Structure of Value Networks in Telematics Business

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Structure of Value Networks in Telematics Business
2.9.2003
Ville Salomaa
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Structure of Value Networks in Telematics Business

• Made by Ville Salomaa at Siemens Oy in Espoo
• Supervisor Professor Heikki Hämmäinen
• Instructor Lic. Tech. Janne Kankare
• Professorship S-38 Telecommunications Management

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Agenda

• Introduction
• Definitions
• Market potential
• Technical overview
• Value networks in wireless telematics
• Two case studies
• Conclusions

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Introduction (1)

• The market of mobile subscribers is becoming
  saturated in Western Europe
• New potential customers beyond human beings
• wireless machine-to-machine communication M2M
  wireless telematics
• M2M has huge market potential due to the fact
  that machines outnumber humans by a ratio of at
  least four to one
• The M2M market potential can not be utilized by
  usual means in telecommunications industry

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Introduction (2)

• Need for cross-business know-how
• Vertical M2M markets, understanding customer
• Telecommunications
• IT, application development
• Business processes and applications
• No single telecommunications company can cover
  the whole fragmented value network ?Need for
  partnerships
• Value network fragmented -gt brings the complexity
  back to business logics in telecommunications
• Value Networks basis for business strategy -gt VN
  must be studied in this new business area

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Intoduction (3)

• Reseach Problem The largest challenge in
  wireless telematics business is considered to be
  the finding and managing of the fragmented value
  networks.
• Objective The key objective of the study is to
  define the structure of value networks in
  wireless telematics business.
• Scope Wireless M2M from business point of view
• Reseach Methods literature analysis, interviews
  and calculations. Literature mostly studies and
  articles.
• Reliability Extensive research material does not
  exist -gt much is based on real-life business

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Definition of Wireless Telematics (1)

• Definitions not established
• The Vocabulary of Mobile Communication (2001)
  describes telematics as follows.
• Telematics Sector of information technology
  which simultaneously combines telecommunications
  technology and data processing technology
• Lately also used in the meaning of automotive
  telematics
• M2M is modernly emphasized as wireless
  machine-to-machine communications
• machine-to-machine,communication between machines
• machine-to-mobile, for example remote monitoring
  by the user
• mobile -to-machine, for example remote control by
  the user

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Definition of Wireless Telematics (2)

• In this thesis
• Wireless Telematics refers to computerized
  wireless communication with or between machines
• M2M
• Wireless machine-to-machine communication

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M2M Market (1)

• Huge market estimations
• Nature the same in all of them, but scale varies
  remarkably

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M2M Market (2)

• Conclusion M2M market is hard to forecast. Some
  studies predict strong growth. But as learned in
  the near history of mobile telecommunications,
  all market estimations in this business field
  have to be dealt with caution.

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M2M Market Areas

• Telemetry
• Telematics / in-vehicle applications,
• Public traffic services,
• Industrial applications,
• Security and surveillance,
• Sales payments,
• Fleet management
• Telemedicine
• B2B market is estimated to
• grow first, because
• consumer market adopts
• new technologies slower

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Technical overview (1)

• Fundamentally, existing technologies used
• GSM/GPRS/UMTS are major M2M technologies
• Short range technologies WLAN, Bluetooth, RFID
  (Radio Frequency Identification)
• XML and Corba to hide the underlaying
  technologies from applications
• Location technologies based on GPS, wireless
  terminals and networks
• At the moment GPRS enables cost effective IP
  connectivity in M2M solutions

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Technical overview (2)
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Technical overview (3)

• Wireless module is essentially a stripped-down
  version of a mobile phone
• Wireless moduless and terminals highly developed
• fast application developement and integration
  (java)
• Rugged, operation in temperatures of (20)
  (65) C
• weight 10-18 grams

Siemens MC45 Wireless Module
Siemens TC 35 Wireless Terminal
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Technical overview (4)

• There is basically no M2M standardization
• -gt strongest technologies will develop into
• de-facto standards
• From technology perspective it is quite clear
  that no wireless technology can provide such QoS
  that life-critical M2M services could be
  implemented in the near future
• QoS enough for applications where best effort
  reliability level is enough
• cost reductive applications
• new features to products via mobility

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Value Chain

• Value chain is a chain of interactions which
  takes place inside or between organizations in
  order to produce products and services to
  customers
• The term value chain is used to underline the
  sequence of actions in value creation.
• VC is a linear mechanistic model of business that
  is based on the industrial age production line.
  Developed by M.E. Porter in 1985.

• Such a mechanistic model is simply
• inadequate to understand the complexities
• of value in the knowledge economy.

Distribu- tion
Manufac- turer
End User
Materials
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Value Network

• A value network is an enlarged view of value
  chains as they come together to form complex
  networks
• A value network is a web of relationships that
  generates economic value and other benefits
  through complex dynamic exchanges between two or
  more individuals, groups or organizations
• The Value network, its different entities and
  their relationships can be defined in different
  resolution

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Value Network in Mobile Services Business

• An example of a value network value network in
  mobile services business from a study by Finnish
  ministry of transportation and communication

http//www.mintc.fi/www/sivut/dokumentit/julkaisu/
julkaisusarja/2001/3_1_22.pdf
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More detailed value network in Medical business
http//www.vernaallee.com/primary20pages/Understa
nding20Value20Networks.html
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Customer interface in value network

• Value network can be complex, but basically only
  one company acts in customer interface
• ? Gatekeeper
• Gatekeeper owns the customer

Supply action in the value chain
Supply action in the value chain
End user / Customer
Gatekeeper owns the customer
Supply action in the value chain
Supply action in the value chain
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Value networks in Telematics business

• Finding successful business models and
  well-managed value chains is probably the most
  difficult part of M2M business.
• Partnerships and alliances are favoured in order
  to reach this goal
• Value Networks in wireless telematics business
  are fragmented
• Who owns the customer?
• A single company can not cover the whole value
  network
• Too many players in the value network will eat
  the profit

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M2M Value Network

• User of the M2M system asks the System Integrator
  for a solution to a problem.
• System Integrator optimizes the
  telecommunications solution according to the
  environment and available telecommunications
  services.
• System Integrator builds the applicable devices
  and controls for the user systems
• M2M system is integrated with the systems of the
  user
• User purchases the defined telecommunications
  services from the Network Operator

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Big role of the integrator in M2M value network
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Case study M2M in industrial automation

• Industrial automation seems to be the most
  interesting market area in M2M business in the
  short-term because
• industrial companies are fast to adopt new
  technologies, like wireless telematics,
• wireless automation is a natural continuation for
  wired automation
• wireless modules are easy to integrate with
  automation logics
• Major driver for M2M is cost reduction
• remote control and maintenance
• also emerging service business
• Automation companies strong candidates for
  integrator role in the value network

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Case study M2M in industrial automation (2)
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Case study Integration of M2M with business
processes

• Machines can be linked wirelessly to business
  processes and applications (like ERP), and thus
  the machines and the company can be managed more
  efficiently.
• Already happening in wired automation. Wireless
  connection does not add complexity to the
  integration from business application point of
  view

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Case study Integration of M2M with business
processes (2)

• Wireless telematics brings more machines
  available for business process integration
• Businesses like vending, can be operated more
  efficienty when the machines are linked
  wirelessly to the business processes of the
  company
• Also tasks in service management can be automized

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Case study Integration of M2M with business
processes (3)
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Conclusions (1)

• An essential conclusion about M2M value networks
  is the importance of defining and managing them
• value network is the basis for business strategy
• The key finding of this thesis is that the value
  network in wireless telematics business is
  dominated by a M2M system integrator.
• Industrial automation seems to be the most
  interesting application area of wireless
  telematics in the short run
• Integrating M2M with business processes will be
  increasingly important in the future

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Conclusions (2) Issues for further research

• There is a need for further research in studying
  the value network in several different
  application areas of wireless telematics
  business.
• M2M application cases from technical point of
  view
• Product and consulting -based approaches on
  wireless telematics business and their influence
  on the M2M value network