M2M Corporate Initiatives 2012

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2012 proved to be another strong year for the M2M/Connected Devices market with a significant rise in corporate business ventures. The nearly 100% increase in activity during 2012 – a total of 114 corporate events – easily surpasses the rate of market development in 2011 according to our database tracking M2M corporate ventures.

The two strategies showing the greatest amount of activity during 2012 were:

• The creation of commercial partnerships across the M2M value chain to supply integrated M2M offerings to the market

• Market entry and expansion initiatives by companies targeting new and different M2M segments.

Finance as a Telco M2M offering

The role of telecommunications service providers in the M2M market is typically associated with the provision of wide-area data connectivity. This narrow perspective ignores the other capabilities - technical and non-technical - that service providers can bring to bear in new application scenarios.

In November 2012, Telefónica announced a cooperation agreement with Generali Seguros in Spain to pilot a new, automobile insurance service. The service will allow users to pay for their car insurance policy based on how they drive. The service will also provide information about how users can drive responsibly and tips to improve their driving habits. The overall service concept is not new; it has parallels with an offering such as 'In Drive' which is available in the USA from State Farm Insurance and Verizon's recently acquired subsidiary, Hughes Telematics.

However, what is interesting in the Spanish case is the three-party business model that Telefónica has put in place to capture a share of the wider commercial potential of this new service.

M2M Corporate Transactions Q3-2012

Please check the "Corporate Initiatives" navigation tab for the most recent market developments.

M2M started to develop as a sizable and strategic market for the mobile industry around 2008. This was the year that consumers and mobile operators began to appreciate the novelty of Amazon's Kindle connected eReader.

The Kindle offered an innovative eBook service enabled initially by Sprint's mobile network and now supported by AT&T in the USA. It employed a smart pricing model that did not force readers into a mobile data contract. It also did not oblige users to think about how much data they were downloading. Amazon's business model was also intriguing in positioning the device as a way to drive revenues in Amazon's core eCommerce business rather than a standalone commercial proposition.

In the market evolution of M2M, 2008 is also important for another reason. This was the year that mobile operators as a group addressed the market potential for connected devices through the GSM Association's Embedded Mobile market development campaign.

Mobile operator business models are going 'Digital'

Business model innovation is all about implementing the right delivery model to address a new business opportunity or to counter a competitive threat.

In this context, the 'right' delivery model involves a mix of elements as described in an earlier post. This multi-element approach is especially important when considering new areas of opportunity. The reason for this is that while marginal changes in the pricing element or re-packaging of an existing offering may provide temporary market respite they are unlikely to be competitive in the long run. Enduring innovation requires several inter-dependent elements of the business model to be reconfigured.

Over the last couple of years, connected devices have opened up many new application and service opportunities in non-mobile markets; think of eReaders, smart meters, connected health devices and digital photo frames. As a result, mobile operators and organizations in markets adjacent to mobile are altering their business strategies to address these opportunities.

Competitive dynamics of international M2M alliances

This note will be updated in light of new alliance announcements. 

In July of 2012, seven mobile operators announced a cooperation agreement featuring a unique SIM. This appears to be a move to address a segment of customers seeking to deploy global connected devices and to compete with Vodafone's global SIM offering. However, there are other competitive dynamics at play and longer term corporate strategy implications for companies that are using partnering approaches as a rapid means of market entry.

Where is the value in the M2M value chain?

M2M has historically been viewed as a specialist market in the context of the wider mobile industry. It struggled to achieve scale because many applications focused on narrow, enterprise sector opportunities.

These applications also involved proprietary designs and significant expenditure on customized engineering efforts. As a result, the value proposition was only perceived in few application areas where there were exceptionally strong financial or operational imperatives. However, this situation is constantly evolving and companies need to understand how value is shifting as they plan their business strategies.