphones with
Android-based operating systems, in the hope of gaining a foothold in the
world's fastest-growing smartphone market. Cementing a place in the device
market will also put Google in prime position to promote other services.
71
Jio's strategy entails creating massive digital ecosystem with various business verticals underpinned by reach bouquet of apps and platforms. The goal is to provide customers with a full array of digital services. "For Jio, it is the ability to get everything to the customer, so you don't leave [its] ecosystem"
Services span across connectivity and cloud, media, digital commerce, financial services, gaming, education, healthcare, agriculture, Government to Citizen (G2C), smart cities and manufacturing.
Jio has created strong internal capabilities across the following key digital
technologies: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), Big Data, Augmented Reality/Virtual Reality (AR/VR), Internet of Things (IoT),
Blockchain, Artificial Intelligence (AI), Machine Learning (ML), edge computing, speech/natural language, supercomputing, computer vision, robotics and drones ("Jio - Best Prepaid, Postpaid Plans, Broadband Connection, Apps, &
More", 2022)
China Telecom Group
Main focus is on implementing "Cloudification" and Digitalized platform for integrating information service. ("China Telecom Corporation Limited - Home", 2022)
In practical terms its business is organized around 3 major segments: Mobile Communications, Wireline and Smart Family services, and Industrial
Digitalization (Cloud, IaaS, PaaS) which is considered to be one of the main growth engines.
Heavy investments in computing capabilities and state of art connectivity.
Company's network infrastructure is built to be adaptive to cloud service offering.
China Unicom
Strategy is focused around 5 pillars: connectivity, computing, big data, applications and security ("China Unicom (Hong Kong) Limited", 2022).
Company builds premium networks with integrated computing infrastructure.
Mobile and Broadband considered to be "Basic businesses". Strong emphasis on cloud services (IoT, data storage, 5g edge cloud, smart video, hybrid cloud, proprietary controllable cloud) with integrated full-stack capabilities.
Vodafone Group
Company looks at digital services as expansion areas on top of its core connectivity.
Figure 1. Digital Focus Areas
Source: ("Vodafone", 2022)
Digital business is complementary and centered around:
- Digital services (Consumer IoT, Cloud & Security, payments and financial services, Voda-Pay lifestyle "Super-app" in partnership with "Alipay"
- Digital experiences (TV and content incl. partnerships with Dicovery+,
Prime Video, Disney+ and Netflix)
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Figure 2 Lifestyle super-app
Source: ("Vodafone", 2022)
Digital technologies are leveraged to improve customer experience (predictive base management, digital marketing platform, App/Web as primary retail channel and AI-based customer service (My Vodafone app and Tobi AI-bot).
Focus on external partnerships (content, consumer equipment) and in-house development (IoT technology platform, Device lifecycle services platform, loyalty applications, fintech)
Figure 3. IoT connectivity business verticals
Source: ("Vodafone", 2022)
Fintech services are viewed as the major future growth driver Figure 4. Financial services vison
Source: ("Vodafone", 2022)
Figure 5. Financial services product set
Source: ("Vodafone", 2022)
In the long run company expects decline of Core mobile services share in total
revenue and growth of Financial, Digital, and IoT services.
75