In Business Model

Connectivity service providers these days often use words such as “experience” or “personalization” or “seamless integration” or “user defined” or “advanced features” when describing the value of their products.

That should not come as a surprise. Most industries and firms try to do the same thing with their own products.

But the use of such phrases does raise some logical issues. To the extent that the emphasis is on “experience,” how far can that focus go? We might all agree the focus on “experience” or “personalization” is a helpful way to sell existing products to existing customers.

But can such emphasis go further, perhaps adding new roles in value chains that did not exist before? That is not an easy question to answer. Selling anything “as a service” rather than “as a product” can represent a new role in a value chain.

The classic old telco example is voice services, which were purchased “as a service” by businesses and consumers, while sellers of business phone systems essentially sold a “product” that allowed customers to create their own voice services.

In the internet era, hyperscale “computing as a service” suppliers essentially sell a service that customers once purchased as a product (computing machines).

It is not so clear whether connectivity service providers can leverage “personalization” or “experience” in similar ways to create new roles in the value chain. That is a different matter from reshaping products in ways that are more “user friendly” or “personalized.”

With the caveat that the phrase “network as an experience” or “network as a service” can be defined, they imply that a tangible product (internet access, for example) can be refashioned as an “intangible” product.

The general shift is from something that can be measured to something which is difficult to measure; something with basic value or attributes  to something with enhanced value and attributes; almost always implying also a shift from “commodity” to “not a commodity” status.

But there are at least a few ways the phrase “network as an experience or service” could mark a departure. In the past, “connectivity” services have been physically limited: legally authorized only in certain geographies by law, whether that is a city; a state or province or a nation.

The rise of all forms of all sorts of exchanges and marketplaces for retailing, for example, illustrate a different model. As e-tailers such as Amazon or Alibaba frequently or mostly enable transactions between buyers and sellers, and do not actually “own” the merchandise sold, so at least some connectivity services might be envisioned as products sold by firms that are facilitators, platforms or marketplaces, not owners of connectivity assets.

Think of firms that allow buyers and sellers to conduct transactions for various types of services, but without actual ownership of the inventory. Where a traditional connectivity services provider makes its money selling services on networks it owns, a platform or marketplace might make its money in the form of commissions on services sold that use the exchange.

So even if all connectivity networks “sell services,” an exchange might plausibly be said to “facilitate those transactions.” Network-owning connectivity providers make their money selling connections and bandwidth; marketplaces make their money hosting the transaction platform and earning a commission on completed transactions.

The major point is that much of the marketing spin around personalization or experience, while meaningful as a way of enhancing the value of existing products, sold to existing types of customers, with existing types of assets, is less apt to create new roles in value chains.

On the other hand, the business model for a marketplace or platform is different. Airbnb does not “own” the properties that are rented by guests on its platform. Uber does not own the vehicles driven by its drivers.

In fact, we might not be able to find many industries that do not attempt to use internet-based technologies to personalize and customize their products and services for customers, though the trend seems most advanced for intangible products that–by definition–exist only in performance.

Tangible products are physical objects whose value can be be embedded in their physical characteristics, materials and functionality. They have “specifications,” for example.

The performance of tangible products can often be demonstrated beforehand through reviews, testing, or even simple observation, so tangible products allow for some degree of pre-purchase evaluation, reducing reliance solely on “performance” after purchase.

Intangible products cannot easily be evaluated that way, as “quality” exists only in “performance” or “experience” of the product. Intangible products like legal advice, financial advice, or music performances derive their value entirely from their execution or delivery. One cannot fully know their worth until you experience them.

The “quality” of intangible products is often subjective and nuanced, whereas the performance of an auto, a computer or a piece of sports equipment can be quantified more easily.

So perception matters, especially in the pre-purchase period. Basically, one often has to experience an intangible product directly to understand its value. It is not so clear how that principle might apply for connectivity service providers touting “network as an experience.”

After all, connectivity products are, by definition, largely intangible. They are digital capabilities and already “services.” So the phrase “as a service” in some ways makes no sense. In computing, the logic is a bit clearer. Processing can be done on an appliance (a server or PC) or virtually at a cloud computing center. The former uses a product; the latter is a service.

Connectivity has generally been services. A few exceptions might include enterprise voice switches, where firms “create their own voice services” rather than buying them from a telco. One might argue that appliance-based virtual private networks similarly allow enterprises to create their own networking by deploying their own switches and routers. And most consumers use Wi-Fi created by their own routers, rather than “buying it as a service.”

But, generally speaking, connectivity is a service, not a physical product. The notion of “experience” as a service might be even more nebulous.


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