Intellectual Capitalism 2
Verizon

Q1: How can this video inform your company president based on the contents of his letter? (video)

https://www.youtube.com/watch?v=Yd98Naz8jvQ

One of the key focal points of Verizon’s strategic position is exploring the Internet of Things. Understanding and creating solutions on this new platform will be paramount to staying ahead of direct competitors. To address this topic and the challenges and opportunities that lie therein, Chad Jones, formerly of Xively by LogMeIn, delivered the above-linked lecture at the Harvard Innovation Lab entitled “The Business of the Internet of Things”.

The Internet of Things (aka Internet of Everything, Industrial Internet) is viewed as the next great technological revolution that will transform how we experience our daily life. The exploration of this new frontier has captivated many different industries, such as energy, health care, manufacturing, construction, and transportation. Many have begun to “connect” devices by incorporating sensors or software that can be remotely monitored, enabling seamless communication in real-time between computer networks and the physical world. Estimates are that by the end of 2014, there were 1.2 billion connections in Internet of Things, and future projections have that number leaping by as much as 5 times by 2020 with the potential to boast nearly 1 trillion connections by 2025. The economic impact is being estimated at $4.6 trillion by 2020, at which point could represent nearly a quarter of the United States’ gross domestic product; clearly an exciting figure.

Internet of Things has limitless possibilities, with critical growth potential in the aforementioned industries. Verizon has shown a significant interest in playing a role in ushering in the next technological revolution. Its customers are growing more and more interactive with digital content as mobile data consumption continues to rise, so Verizon has responded to the increased consumption by improving its network reach, speed and reliability, while also bolstering broadband speeds, fiber-based wireline services, and overall reliability. Verizon Telematics has become a big player in the connected car marketplace, with established relationships with Mercedes Benz, Volkswagen, Toyota, and Hyundai. An exclusive telematics platform called the mbrace Connect was developed with Mercedes Benz, which is being added to high-end 2015 models (standard in 2016). This platform connects owners to their vehicle via smartphone or computer to monitor performance, enhance security, expedite roadside assistance, and of course, start the vehicle remotely. Verizon and Mercedes Benz have been working together since 2009, providing wireless connectivity to customer service call centers. Verizon has also provided fleet management services, by using sensors, remote diagnostics and cloud computing to provide useful tools and feedback for managing large fleets. SAs a result, significant time and fuel costs have been saved. The ultimate goal for this technology should be to reduce carbon emissions, improve fuel efficiency for vehicles, reduce traffic congestion, and increase driver & passenger safety.

Mr. Jones discussed the potential power and impact of Internet of Things, but also how simply connecting devices is not enough. Machine-to-machine technology has existed for years, but not in such a way that meaningful solutions can be created in real-time to transform products into services-oriented opportunities. The trillion dollar economic impact is derived via generating these service experiences through connected objects we interact with on a daily basis. These experiences have the power to cultivate deep loyalty from consumers if they come to believe that a company cares about their well-being, rather than making the next sale. For example, Mr. Jones provides an example about an internet-connected snow thrower sold by a hardware store in the northeast. The connectivity of the device can alert the user and vendor of the health of the product, and if, for example, the spark plugs are burning to hot (symptom of misfires). The vendor can then relay that information to the consumer to suggest purchasing new spark plugs, send them information as to how to replace the spark plugs, or refer them to a nearby location to perform the maintenance. The product can then be sold on the platform of “clean, safe driveways in winter”, rather than on the features or performance of the particular product. Selling the experience (clean driveways) can be much more powerful than industry-leading performance or reliability.

Another way that Verizon can benefit from this lecture is the discussion of information known as “dark data”, or data that is unstructured and unused information. One of the potential key benefactors of dark data can be retailers. As Verizon has over 2,000 store locations, understanding how customers engage in retail space, how consumers make-decisions, or their movement patterns; can be a powerful tool to designing an efficient store layout.

Product development and launch can also be expedited through the Internet of Things. Being able to increase the speed at which companies can bring a product to market by having access to real-time data will enable companies to be more agile and tailor their product to their specific target market. If a company misses its target audience by even a marginal amount, it has a significant impact on sales generation. Honing the message a company wants to deliver and the best avenue to deliver that message will improve efficiency and present implications for inventory levels, distribution and supply chain management.

Q2 What information is provided and how can this be useful in understanding your chosen company’s strategic situation? (company profile)

In the Verizon company profile completed by MarketLine, one of the sections of importance is the company history. Tracking the journey of where the company has been is important to project where it may be going. Mergers, acquisitions, and liquidations communicate strategic decisions made in the best interest of the future of the company.

A recent example, on February 5th 2015, Verizon Communications, Inc. announced a major transaction completed with Frontier Communications Corporation. Frontier is a telephone company that mainly serves rural areas and smaller communities across the contiguous United States. The $10.4 billion acquisition included copper and fiber fixed-line infrastructure in California, Florida, and Texas, as well as the operating companies, GTE Southwest, Verizon California, and Verizon Florida. These operations served roughly 4 million voice, 1.5 million internet, and 1.2 million video customers.

The sale to Frontier signals a transformation for Verizon. This coming about eight months after Verizon acquired complete control of its wireless business, as it bought out Vodafone’s share for $130 billion. Reducing the number of wireline operations and turning focus to growth businesses such as wireless, data, and video streaming services seems like a smart move, given that reports have shown data consumption has increased year over year for the past 4 years. The Cisco Visual Networking Index reported that video already comprises 55% of mobile traffic, and projections indicate that global mobile data traffic will increase by 10 times by 2019. In response to these numbers, Verizon acquired AOL (for $4.4 billion) and Intel’s OnCue in order to bolster its high-quality video services and mobile video advertising technologies, and possibly launch its own internet-based TV service. These moves are all part of a bigger plan to bet big on future growth businesses, but voluntarily shedding 6 million customers certainly is counter-intuitive and risky by traditional thinking.

http://www.prnewswire.com/news-releases/verizon-sharpens-strategic-focus-and-returns-value-to-investors-with-transactions-valued-at-1554-billion-300031891.html

http://variety.com/2015/digital/news/verizon-mobile-video-service-details-uncovered-to-be-called-go90-exclusive-1201548130/

http://www.verizon.com/about/sites/default/files/annual/chairmans-letter-2014.html

http://variety.com/2015/biz/news/verizon-to-buy-aol-for-4-4-billion-report-1201493016/

Q3: Based on the information provided, explain the three most important things you can say about your company’s industry? (industry profile)

One of the big trends taking place in the United States telecommunications industry is consolidation of the market. Consolidation has reduced competition, making it harder for small, regional companies to create and sustain growth. Therefore, smaller, regional companies will continue to be acquired and merge with larger operators. This will make key players more influential in the long term, but it appears significant future growth will be found in the cannibalization of top competitor’s user bases.

“Cord-cutters”, or consumers switching entirely to wireless services, will contribute to this trend as well. At the end of 2014 there were approximately 129.4 million fixed-line connections, and projections expect that number to fall to 116 million by the end of 2019. The larger companies like AT&T and Verizon will be poised to capture the by offering packaged services profitably, as it is expected there will be a number of consumers reluctant to forego a wired connection entirely.

http://web.a.ebscohost.com/bsi/pdfviewer/pdfviewer?sid=7e9728f1-32ba-489e-a155-8542fd90f0c6%40sessionmgr4005&vid=13&hid=4212

Another hotly debated issue over the past eighteen months that directly affects Verizon and its competitors has been net neutrality. The issue is based in the principle that ISPs should enable access to all content and applications, regardless of the source, and without favoring or blocking particular products or websites. Essentially it preserves the right for all consumers to communicate freely online. Currently, the internet was originally classified as an information service under Title I of the Communications Act. On February 26, 2015 was reclassified as a common carriers under Title II of the Communications Act by the FCC. Now the FCC can create rules that prevent content discrimination and the creation of fast and slow lanes. Title II would also put stricter regulations on ISPs to control how they treat traffic on their networks, prohibiting commercial agreements.

If ISPs were allowed to block or discriminate against any content of competitors, or entities they disagree with, they could slow down opposing applications and divide the internet into fast and slow lanes. This could also drive ISPs to charge extra fees to provide content on the “fast lane” and relegate those that cannot afford the surcharge to an inferior tier service. While this could be largely profitable for operators (Verizon included), it would effectively destroy the open internet and significantly restrict one form of free speech. It is almost comparable to a service provider determining who you are allowed to call, and what you can say to that person.

Net neutrality is important for organizations who rely on the open internet to launch their businesses, advertise/market their products, and distribute products/services. Open connection is conducive to job growth and competition. An open marketplace is paramount to innovation and opportunity, and no company should have the ability to limit that access. http://www.savetheinternet.com/net-neutrality-what-you-need-know-now http://www.dailydot.com/politics/what-is-title-ii-net-neutrality-fcc/

3. Pay TV/video streaming (p. 56) FiOS, AT&T, Comcast, TWC, Charter, Netflix, Amazon Prime Instant Video, HBOGo, Hulu

Q4: Based on the information provided, how would you characterize the company’s competitive situation? (industry profile)

Q5: Explain what useful information is provided to help you understand the competitive situation of your company? (market research reports)

Q6: What three items did you find that are most interesting to you? Why? (Case study, product review, report, working paper, article)

IoT can lead to 21st Century Industrial Revolution
Power of mobile connection * People can transform from abject poverty to owning their own multi-million dollar business * Applicable now to products
Technology is only one part; journey of product to market
Wave 1: WWW;
Wave 2: 2.32B devices shipping annually
Wave 3: Internet of Things (50B objects by 2020) * Combines cloud, mobile, sensors, to connecting EVERYTHING around us * Energy, lighting, roofing, humidity, doors, water flow, etc. can be monitored * $4.5 trillion by 2020; will surpass mobile phone market; 1T devices by 2025
Opportunities
* Predict and streamline services and maintenance * Optimize supply chain * Product activation and management * “Dark data”, learning engagement patterns (i.e. retail space; Best Buy – right) * Sensors could crack movement patterns of customers * Asset tracking and availability * Sale, service, and marketing flow * More than just a sale or transaction; who, where, why? * Sales mechanism itself, Buying patterns of individual
Examples: 1B lamp posts * Interaction two-ways? (NFC in phone) * Business opportunities??? * Logistics and delivery * Smart cities (oil, gas) * Health Care (LIMITLESS!!!) crash carts, nearest inhaler * Energy Consumption (sustainability) * FUN – gaming, “claw” game, immediately recognize revenue, * Gum ball machine flash on in response to claw game usage?

Simply connecting things is not enough. M2M has existed for YEARS * Revolution of the cheap * Products, services are now accessible to common * Create experiences of broad appeal * Example: Internet Connected Snow Thrower * Sell “Clean Safe Driveways During Winter” * Connect engine to experts at hardware store; spark plugs burning hot = misfire, can order more, show how to change them (storm coming) * Vendor, consumer and product * SERVICE not just a product; cultivate loyalty * In-bound marketing; “trust” friends * What is the experience as you move through “eureka” moment * Unfettered access to allow meaningful solutions to come together

How to take it to market? How to build this? * Research * Understanding market and product requirements to make it valuable * Analysts, press coverage, potential/current markets, SWOT, goals, competition, customers, past/present offerings, venture capital (crowd-funding) * Define Target Constituencies, Scenarios, Issues * Define Least Common Denominator segments * Hone message, monetization * Must speak to each party differently * Develop market focused roadmap * Minimum Viable Product (MVP) * IoT maturing in steps * Connected product (start) * Optimized Business * Transform Business Model (data-driven; becomes a service) * As much as 5x as a service vs. product * Interconnection Effect * Tie together solutions into one for the individual * What if you can control all the objects (fire alarm, lights, baby monitor)? * IoT Primitives (blocks to build a solution) * Full/Empty * Open/close * Hot/Cold * On/Off * Flow Rate * Pressure * Location * Use/Control
EXAMPLE: Home Heating Oil, storm is coming * Full/empty detection; Flow rate = internet connection * Centralized monitoring, consumption analytics, predictive delivery pattern * Optimized supply chain (summer vs. winter) * Customer does not need to buy gallons at a time * Fuel AS A SERVICE