Making more money in M2M

Jan 24, 2013

And when it comes to M2M that's a big problem for business strategists of all kinds and for those working in telcos in particular. They worry that competition allied with a requirement for network neutrality will mean that there will be nowhere to hold the line on M2M and Internet of Things service pricing... and they're probably right.

Like the ISP business, or apps download, voice minutes, messaging (there's a long list) the immediate opportunities that exist will end up being inviable because another company will always (eventually) take a bullish 'fremium' position and gut the business model you launched just a year previously.

What to do? Is there an answer? Or is this just the way the world is from now on?

Well it's probably the way the business world always has been (it's just recently sped up) and - as with those fast-motion plant growing videos - it suddenly looks astonishing because we're seeing it clearly for the first time. The answer may be to get ahead of the game and look at what the 'REAL' impact and value of M2M might be and sell the value rather than the gadgets (and network services). That sounds like a sustainable position.

Telco 2.0 is running a workshop on this approach at its Silicon Valley Executive Brainstorm in March and has just published some blurb on what the terms of the discussion is going to be. It struck me as a useful approach.

It references Charles Revson, the founder of the cosmetics giant, Revlon

"Revson once famously said: “In the factory, we make cosmetics. In the drugstore, we sell hope.”

In M2M, operators have traditionally tried to sell the equivalent of ‘cosmetics’ - something that makes sense to operators, such as SIMs, gigabytes of data traffic, or bundled messaging tariffs. Whether it was a sheep, for Telenor, an Amazon Kindle for Sprint or Vodafone, or one of these baggage-tracking devices that SMS you their location, it worked a bit like that.

But here’s a question: how many M2M customers actually want “SIMs”, “modules”, “data”, or “connectivity”?

The solution, says Telco 2.0, may be to think through to where the value is.

Here’s an example. In the UK, train leasing companies acquire and maintain trains for the UK railways’ train operating companies and the Department for Transport (Rail). Today, it is typical that the contract between DfT(R), the TOC, and the leasing company specifies a number of “diagrams” - roughly, a diagram is one train-movement - rather than a number of physical trains. This means that a major opportunity exists for the competitor who can maximise the amount of time the trains spend on the line, thus both making the service more efficient and reducing the number of trains they need to buy.

Collecting live data from instrumentation on the trains could make it possible to bring them in for maintenance on an as-needed or predictive basis, rather than on a schedule, and therefore improve their operational efficiency. (Similar projects exist for Rolls-Royce jet engines, for example.)

An M2M service company could take on the project, supplying the hardware, the service enablement, the connectivity, and some or all of the data work, in exchange for a share in the gains from improved availability and on-time running. As there are numerous TOCs, leasing companies, and M2M applications in UK rail, such a company might even aggregate more projects and become a sector-wide platform.

Have a look at the full Telco 2.0 blog.

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