What Anna Karenina Can Teach Telcos About Scale and Success in the Internet of Things

I. Grant

Summary Bullets:

• When there are more ways to go wrong than right, only the very brave take up the challenge.

• Specialization offers a viable risk mitigation strategy, but choosing it is hard.

Tolstoy opens Anna Karenina, “Happy families are all alike; every unhappy family is unhappy in its own way.” By this he means a family must satisfy all of a number of criteria in order to be happy; a failure in any one leads to unhappiness. Thus there are more ways to be unhappy than happy.
So too with telcos and the Internet of Things (IoT) – there are more ways to fail than to succeed, because telcos must satisfy many criteria simultaneously for there to be a happy and sustained outcome. That makes it hard or impossible to scale between use cases except at the lowest common denominator levels, such as communications infrastructure, connectivity, hosting and enablement platforms. A case in point is GE Digital, which has “paused” its Predix strategy to rethink how it achieves scale, and now points customers to Microsoft or AWS rather than its own cloud for backend processing, and to Apple devices for mobile reports.

This much is evident from many telcos’ public recognition that they cannot do it all themselves, and the subsequent search for partners or family members, an ‘ecosystem,’ if you will, that in aggregate compensates for each other’s shortcomings.

This effect shows up in the case studies many telcos offer as evidence of their happiness. One recently highlighted four vastly different but common IoT–dependent case studies; a smart city consultancy, a healthcare solution for the aged, an asset predictive maintenance system for jet engines, and a connected car system with three monetization angles – usage-based insurance, smart parking, and car sharing.

These use cases are all familiar to the telco IoT community. They are all happy families in the sense that their key success factors are common knowledge. However, the deliverable in each was unique to the customer and use case. While there are some common key success factors (KSFs) in each vertical use case, there are hardly any common horizontal KSFs between the use cases. From the telcos’ point of view, these use cases are uniquely “unhappy” families because their KSFs are not common ground between them; they have some potential for vertical ”happiness”, but hardly any horizontal ”happiness”.

It is no accident that telcos’ greatest IoT success (to date) has come either from specialization, as in connected car applications, or from providing connectivity. Specialization allows them to control all the elements (or family members) that could cause failure, while a pure connectivity play absolves them from family entanglements – but also minimizes their revenue potential. Vodafone estimates that connectivity can earn a dollar per month per connected device, but providing a response to a situation reported via that connectivity can earn ten times that, and Orange Business Services indeed notes how its IoT activities drive revenue in applications, networking and information processing.

Peter Thiel, the technology investor, argues that what make a business “happy” is the opposite of families. “All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.”

Telcos should therefore consider, is their IoT strategy to be a family or a business – Tolstoy or Thiel? If it is to be a family, then it should sponsor and curate an enabling ecosystem in which connectivity is its contribution. If it is to be a business, then vertical specialization and the offer of “one throat to choke” offers the best chance of success.

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