The AT&T Merger With Time Warner Opens A New Chapter For The Telco Industry

With Laura Koetzle

On October 22, 2016, AT&T announced its intention to acquire Time Warner for an equity value of $85.4 billion. The deal is essentially about the combination of quality content and content distribution, as it transforms AT&T into a content producer and owner — rather than just a distributor of content. Many telecom regulators restrict revenue growth opportunities for telcos in highly regulated telco markets. As a result, telcos are increasingly looking outside their markets for growth opportunities. This deal is evidence of this trend.

Telco CIOs Must Become More Strategic To Prepare For The Content Opportunity

The AT&T-Time Warner deal deserves special attention by telco CIOs. The deal needs to be seen against a challenging backdrop for the telco industry, where revenue growth from traditional revenue sources is hard to come by. Yes, AT&T already operates the largest US pay-TV business through its ownership of DirecTV. The Time Warner deal — should it materialize — would enable AT&T to offer its own premium entertainment programming to its pay-TV, mobile phone, and internet customers. AT&T’s intention to acquire Time Warner opens a new chapter for telcos, because the combination of quality content and content distribution potentially helps telcos to:

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Brexit Makes Customer-Focused Innovation Imperative

Photo: Cover of Panorama magazine Italia

While uncertainty continues, focusing on innovation is your best chance of success. British Prime Minister Theresa May has repeatedly said, "Brexit means Brexit." This statement ensures that every business operating in the UK will experience an uncertain and volatile market environment for some time. In our conversations with CIOs and chief technology officers (CTOs) since the Brexit vote, Forrester has retained its view that only if companies retain a focus on customers will they ensure growth and innovation, especially in times of uncertainty. All CIOs and CTOs at businesses operating in the UK should:

  • Make the business case that innovation can help their firms deal with uncertainty. Top management will be distracted by many short- term tactical considerations relating to Brexit. Make the case that innovation will move you closer to your customers and help to deal with underlying uncertainty.
  • Partner with their risk managers. Developing innovations that rely on customer and machine data will expose businesses to regulatory and compliance risks. Plan your business technology and innovation strategies with the risk manager on your side.

The report Brexit Makes Customer-Focused Innovation Imperative summarizes Forrester’s recent discussions and outlines how companies can best drive their innovation in the wake of Brexit.


Nokia “Connects” Network Services To Customer Experience

Nokia’s services division recently hosted an analyst event where it elaborated on the interlinkage between network services and network infrastructure. Of course, network services matter to businesses and telcos because they help technology managers to better manage infrastructure complexity and to modernize network infrastructure with the goal of making networks faster and more reliable. However, there are more fundamental implications:

  • Network services add value to products and open new business areas. Customers want features and services that are relevant to them in the immediate context of their needs and desires. As more products become connected, network services will play a critical role in developing and enhancing such features. Moreover, network services play a central role in driving augmented and virtual-reality solutions in outdoor conditions, such as those already used in manufacturing by Caterpillar or in construction by BAM Group.
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Bosch And SAP Agree A Strategic Internet Of Things (IoT) Partnership To Facilitate Data Orchestration

I recently attended an event at which Bosch and SAP announced a major partnership to more closely align their respective cloud and software expertise around the industrial internet of things. This partnership underlines the fact that SAP and Bosch are prepared to significantly transform their respective business models to generate new value for their customers. The SAP and Bosch partnership focuses on two main items:

  • SAP will add SAP Hana database to Bosch IoT Cloud. Bosch customers will be able to access SAP Hana in the Bosch IoT Cloud with the goal of processing large quantities of data in near-real time. This makes it easier for Bosch’s customers to run analytics of IoT sensor data in the SAP Hana environment.
  • Bosch will make its IoT microservices available to SAP on SAP Hana Cloud Platform. This move will facilitate the safe connection of different devices and components, including vehicles, manufacturing machinery, and smart tools, with open platforms. Customers will benefit from a broad range of emerging services to support their business processes.
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Frugal Innovation Supports Customer-Obsessed Innovation

Photo: Indian By Design

The age of the customer demands that businesses drive innovation at ever faster speeds and with limited budgets. More than ever, innovation is of the essence, and innovation must be cost-effective. Frugal innovation offers an alternative approach to driving innovation as it is based on the tenet to do “more with less” in contrast to the widespread practice to increase the R&D budget. Frugal innovation:

  • Opens opportunities to cater to people “at the bottom of the pyramid.” Traditional R&D often ignores those customers with lower purchasing power. Frugal innovation specifically targets this customer segment, opening up opportunities for new revenue streams.
  • Is complimentary to traditional R&D, not a substitute. Frugal innovation will not replace traditional innovation, but it will add a new approach to drive innovation.
  • Requires a change of mindset and a different approach to innovation. The frugal innovator’s mindset sees constraints not as a disadvantage, but an opportunity. Frugal innovation supports and furthers a mindset for global innovative collaboration.
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Cisco Takes Next Step To Becoming A Partner For The CIO's BT Agenda

Cisco's declared intention to further invest in key priority areas in its portfolio, such as security, IoT, collaboration, next generation data center and cloud, did not come as a great surprise to Forrester.

Last year, we evaluated Cisco’s efforts to transform itself  from a network business to a global provider of business technology (BT) -- the technology, systems, and processes to win, serve, and retain customers -- and a strategic partner to CIOs and CTOs. Cisco launched several programs to change its operational set-up, its business culture, its compensation incentives, and also its skillsets.  

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Bosch Software Innovation Offers Lessons For Digital Transformation

Traditional manufacturing businesses must rework the structure and culture of their organization to address rapidly changing client expectations. Bosch is a fascinating example of how a traditional manufacturing firm can successfully transition into a leading digital business. Our discussions with Bosch highlight that:

  • The shift from selling products to outcomes-as-a-service requires business model change. In order to sell business outcomes, Bosch combines business process expertise with technical know-how and an outside-in approach.
  • Digital transformation depends on successful cultural transformation. Bosch’s digital transformation is based on a fundamental cultural transformation that takes every Bosch employee and customer along.
  • Bosch’s software engineering division acts as a catalyst for digital transformation. Bosch believes in a central coordinating role for its software engineering division as part of the digital transformation process.
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Verizon’s Acquisition Of Fleetmatics Group Boosts IoT Momentum In The Telco Space

Verizon’s acquisition of Fleetmatics Group isn’t the first deal that involves a telco pushing into new internet-of-things (IoT) territory in the vehicle management space. In 2015, Orange acquired fleet management provider Ocean to strengthen its vehicle fleet management activities.

However, at $2.4 billion, the Fleetmatics deal is much bigger than most telcos have been willing to contemplate to date, underlining Verizon's commitment to the IoT space. But this deal won’t transform Verizon’s enterprise revenue composition overnight. While it will help improve Verizon's position in terms of IoT revenues, Fleetmatics had revenues of $285 million in 2015 – compared to Verizon’s $132 billion.

The price it is prepared to pay for Fleetmatics shows that Verizon expects to see impressive long-term benefits from the deal. Forrester expects that Verizon will ultimately extend Fleetmatics’ business model beyond global fleet and mobile workforce management solutions to more general tracking and tracing solutions for nonpowered objects like skips, agricultural equipment, machinery, and other connected assets.

Verizon has its work cut out: The acquisition is the easy part. But successful integration will be much harder, as this deal is about supporting customers with their business processes rather than just selling them new products.

Digital Transformation - Part 2: Culture And Organization

The most digitally aware managers are realizing that cultural and organizational transformation will dominate their agenda for years to come. Emerging business models will not function based on old organizational structures, traditional innovation approaches, and outdated management techniques.

In the late 1990s, many traditional businesses mentally leapfrogged by adding a “dotcom” to their name. Those old enough to remember those days, know that many businesses failed miserably in their efforts and still have not fully adjusted to IP realities.

Today we see a similar trend, with every business claiming to be a "digital" business. To me, this is a clear sign that we have crossed the zenith of digital hype. This period is a risky one. Just as the once mighty telcos were blown out of the water by the much more agile and flexible social media and big data players in the 2000s, I believe a majority of traditional businesses will succumb to the forces of successful digital businesses. Declarations of digital intentions, the creation of chief digital officers, or the allocation of digital budgets alone will not translate into digital success.

Most grand digital visions and strategic ambitions that have become the staple diet of corporate presentations mostly fall short of concrete plans for management innovation. It is not conceivable how traditional management techniques can deliver on promises of ongoing and inside-out-driven innovation as well as responding instantaneously to fast-changing customer demand. The creation of a work environment that stimulates employees’ self-initiative and creativity as well as passion for one's work must be the central building block for an agile, flexible, and experimental digital business.

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Microsoft’s Acquisition Of LinkedIn Will Not Translate Into A Revolution Of Enterprise Social Networking

In a report, Forrester discussed arguments made by Microsoft regarding the potential benefits of the tie-up. There are some additional aspects that I also consider important when discussing the implications of the tie-up:

  • LinkedIn's status of trusted independent platform for professional information exchange could be undermined. Although the deal, should it go through, would help Microsoft to strengthen its social networking services and professional content, there will be LinkedIn users that are not keen to become sucked into the Microsoft ecosystem as part of their social collaboration activities and abandon LinkedIn as active users.
  • Microsoft must be much faster to decide on LinkedIn's strategy than it did with Skype. It took Microsoft several years to define its strategy for Skype, and Yammer for that matter. This slow response to sort out Skype's place in the Microsoft family slowed down Skype's momentum significantly. By the time the new Skype strategy was announced, most of the hardcore Skype users had migrated away towards other social collaboration platforms like WhatsApp, Facetime, or WeChat.
  • Microsoft must redouble its mobile efforts. A large part of LinkedIn users’ activities are mobile based. Microsoft's weak position in mobile ecosystems could dramatically undermine LinkedIn's longer-term opportunities. If Microsoft underestimates the mobile dimension for LinkedIn, the future for LinkedIn could be very questionable. Users are fickle and there is no loyalty to outdated social media platforms.
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