Transcript No Slide Title

Mapping the Telecom Value Chain:
A Roadmap for Communications Networks
Excerpts from
Professor Charles Fine
Massachusetts Institute of Technology
Sloan School of Management
Cambridge, Massachusetts 02142
May 2001
[email protected]
http://www.clockspeed.com
Tel: 1-617-253-3632, Fax: 1-617-258-7579
Mapping the Telecom Value Chain:
A Roadmap for Communications Networks
1. Fruit Flies & Temporary
Advantage
2. Value Chain Design & 3-DCE
3. eBusiness Phenomena:
Business Model Innovation
4. Telecom Value Chains:
A fruit fly example
Value Chain Design in a Fast-Clockspeed
World:
Study the Industry Fruitflies
Evolution in
Evolution in
the natural world:
the industrial world:
FRUITFLIES
evolve faster than
MAMMALS
evolve faster than
REPTILES
INFOTAINMENT is faster than
MICROCHIPS is faster than
AUTOS evolve faster than
AIRCRAFT evolve faster than
MINERAL EXTRACTION
THE KEY TOOL:
THE KEY TOOL:
Cross-SPECIES
Benchmarking
of Dynamic Forces
Cross-INDUSTRY
Benchmarking
of Dynamic Forces
Cisco’s End-to-End Integration for
its Fulfillment Value Chain
• New product development on-line
with supply base
• Technology Supply Chain Design:
Innovation through Acquisition
Customers
Order info
flows direct to
Cisco and suppliers
Cisco
Finished Product flows direct to
customer via logistics
supplier
Contract
Manufacturers
• Single enterprise information system
• Dynamic replenishment, direct fulfillment,
merge in transit
• Customer orders through Cisco
Connection online
Component
Suppliers &
Distributors
Cisco’s Strategy for
Technology Value Chain Design
1.Integrate technology around the router to
be a communications network provider.
2. Leverage acquired technology with
- sales muscle and reach
- end-to-end IT
- outsourced manufacturing
- market growth
3. Leverage venture capital to supply R&D
Volatility Amplification in the Supply Chain:
“The Bullwhip Effect”
Customer
Retailer
Distributor
Information lags
Delivery lags
Over- and underordering
Misperceptions of feedback
Lumpiness in ordering
Chain accumulations
Factory
Tier 1 Supplier Equipment
SOLUTIONS:
Countercyclical Markets
Countercyclical Technologies
Collaborative channel mgmt.
(Cincinnati Milacron & Boeing)
Supply Chain Volatility Amplification:
Machine Tools at the tip of the Bullwhip
% Chg. GDP
% Chg. Vehicle Production Index
% Chg. Net New Orders Machine Tool Industry
100
“We are experiencing a 100-year flood.” J. Chambers, 4/16/01
80
% Change, Year to Year
60
40
20
0
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
-20
-40
-60
-80
"Upstream Volatility in the Supply Chain: The Machine Tool Industry as a Cas
E. Anderson, C. Fine & G. Parker Production and Operations Managemen
Vol. 9, No. 3, Fall 2000, pp. 239-261.
INDUSTRY CLOCKSPEED IS A COMPOSITE:
OF PRODUCT, PROCESS, AND ORGANIZATIONAL
CLOCKSPEEDS
Automobile INDUSTRY CLOCKSPEED
THE
Automobile
product technology
THE MANUFACTURING
COMPANY
Automobile
organization
PRODUCTION
PROCESS
THE
Automobile
process technology
Automobile CLOCKSPEED IS A MIX OF
ENGINE, BODY & ELECTRONICS
Automobile
ENGINE
BODY
slow clockspeed
medium clockspeed
ELECTRONICS
fast clockspeed
ISSUE: MOST AUTO FIRMS OPERATE
AT ENGINE OR BODY CLOCKSPEEDS;
IN THE FUTURE THEY WILL NEED TO
RUN AT ELECTRONICS CLOCKSPEED.
Clockspeed drives
Business Strategy Cadence
Dynamics between New Projects
and Core Capability Development:
PROJECTS MUST MAKE MONEY
AND BUILD CAPABILITIES
CORE
CAPABILITIES
NEW PROJECTS
Leonard-Barton, Wellsprings of Knowledge
(New products,
new processes,
new suppliers)
The Strategic Leverage of Value Chain Design:
Who let Intel Inside?
1980: IBM designs a product, a process, & a value chain
Customers
Intel
IBM
Intel Inside
Microsoft
The Outcome:
A phenomenonally successful product design
A disastrous value chain design (for IBM)
LESSONS FROM A FRUIT FLY:
THE PERSONAL COMPUTER
1. BEWARE OF INTEL INSIDE
(Regardless of your industry)
2. MAKE/BUY IS NOT ABOUT WHETHER IT IS
TWO CENTS CHEAPER TO OUTSOURCE
3. VALUE CHAIN DESIGN CAN DETERMINE
THE FATE OF COMPANIES AND INDUSTRIES,
AND OF PROFIT AND POWER
4. THE LOCUS OF VALUE CHAIN CONTROL
CAN SHIFT IN UNPREDICTABLE WAYS
Automotive Power Dynamics
of Technology Value/Content
1965
2005
Steel
Steel
Autos
-styling
-structural integrity
Autos
Electronics
Elec.
-$/vehicle
-customer interface
Will electronics replace sheet steel . . .
. . . as the most integral subsystem in the automobile,
driving shifts in the relative strategic and financial
importance of various members in the supply chain?
Strategic Design of
Automotive Electronics Value Chains
Customers
Ford
Auto Opns
GM
NAO
Denso Inside?
Toyota
Visteon
Delphi
Supplier
Chrysler JCI Inside?
Mercedes
Delphi Inside?
Supplier
Vertical Industry Structure
with Integral Product Architecture
Computer Industry Structure, 1975-85
IBM
DEC
BUNCH
All Products
All Products
All Products
Microprocessors
Operating Systems
Peripherals
Applications Software
Network Services
Assembled Hardware
(A. Grove, Intel; and Farrell, Hunter & Saloner, Stanford)
Horizontal Industry Structure
with Modular Product Architecture
Computer Industry Structure, 1985-95
Intel
Intel
Microprocessors
Operating Systems
Peripherals
Applications Software
Network Services
Mac
Moto
Microsoft
HP
IntelEpson
Microsoft
Mac
Mac
Seagate
Lotus
Novell
AOL/Netscape Microsoft
Assembled Hardware
HP Compaq
IBM
Dell
(A. Grove, Intel; and Farrell, Hunter & Saloner, Stanford)
TI
etc
etc
AMD
Unix
TIetc etcetc
etc
EDS etc
etc
etc
etc
THE DYNAMICS OF PRODUCT ARCHITECTURE
AND VALUE CHAIN STRUCTURE:
THE DOUBLE HELIX
NICHE
COMPETITORS
INTEGRAL PRODUCT
VERTICAL INDUSTRY
MODULAR PRODUCT
HORIZONTAL INDUSTRY
TECHNICAL
ADVANCES
HIGHDIMENSIONAL
COMPLEXITY
ORGANIZATIONAL
RIGIDITIES
SUPPLIER
MARKET
POWER
PRESSURE TO
DIS-INTEGRATE
PRESSURE TO
INTEGRATE
PROPRIETARY
SYSTEM
PROFITABILITY
Fine & Whitney, “Is the Make/Buy Decision Process a Core Competence?”
THE DOUBLE HELIX
IN OTHER INDUSTRIES
• TELECOMMUNICATIONS--
– “MA BELL” was Vertical /Integral
– BABY BELLS & LONG LINES & CELLULAR are Horizontal/Modular
– Today’s Verizon is going back to Vertical /Integral
• AUTOMOTI VE--
– Detroit in the 1890’s was Horizontal/Modular
– Ford & GM in the mid 1900’s were Vertical /Integral
– Today’s Auto Industry is going back to Horizontal/Modular
• TELEVISION--
– RCA was Vertical /Integral
– 1970’S THROUGH 1990’S were Horizontal/Modular
– Today’s media giants are going back to Vertical /Integral
• BICYCLES--
– Safety Bikes to 1890’s boom to Schwinn to Shimano Inside
TELECOMS: IN THE BEGINNING,
THERE WAS VERTICAL INTEGRATION
AND MARKET POWER
VOICE
COMMUNICATION
TELEPHONE
NETWORK
VIDEO
ENTERTAINMENT
CABLE &
BROADCAST
NETWORKS
CORPORATE DATA
DATA
NETW0RKS
DAVE CLARK,
LCS, MIT
IP BEGAT CONVERGENCE & LOSS OF MARKET POWER
THE HOURGLASS
SHOPPING, PORTALS, SEARCH,
MUSIC, VIDEOS, JOKES, CHAT, EMAIL,
PORNOGRAPHY, DATA, ETC., ETC.
IP
FIBER OPTIC NETWORKS, CABLE MODEMS,
DSL CONNECTORS, SWITCHING
SUBSTATIONS, ETC., ETC.
DAVE
CLARK,
RPCP, MIT
Controlling the Chain Through Distribution:
The End of P&G Inside ?
•
•
Controlling the Channel Through Closeness to Customers:
consumer research, pricing, promotion, product development
Customers
Retailer
Retailer
Retailer
P&G
Controlling the Chain Through Distribution:
Beware of Walmart Outside
Controlling the Channel Through Closeness to Customers:
Chain Proximity
Customers
WalMart
Retailer
Retailer
P&G
Retailer
WalMart Private Label
• Battle for Channel Control • Proprietary Systems v. Closeness to Customers
Customers
Compaq
AMD
Nexgen
Dell
Gateway
Intel
Volatility Amplification in “The Bullwhip Effect” and
Clockspeed Amplification in “The Speedup Effect”
Customer
Retailer
Distributor
Factory
Tier 1
Equipment
Inventories & Orders fluctuate more
as you look upstream, tough on suppliers, but
Web Site
Developer
PC Maker
Chip maker
Equipment
Maker
Clockspeeds accelerate as you head downstream,
closer to the final customer
Mutually Reinforcing Clockspeed Drivers:
Technological Innovation & Competitive Intensity
+
Technological
Innovation in
Computing &
Communications
+
Industry &
Organization
Clockspeeds
Industry &
Organization
Clockspeeds
+
Competitive
Intensity from
Reduced Trade
Barriers and
Internet Commerce
+
Media Supply Chains: An Industry at Lightspeed
Customers
The box
Wired
Phone
Wireless phone
PC/laptop
PDA
Television
VCR
Page
r
The Content
The Pipe
(Access, Metro, Backbone)
LandbasedTelco:
-copper POTS
-fiber
-DSL
Cable
Networks
Wireless:
-broadcast TV
-CDMA, TDMA, GSM
-satellite/microwave
Retail Outlets
-Borders:
-Blockbuster
-Seven-Eleven
Delivery (e.g., Fedex)
Video/Audio:
Movies & Art
& News & Sports
News/articles/books
(newspapers &
magazines)
Communication:
voice & video & email
Banking
Education
Shopping
Internet, et al
ALL COMPETITIVE ADVANTAGE
IS TEMPORARY
Autos:
Ford in 1920, GM in 1955, Toyota in 1990
Computing:
IBM in 1970, DEC in 1980, Wintel in 1990
World Dominion:
Greece in 500 BC, Rome in 100AD, G.B. in 1800
Sports:
Bruins in 1971, Celtics in 1986, Yankees no end
The faster the clockspeed, the shorter the reign
Mapping the Telecom Value Chain:
A Roadmap for Communications Networks
1. Fruit Flies & Temporary Advantage
2. Value Chain Design & 3-DCE
3. eBusiness Phenomena:
Business Model Innovation
4. Telecom Value Chains:
A fruit fly example
VALUE CHAIN DESIGN:
Three Components
1. Insourcing/OutSourcing
(The Make/Buy or Vertical Integration Decision)
2. Partner Selection
(Choice of suppliers and partners for the chain)
3. The Contractual Relationship
(Arm’s length, joint venture, long-term contract,
strategic alliance, equity participation, etc.)
IMPLEMENTATION OF VALUE CHAIN DESIGN:
EMBED IT IN 3-D CONCURRENT ENGINEERING
Recipe, Unit Process
PRODUCT
Performance
Specifications
PROCESS
Technology, &
Process Planning
Details,
Strategy
Product Architecture,
Make/Buy components
Time, Space, Availability Manufacturing System,
Make/Buy processes
VALUE CHAIN
ARCHITECTURES IN 3-D
INTEGRALITY VS. MODULARITY
Integral product architectures feature
close coupling among the elements
- Elements perform many functions
- Elements are in close spacial proximity
- Elements are tightly synchronized
- Ex: jet engine, airplane wing, microprocessor
Modular product architectures feature
separation among the elements
- Elements are interchangeable
- Elements are individually upgradeable
- Element interfaces are standardized
- System failures can be localized
Ex: stereo system, desktop PC, bicycle
-
VALUE CHAIN ARCHITECTURE
Integral value-chain architecture
features close proximity among its elements
- Proximity metrics: Geographic, Organizational
Cultural, Electronic
- Example: Toyota city
- Example: Ma Bell (AT&T in New Jersey)
- Example: IBM mainframes & Hudson River Valley
Modular value-chain architecture features multiple,
interchangeable supplier and standard interfaces
- Example: Garment industry
- Example: PC industry
- Example: General Motors’ global sourcing
- Example: Telephones and telephone service
DESIGNING ARCHITECTURES FOR PRODUCTS &
VALUE CHAINS: THE NEED FOR ALIGNMENT
VALUE CHAIN ARCHITECTURE
(Geog., Organ., Cultural, Elec.)
INTEGRAL
PRODUCT
Jet engines
ARCHITECTURE
Microprocessors
INTEGRAL
Mercedes vehicles
Automotive
Supplier Parks
MODULAR
MODULAR
Polaroid
Nortel
Personal Computers
Bicycles
Chrysler Vehicles
Cisco
DESIGNING ARCHITECTURES FOR
PRODUCTS & VALUE CHAINS:
MODULARITY VS. OPENNESS
ARCHITECTURAL
PROPRIETARINESS
CLOSED
ARCHITECTURAL
STRUCTURE
Pentium Chip
INTEGRAL
MODULAR
Mercedes Vehicles
SAP ERP
IBM Mainframes
Microsoft Windows
Chrysler Vehicles
OPEN
Linux
Palm Pilot
software & accessories
Phones & service
Web-based ERP
INFORMATION ARCHITECTURE MUST
REFLECT BUSINESS MODEL
In/Outsourcing: Sowing the Seeds
of Competence Development to develop
dependence for knowledge or dependence for capacity
Independence
Dependence
+
Amount of
Work
Outsourced
knowledge
+/or supply
Supplier
Capability
+
Amount of
Supplier
Learning
+
Amount of
Work
Done In-house
+
knowledge
+/or supply
Internal
Capability
+
+
Amount of
Internal
Learning
Technology Dynamics in the Aircraft
Industry:
LEARNING FROM THE DINOSAURS
+
Japanese
appeal as
subcontractors
U.S. firms’
appeal as
subcontractors
+
+
Boeing outsources
Japanese
Industry
Autonomy
to Japan
(Mitsubishi Inside?)
+
Japanese
industry
size &
capability
+
-
U.S.
industry
size &
capability
SOURCEABLE ELEMENTS
PROCESS ELEMENTS
ENGINEERING
CONTROLLER
ASSY
VALVETRAIN
TEST
BLOCK
I4
SUBSYSTEMS
V6
V8
PRODUCTS
ITEM IS INTEGRAL ITEM IS MODULAR
Strategic Make/Buy Decisions:
Assess Critical Knowledge & Product Architecture
DEPENDENT FOR
KNOWLEDGE
& CAPACITY
A
POTENTIAL
OUTSOURCING
TRAP
WORST
OUTSOURCING
SITUATION
INDEPENDENT FOR
KNOWLEDGE &
DEPENDENT FOR
CAPACITY
BEST
OUTSOURCING
OPPORTUNITY
CAN
LIVE
WITH
OUTSOURCING
INDEPENDENT FOR
KNOWLEDGE & CAPACITY
OVERKILL
IN
VERTICAL
INTEGRATION
BEST
INSOURCING
SITUATION
Adapted from Fine & Whitney, “Is the Make/Buy Decision Process a Core
Strategic Make/Buy Decisions:
Also consider Clockspeed & Supply Base Capability
Few Many
Suppliers
Few Many
Clockspeed
Fast Slow
Fast Slow
Clockspeed
Fast Slow
Few Many
Watch
it!
Suppliers
OK
Clockspeed
Suppliers
Fast Slow
Few Many
Fast Slow
Suppliers
Few Many
Suppliers
Clockspeed
Clockspeed
Suppliers
DECOMPOSABLE
(Modular)
INTEGRAL
Clockspeed
INDEPENDENT FOR
KNOWLEDGE & CAPACITY
Few Many
DEPENDENT FOR
CAPACITY ONLY
DEPENDENT FOR
KNOWLEDGE & CAPACITY
Adapted from C. Fine, Clockspeed, Chap. 9
Fast Slow
Qualitative analysis of strategic
importance uses five key criteria
Value chain elements with high customer
importance and fast clockspeed are generally
Customer
Importance:
strategic (unless there are many capable
• High
suppliers)
• Medium
• Low
 Competitive position is seldom the
Technology
primary consideration for strategic
Clockspeed:
importance, rather it serves as a
• Fast
“tie-breaker” when other criteria are
• Medium
• Slow
in conflict
Competitive

Position:


When many capable
suppliers exist, knowledge
may be considered
commodity and
development should be
outsourced
• Advantage
• Parity
• Disadvantage
Architecture is considered a
constraint for the sourcing decision
model, controls the level of
engineering that must be kept in
house for integration purposes
Capable Suppliers:
• None
• Few
• Many
Architecture:
• Integral
• Modular
Possible Decisions
(Knowledge & Supply):
• Insource
• Outsource
• Partner/Acquire
• Partial Insource
• Partial Outsource
• Invest
• Spin Off
• Develop Suppliers
are applied
for Products
for Subsystems
Model Criteria
developed
by GMdifferently
Powertrain,
PRTM,than
& Clockspeed,
Inc.
Sourcing Strategy Decision Tree High Customer Importance Path
High Customer Importance Path
High
Customer
Importanc
e?
Low
Technology Slow
Clockspeed
?
Strong
Weak
Competitive Weak
Competitive
Position?
Position?
Fast
Strong
None Capable Many
Many
Minimal Suppliers?
Few
Outsource Modular
Few
Architectur
Invest for
e?
Outsource
Fe
Architectur
Architectur
Modular
Modular
Parity,
e?
e?
- Maintain
Integral
w
Integral
Architectur Develop
Mostly
Integral
Internal
e?
Suppliers
Minimal
Outsource
Knowledge
Outsourc
- Specify
(possibly
Integral
Minimal e - Equity
&
develop
Modular Partial
Outsource / Acquire
Partial
OutsourcIntegrate
Minimal
suppliers)
- Equity /
Outsour
e
- Invest
Outsource
Outsource
Partial ce (less
Acquire
in
Equity/Acq
All
Outso integral
and
Outsourc
Internal
uire
&
Outsourc
urce
Partner
compon
e All
Partner
e All Capabilit
ents)
y
Minimal
Outsource Minimal
Invest
Outsourc
e - Invest
Suppliers?
None Capable
Man
Minimal Suppliers? y
Non
e Capable
Model developed by GM Powertrain, PRTM, & Clockspeed, Inc.
Sourcing Strategy Decision Tree Low Customer Importance Path
Customer
High
Low
Importance
?
Fast
Competitiv
e
Position?
Strong
Non
Man
Capable
e
y
Suppliers?
Architectur
Modular
e?
Fe
w
Technolog
Slow
y
Clockspee
d?
Weak
Competitiv Weak
Strong
e
Position?
None CapableMany
Suppliers?
Few
Minimal
Outsource
Outsour
-Develop
ce All
Suppliers Mostly
Minimal
Architectur
Outsour
Outsource
e?
ce Modula
, Develop
Develop
Integr
r
More
Supplier
al
Minimal
Suppliers
s
Outsour
and/or
Partial
ce Some
Outsource
Maintain
Integratio
Partial
Outsourc
n
Outsourc
e All
Capability
e
Integral
Low Customer Importance Path
None
None Capable Many
Suppliers?
Few
Architectur
Modular
Modular Architectur
e?
e?
Capable Many
Suppliers?
Develop
Outsourc Supplie
rs and
e All
Outsour
ce
SpinMinimalIntegral
off and
Outsour
Develo
ce Minimal
p
Outsour Develop
Suppli
Supplier
ce Partial
ers
s
Maintain
Outsour
and
ce
Develop
Supplier
s
Integral
Few
Outsourc
e All
Develop
Supplier
s and
Outsour
ce All
Data is still preliminary
Model developed by GM Powertrain, PRTM, & Clockspeed, Inc.
Actual knowledge work compared to
outcome of Decision Framework
0
%
Percentage of
Knowledge Work that 100%
Should be Controlled
Percentage of Knowledge Work Currently Done
0%
50%
100%
No
Outsourcing
Minimal
OutsourceEquity/Acquire
& Partner
Minimal
OutsourceMaintain
Internal
Knowledge
Partial
Outsource
Mostly
Outsource Specify &
Integrate
Mostly
Outsource Develop More
Suppliers
Spin-off and
Develop
Suppliers
Outsource All
Model developed by GM Powertrain, PRTM, & Clockspeed, Inc.
Every decision requires qualitative and
quantitative analysis to reach a conclusion
High
Knowledge
Supply
Qualitative
Value
Strategic
Importance
Qualitative Model
Improve
Economics
Divest/
Outsource
Customer
Im portance:
•
H ig h
•
M e d iu m
•
Low
Invest &
Build
Low
Technology
Clockspeed:
• F as t
• M ed iu m
• S lo w
Harvest
Investment
Com petitive
Position:
• Ad van t ag e
• P arity
Low
• Disa d va n ta g e
Quantitative
Value
Capable Suppliers:
• No n e
• F ew
Possible Decisions:
• M an y
High
• In s o ur ce
Architecture:
• In teg ral
• M o d u lar
•
•
•
•
•
•
O u ts o u rc e
Pa rt ne r/ A c q u ir e
Pa rt ia l In s o u rc e
Pa rt ia l O u t so u rc e
In v e st
Sp i n O f f
• D e v e lo p S u p pl ie rs
Engine A
EVA
Engines
EVA
AS-IS
BIC
AS-IS
Net Assets
BMK
Working
Capital
.
WACC
BMK
BIC
X
AS-IS
.
AS-IS
AS-IS
BIC
AS-IS
Capital
Charge
AS-IS
Fixed
Assets
Quantitative Model
(Financial)
BIC
BMK
AS-IS
EVA
COGS
BMK
Taxes
.
.
.
Transmissions
EVA
AS-IS
BIC
BIC
AS-IS
Engine B
EVA
GMPT
EVA
Revenue
.
BIC
AS-IS
PBIT
NOPAT
Model developed by GM Powertrain, PRTM, & Clockspeed, Inc.
Value Chain Mapping
Organizational Value Chain
Chrysler
casting
supplier
Eaton
clay
supplier
Technology Value Chain
engines
valve lifters
casting
manufacturing
process
clay
chemistry
Capability Chain
Supply Chain Management
Quality assurance
NVH engineering
Underlying Assumption: You have to draw
the maps before you can assess their dynamics.
R&D
VALUE CHAIN DESIGN IS
THE ULTIMATE CORE COMPETENCY
Since all advantages are temporary,
the only lasting competency is to continuously build and
assemble capabilities chains.
KEY SUB-COMPETENCIES:
1. Forecasting the dynamic evolution of market
power and market opportunities
2. Anticipating Windows of Opportunity
3. 3-D Concurrent Engineering:
Product, Process, Value Chain
CAPABILITIES
Fortune Favors the Prepared Firm
PROJECTS
PROCESS FOR
VALUE CHAIN DESIGN
1. Benchmark the Fruit Flies
DOUBLE
HELIX
2. Map your Supply Chain
-Organizational Value Chain
BOEING
-Technology Value Chain
-Competence Chain
3. Dynamic Chain Analysis
at each node of each chain map
4. Identify Windows of Opportunity
5. Exploit Competency Development Dynamics
with 3-D Concurrent Engineering
CAPABILITIES
PROJECTS
STRATEGY IN 3-D:
CASE EXAMPLES
Boeing: Static 3-D in airplane Projects
Dynamic, Strategic Value Chain,
unintegrated w/ Product & Process
Intel: Modular Product vs. Process
Integral Process and Value Chain
Chrysler: Modular Product & Value Chain
(weak on process?)
Toyota: Integral 3-D in Nagoya
(weak on global 3-D?)
Components of Product, Process,
and Value Chain Strategy
• Customer Needs
• Market Segments
• Product Architecture
• Mission Statement
• Operating Objectives
• Policies & Procedures
-Structural: Bricks, Tech, Org
-Infrastructural:
HR, Business Processes
1. Sourcing: Make/Buy
2. Partner Selection
3. Relationship Design
(spot, alliance, equity, etc.)
4. Logistics System Design
5. Inventory management Policies
6. Relationship Management
7. Value Chain Architecture
Mapping the Telecom Value Chain:
A Roadmap for Communications Networks
1. Fruit Flies & Temporary Advantage
2. Value Chain Design & 3-DCE
3. eBusiness Phenomena:
Business Model Innovation
4. Telecom Value Chains:
A fruit fly example
Internet Era Phenomena:
eCompetition in Business Model Innovation
Benchmarking the eFlies
E-tailing:
Attack:
Amazon, Webvan Market disruption in hopes of making a place
Defend:
Walmart.com, Ford.com Defense can require costly SC revamping
B2B:
E2E integration:
Cisco, Dell Integration pays off with modular products
Marketplace Creation:
Freemarkets Reverse auctions reduce short term costs
Covisint Common standards reduced supplier investment cost
Free & Open Digital Content:
Peer-toPeer Sharing/Theft:
Napster Industry-shaking disruptions require value chain SWAT team
Internet Era Phenomena:
eCompetition in Business Model Design
E-tailing:
Attack: Amazon, Webvan
Defend: Walmart.com, Ford.com, Office Depot.com
B2B:
E2E integration: Cisco, Dell
Marketplace Creation:eSteel, Ariba, Freemarkets, Covisint
Product Development: Cisco
Customer as Product Manager:
Product Innovation/Pricing/Design/Spec/Tracking/Delivery:
Dell, Herman Miller, Reflect, iMotors, Fedex, Priceline
Free & Open Digital Content:
Constructive Collaboration : Linux, Lego, Palm Pilot
“Anarchistic Constructive” Conversation: Cluetrain
Ubiquitous Sharing/Theft: Napster, FreeNet, Gnutella
DOT.COM COMPETITION:
FOCUS ON THE SUPPLY CHAIN
CASE#1:
WALMART.COM GOT NO TRACTION
Customers
Walmart
Store
Walmart
Store
Walmart.com
Shipper
Supplier
WalMart
Procurement
Supplier
DOT.COM COMPETITION: FOCUS ON THE SUPPLY CHAIN
Napster’s New Supply Chain Strategy
(go to the end and steal everything!)
Identify
Talent
Develop
Songs
Steal
Songs
Vertically Integrated
Music Giants
Record
Music
Promote
Music
Press
CD’s
Sell to
Retail
Customer
Consumption
Matching Supply Chain
Strategies with Products
Demand
uncertainty
(C.V.)
Pull
Push
H
L
I
II
Computer
Furniture
IV
III
Books & CDs
Grocery
L
Pull
Prof. David Simchi-Levi, MIT
H
Push
Delivery cost
Unit price
Cisco’s Value Chain Design
Product
Design
Process
Design
• minimal prototype iteration
• shared product databases
• highly modular products
• joint with suppliers
• orders go from CCO website to CM’s
• products go from CM’s to customer
via logistics supplier
• order & forecast data online to
supply chain
• innovation through acquisition
• outsourced manufacturing (e.g., Solectron)
• outsourced logistics (e.g., Fedex)
• independent for knowledge in IT system
Value Chain
Design
Chrysler’sExtended Enterprise Model
Key Elements of the model:
1. Build Trust in Relationships
-ask for suggestions and act on them
-honestly and aggressively seek mutual benefits
-communicate frequently and broadly across the org.
(understand each other’s problems)
-manage the relationship constantly
-pre-select suppliers very early and work together
-act for long-term gain, avoid short-term temptations
Stallkamp: “You are our supplier forever if you can be the leader in cost,
quality, technology, and delivery. If you fall behind, we will give you a
chance to catch up. If you cannot catch up (with our help), we will drop
you.”
Chrysler’s Extended Enterprise Model
Key Elements of the model (continued):
2. Share cost savings
-start with target costs and learn jointly
-provide economic incentives for partnerships
-share data with scorecards on performance
-collaborate to reduce system costs along the entire chain
-better to have a low-cost supplier than a low-price supplier
3. Develop products jointly
-utilize co-located, cross-functional teams; common CATIA
4. Develop both a strategy toward each supplier
(how strategic; areas of joint interest), and
a strategy for each commodity
(e.g., we only source tires from Goodyear & Michelin)
Chrysler’s RESULTS
Lower development costs:
joint incentives, ECN’s come early
Faster development speed:
early involvement, fewer late ECN’s
Lower procurement costs:
less time haggling and soliciting bids
Lower production costs:
suppliers get scale, more advanced planning
Improved quality:
joint incentives, better designs
Three Secrets to success:
Relationships, Relationships, Relationships
Mapping the Telecom Value Chain:
A Roadmap for Communications Networks
1. Fruit Flies & Temporary Advantage
2. Value Chain Design & 3-DCE
3. eBusiness Phenomena:
Business Model Innovation
4. Telecom Value Chains:
A fruit fly example
Network Communications Roadmap:
Start with Static Maps
Fiber and Cable-based Networks
Optical Networks
Wireless Networks
”Killer Technologies” of the Information Age:
Semiconductors, Magnetic Memory, Optoelectronics
“We define a ‘killer technology’ as one that
delivers enhanced systems performance of a
factor of at least a hundred-fold per decade.”
C.H.Fine & L.K. Kimerling, "Biography of a Killer Technology:
Optoelectronics Drives Industrial Growth with the Speed of Light,”
published in 1997 by the Optoelectronics Industry Develoment
Association, 2010 Mass Ave, NW, Suite 200, Wash. DC 20036-1023.
Killer Question:
Will Integrated Optics evolve linearly like
Semiconductors with Moore’s Law or like
Disk Drives with repeated industry disruptions?
Roadmap for Electronic Devices
Number of chip components
295oK
1018
Classical Age
Quantum Age
1016
77oK
1014
4oK
2010
SIA Roadmap 2005
Quantum State Switch
2000
1995
1012
1010
108 Historical Trend
1990
6
10
1980
104
CMOS
1970
102
101
100
10-1
Feature size (microns)
Horst D. Simon
10-2
10-3
International Technology Roadmap for
Semiconductors ‘99
Year
2005
2008
2011
2014
Technology (nm)
100
70
50
35
DRAM chip area (mm2)
526
603
691
792
DRAM capacity (Gb)
8
64
MPU chip area (mm2)
622
713
817
937
MPU transistors (x109)
0.9
2.5
7.0
20.0
MPU Clock Rate (GHz)
3.5
6.0
10.0
13.5
Moore’s Law
Transistors per chip
109
?
108
Pentium 80786
Pro
107
80486
Pentium
106
80386
80286
105
8086
8080
104
4004
103
1970
1975
1980
1985
1990
Year
Source: Joel Birnbaum, HP, Lecture at APS Centennial, Atlanta, 1999
1995
2000
2005
2010
Disk Drive Development
1978-1991
Disk Drive Dominant
Generation Producer
14”
8”
IBM
Dominant
Usage
Approx cost per
Megabyte
mainframe
$750
Quantum Mini-computer
$100
5.25”
Seagate
Desktop PC
$30
3.5”
Conner
Portable PC
$7
2.5”
Conner
Notebook PC
$2
From 1991-98, Disk Drive storage density increased by 60%/year
while semiconductor density grew ~50%/year. Disk Drive cost
per megabyte in 1997 was ~ $ .10
Optical Networking
is Keeping Up!
Voice growth
Capacity
OC768
OC192
OC48
OC12
Time
TDM line rate
growth
Data growth
Optical network
capacity growth
Optical Technology Evolution:
Navigating the Generations
with an Immature Technology
1
2
3
4
5
Timeline
Now
Starting
Starting
3-5 years
5-15 years
Stage
Discrete
Components
Hybrid
Integration
Low-level
monolithic
integration
Medium
Monolithic
integration
High-level
monolithic
integration
Examples
MUX/
DEMUX
TX/RX
module
OADM
TX/RX
module
OADM
OADM,
Transponder
Switch
Matrix
Transponder
Core
Technologies
FBGs, Thinfilm,
fused fiber,
mirrors
Silicon
Bench,
Ceramic
substrates
Silica
Silicon
InP
InP, ??
InP, ??
How many
Functions?
1
2-5
2-5
5-10
10-XXX
Industry
Structure
Integrated
Integrated/
Horizontal
Integrated
/Horizontal
Dr. Yanming Liu, MIT & Corning
DOUBLE
HELIX
DOUBLE
HELIX
Collaborative Supply Chain Development can
support Shared Costs and Shared Learning
in a fast-clockspeed environment
Can Telecom learn from Sematech?
“Coffee & Donuts” plus Technology Focus
Intel
IBM
Advantest
Supplier
Supplier
Nikon
TI
AT&T
Moto.
Fujitsu
Chips
AMAT
Fujitsu
Computer
Fujitsu
Supplier
Canon
et al.
U.S. “Co-opetition in the 1980s”
NEC
Chips
NEC
Computer
Ando
NEC
Optical Network Value Chain:
Layers & Players
Access Provider
Netw Mgmt/Maint
Network Owner
Netw contr/install
Netw Design
Netw Elements
Control Software
Box Assembly
Modules
Actives
Passives Fiber
Silicon
GaAs
Optical Networks Roadmap
Optical Taxonomy By Scott Clavenna and Peter Heywood http://www.lightreading.com
Optical Networks Roadmap
Optical Taxonomy By Scott Clavenna and Peter Heywood http://www.lightreading.com
Opportunity: Provision services directly
from DWDM systems
Solution Structure: More integration
between DWDM & the services layer.
Evidence: the “optical packet node”
and the intelligent optical switch.
Carrier Wish List
 Longer distances
 Smaller footprint
 More channels per fiber
 Greater capacity per channel
 Improved
optical channel monitoring
Nortel, Fujitsu, and Hitachi have integrated DWDM into their
Sonet/SDH equipment. Other vendors have promoted "open" systems
that can be used in conjunction with any vendor's equipment and are
not limited to carrying Sonet.
Optical Taxonomy By Scott Clavenna and Peter Heywood http://www.lightreading.com
OPTICAL VALUE CHAIN:
MINI CASE EXAMPLE
NORTEL NETWORKS plays at at least three levels of
the Optical Network Telecom value chain:
1. Network design & installation
2. Modules (OC-192 network elements)
3. Components (lasers, amplifiers)
QUIZ: Should Nortel sell their components business?
Hint: How likely are the scenarios of:
- An Intel Inside effect in components?
- Networks become sufficiently modular as to be
assembled by the customer?
Optera Metro
Network topology
(C. Thompson & R. Berryman, MIT)
Access
Metro
Regional
Long Haul
Media Value Chain
(C. Thompson & R. Berryman, MIT)
Content
Pipe
Aggregator
Service Provider / Network Operator
Web Portals
Access
Metro
MSN
Access
Generator
Backbone
Network Builder
Access
Systems
Solutions
"God box"
Multi-Service
CO Nodes
SMS
SONET/DWDM
CO Nodes
Retail, Service Providers
Box Builder
Metro
Systems
Solutions
Backbone
Systems
Solutions
Home Gateways, servers
(Nortel, Lucent, Nokia)
Aggregation
Transport
Managed Wavelength
Component Supplier
Grooming
Sw itching
Services
Hardware
Boards
Modems
Drives etc
Software
Apps
NOS
Tools
Semionductor / IC
Webpages
Component Supplier
Games
Components
Hardware
Software
(Transport nodes, switches Applications (Network Planning & Provisioning)
routers, aggregators etc)
(ADMs, OADMs, Line Cards, Systems
(Network OS, OSS)
multiplexers, modems etc)
(Boards, lasers, filters etc) Tools
(Routing & switching algorithms)
Chips
(Network processors, ASICs) Protocols
Boxes
Modules
Materials
(SONET, IP, MPLS etc)
Customer
Enterprise
Other Carriers
Box Distributor
Metro
Entertainment Portals
Streaming Video
Financial Services
Applications
Phone Calls
Service
Backbone
Network Owner
ISP Portals (eg AOL)
Gaming Portals
Financial Portals
Box
Chips, memory etc
(Intel, Motorola, Broadcom)
Multi-tenant buildings
Residential Customers
Microphotonics Technology Bottlenecks
(Prof. Rajeev Ram, MIT)

100 Channel OADM
o
o
o
o
o
o
o
mircoring – resonating ring
Photonic crystals – photonic band gap
Thin film filters
AWG – Large
Bragg gratings (isolation) –
Fiber gratings (bulky)
Diffraction grating (bulk)

Waveguide Isolators

LN-SOA (low noise silicon optical amplifier)

Optical Computing
o
o
Waveguides on IC
Optical Sources on CMOS
Wireless Value Chain
& clockspeeds
Hardware (Nokia, Moto, Palm, HP) fast
C
U
S
T
O
M
E
R
Device
fast
O/S (Palm, Windows, Psion) slow
Applications (phone, PDA, etc.) medium
Standard (CDMA, GSM, etc.) medium
Access
Equipment (Nortel, Ericcson, etc. medium
Provider
(ATT, Cingular,
Network Design (Sonet, ATM, IP) slow
Vodaphone, AOL)
Content fast
(Yahoo, Quicken,
IM, M-commerce,
VoiceCommunic
Product/Service packages fast
Wireless Communications
Market Analysis
Industry Structure
Supply Chain: Industry, Cell Phone, Network
Business Cycle: Vertical/Integral vs. Horizontal Modular
Evolution and Adoption of Services
Market Share
Standardization
Internet Converging with Wireless Telecommunications
Laws and “Laws” Guiding Development of Technology
(J. Gower & S. Constance, MIT & Siemens)
Wireless Marketplace
Value of Exchanges Between Supply Chain Links
Application
Developers
Content
Providers
Network
Operators
End-User
Consumer
Retail VAR
Radio Shack
Circuit City
Exchanges Between Links
Infrastructure
Provider
Device
Manufacturers
(J. Gower & S. Constance, MIT & Siemens)
Information
Partnership
Cash-flow
Exchange
Wireless Marketplace
Links Are Consummated on Exchanges
Application
Developers
Applications provide
efficient access to content
Network Operators
need applications to
enhance services
Infrastructure
supports applications
Content sites must
develop brand and
drive greater
accessibility
Content must meet
target customer
segments needs
Consumer agrees on service contract
Network
Operators
Infrastructure facilitates
network management
Content
Providers
VARs sell service contracts
as middleman
Retail VAR
Radio Shack
Circuit City
Device must gain network
access
End-User
Consumer
VARs sell devices as
middleman
Users must be able to operate device
Infrastructure
Provider
Device
Manufacturers
Air interface compatibility
(J. Gower & S. Constance, MIT & Siemens)
Wireless Marketplace
Wireless Industry Structure: 5 Forces
Market Entry
•Proprietary learning curve
•Economies of scale
•Capital requirements
•Brand identity
•Switching costs
•Expected retaliation
•Proprietary products
Supplier Power
•Supplier concentration
• Importance of volume to supplier
•Differentiation of inputs
•Switching costs of firms
•Threat of forward integration
Firm Rivalry
•Industry concentration ratio
•Fixed costs/Value added
•Industry growth
•Intermittent overcapacity
•Product differences
•Switching costs
•Brand identity
Substitutes
(J. Gower & S. Constance,
MIT & Siemens)
•Switching costs of adopters
•Buyer propensity to substitute
•Relative price performance of
substitutes
Buyer Power
•Bargaining leverage
•Buyer volume
•Buyer information
•Brand identity
•Price sensitivity
•Product differentiation
•Substitutes available
Many
Few
Wireless Marketplace
Industry Structure: 5 Force Analysis
Market Entry
Network Operator
Network
Operator
Supplier Power
Network Operator
Power
Many
Entry
Hard
Infrastructure Provider
Difficult
Device Manufacturer
Difficult
Application Provider
Easy
Content Provider
Easy
Competition
Rivalry
Device
Manufacturer
Buyer Power
Power
Network Operator
Intense
Network Operator
Strong
Infrastructure Provider
Intense
Infrastructure Provider
Intense
Infrastructure Provider
Weak
Device Manufacturer
Intense
Device Manufacturer
Intense
Device Manufacturer
Strong
Application Provider
Weak
Application Provider
Weak
Application Provider
Weak
Content Provider
Strong
Content Provider
Strong
Content Provider
Weak
Substitutes
Content
Provider
Unattractive
Voice/Data Network
Network Components
Cell Phones
Applications&Content
Number
Many
Few
Many
Few
Content Enabler
Infrastructure
Provider
Application Provider
Attractive
Wireless Marketplace
Wireless Device Supply Chain (Horizontal/Modular?)
Software Radio
Vanu Inc.
Non-Circuit
Component
Manufacturers
Circuit Board
Component
Manufacturers
Application
Developers
OS & AP
VAR Sellers
Device
Manufacturers
Network
Operators
Upstream
Voice and/or
Data
Customers
Downstream
EXAMPLES
• Microphone
• Speaker
• Battery
• Dial Pad
• Case
•
•
•
•
•
DSP
Microprocessor
ROM Chips
Flash Memory
RF Transceiver
• Operator
System
• WAP
• iMODE
• SMS
•
•
•
•
•
•
Cell Phones •
PDAs
•
Smart Phones •
SIM Pads
•
Controls
•
LANs
Radio Shack
Circuit City
Best Buy
Sprint Store
Verizon Store
COMPANIES
• Sharp
• Phillips
• NEC
• Fujitsu
• Panasonic
•
•
•
•
•
TI
ADI
Intel
Motorola
National S.
• Aether
Systems
• Microsoft
• Phone.com
• Sun
•
•
•
•
•
Nokia
Motorola
Ericsson
Siemens
Samsung
BT, FT, DT
Radio Shack
Sprint
Cingular
NTT Do Co
(J. Gower & S. Constance, MIT & Siemens)
•
•
•
•
•
• Personal use
• Enterprise use
• Public services
N/A
Wireless Marketplace
Wireless Device Components
Micro-processor
Phone
Battery
-lithium
iodine
Flash
Memory
-SID Chip
Microphone
& Speaker
Digital Signal
Processor
Keypad and
contacts
(J. Gower & S. Constance, MIT & Siemens)
Wireless Marketplace
Wireless Network Supply Chain(Vertical/Integral?)
Mercury Computers
PSTN/Internet
Component
Manufacturers
Cell Switching
Component
Manufacturers
Base Station
Component
Manufacturers
American Tower
Infrastructure
Providers
Network
Operators
Upstream
EXAMPLES
• WAP Server
• WAP Gateway
• PSTN
Gateway
• GPRS
Gateway
COMPANIES
• Nortel
• Sun
• Siemens
• Motorola
• Lucent
Voice and/or
Data
Customers
Downstream
• Mobile Operators
Switch Center
• Packet Control
Unit
• Base Station
Controller
• Antennas
• Radio
transceiver
• Channelizer
• Modem
• Transmission
Interface
• Base Station • Voice & Data
Assembly
Service
• Tower
• Services &
Assembly
Features
• Switching
• Billing
Optimization
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Nortel
Nokia
Siemens
Ericsson
Motorola
Lucent
Nortel
Nokia
Siemens
Ericsson
Motorola
Lucent
(J. Gower & S. Constance, MIT & Siemens)
Nortel
Nokia
Motorola
Ericsson
Siemens
Lucent
•
•
•
•
•
BT, FT, DT
Sprint
Cingular
Bell South
NTT Do Co
• Region Users
• National Users
• Global Users
Voice
&
Data
Wireless Marketplace
Wireless Voice Circuit Switch Network Components
Base Station
Operations
Step 1:
Base Station Controller
Converts signal from
base station to land line
friendly format
BSC
MSC
Step 2:
Mobile Switching Center
Keeps track of users and sends
them calls when necessary.
Includes: Home locator, visitor
locator, equipment identity,
authentication, and message
center
Step 3:
Mobile Operator’s Circuit
Switch Voice Network
Internal network supporting
voice services
MO
CSVN
GMSC
Step 5:
Public Switch
Public Switched
Telephone Network
PSTN
Step 4:
Gateway Mobile Switching Center
Connects a mobile network to the
public switched telephone network
and to other operators with which it
has roaming agreements
(J. Gower & S. Constance, MIT & Siemens)
Wireless Marketplace
Wireless Data Packet Network Components
Base Station
Operations
Step 1:
BSC
Step 2:
MSC
BSC
MSC
Step 7
WAP Gateway
Remote access server
for WAP
Step 2, 3, or 4:
Serving GPRS Support Node
It connects to various databases to
locate and authenticate traffic. Acts
as a router instead of a switch
Step 8:
Internet
SGSN
PCU
Step 1, 2, or 3:
Packet Control Unit
Needed to adapt base station for
packet data. Point at which data
departs from a voice networkGPRS
(J. Gower & S. Constance, MIT & Siemens)
MO
CSVN
GGSN
WAP
GATE
Net
WAP
SERVER
Step 6:
Gateway GPRS Support Node
Converts data packets to & from
GTP to TCP/IP
Step 5:
Mobile Operator’s Packet
Switched data network
Internal network for
providing data services
Step 9:
WAP Server
Where WAP Data
is stored
Wireless Marketplace
(J. Gower & S. Constance, MIT & Siemens)
Wireless Devices Becoming Horizontal & Modular
-Massive adoption of handsets capacity
US
Abroad
-Motorola-Devices
Ericsson/Nokia/NTT Devices
1980-85
strained as outsourcing coordination
becomes apparent
-International demand & competition
-Consumer Expectations Increase
-Avg. # of Components 550 to 900
1999-2001
INTEGRAL PRODUCT
VERTICAL INDUSTRY
1985-1990
2005E-2010E
NICHE
COMPETITORS
Software Radio
Emerges
Phone Becomes Easy
to Carry
HIGHDIMENSIONAL
COMPLEXITY
ORGANIZATIONAL
RIGIDITIES
Complexity of phone increases
Avg. # of Components 200 to 550
PRESSURE
TO
DIS-INTEGRATE
1996-97
MODULAR PRODUCT
HORIZONTAL INDUSTRY
1997-1999
2G Digital Phone
Shift to Messaging
and Data
PRESSURE
TO
INTEGRATE
2003E
-US 1996 Telecom Act
-DSP & Flash Chips
accelerate as PC Sales slow
Device
Manufacturers
Cell Phone
Nokia, Motorola,
Siemens, Ericsson,
Samsong
PDA
Handspring, Palm,
Compaq, Casio,
Sony
SIM Pads
Sony, Siemens,
Nokia
Smart
Phones
Kyocera, Ericsson
2001-2002E
TECHNICAL
ADVANCES
Outsourcing Devices
-Flextronics & EMS
SUPPLIER
MARKET
POWER
PROPRIETARY
SYSTEM
PROFITABILITY
-Qualcomm liciences Chip Sets for Phone
-Motorola & Others follow
Wireless Marketplace
(J. Gower & S. Constance, MIT & Siemens)
Wireless Infrastructure Still Vertical & Integral
US
Abroad
-Network costs focus attention on Spectral
Efficiency and Network Optimization
-Pressure from Consumer for data services
and from device manufacturers to provide
faster data rates
-Motorola, Nortel
Ericsson,Nokia,Siemens
1980-90
AMPRS AT&T & Baby Bells
BT, FT, Vodaphone, NTT
1990-1995
2001-2005E
INTEGRAL PRODUCT
VERTICAL INDUSTRY
2007E-2010E
Convergence of
Wireline to Wireless IP
& 3G
-US 1996 Telecom Act
MODULAR PRODUCT
HORIZONTAL INDUSTRY
TECHNICAL
ADVANCES
NICHE
COMPETITORS
-American Tower, ArrayComm
HIGHDIMENSIONAL
COMPLEXITY
ORGANIZATIONAL
RIGIDITIES
PRESSURE
TO
DIS-INTEGRATE
1995-2001
-US 1996 Telecom Act
-Spectrum Auctions $$$$$
-Vender Financing
SUPPLIER
MARKET
POWER
PRESSURE
TO
INTEGRATE
-2.5-3 G Costs, ROI cycle shrinks
-IP Standardizing PSTN/Packet Interface
-Demand for data service increases complexity
PROPRIETARY
SYSTEM
PROFITABILITY
2006E
Mobile Industry Evolution: THE DOUBLE HELIX
Are we moving horizontally and towards modular products?
AT&T & Motorola
NICHE
COMPETITORS
Sprint, AT&T,
Cingular,
Voicestream,
BT,DT,FT,
INTEGRAL PRODUCT
VERTICAL INDUSTRY
MODULAR PRODUCT
HORIZONTAL INDUSTRY
GPRS, 3G, IP
AMPRSHIGH-QoS
TECHNICAL
ADVANCES
Flextronics & EMS
SUPPLIER
MARKET
POWER
DIMENSIONAL
COMPLEXITY
ORGANIZATIONAL
RIGIDITIES
Nokia, Ericsson,
Motorola,
Siemens, Sanyo,
Panasonic,
Cisco, Nortel,
PRESSURE TO
DIS-INTEGRATE
PRESSURE TO
INTEGRATE
2G-Digital, FCC
PCS Licenses
(J. Gower & S. Constance, MIT & Siemens)
PROPRIETARY
SYSTEM
PROFITABILITY
Qualcomms CDMA, WCDMA, CDMA 2000
3G System Specification for DSP/Memory[1]
System Spec
2G Terminal
1998
2002
3G Terminal
2002
Memory Size
4 Mb
16 Mb
64 Mb
Radio Channel
Speech Coding
Voice Control
Video Coding
Processor
30 MIPS
3-20 MIPS
-8-16 bit 10 Mhz
30 MIPS
3-30 MIPS
50 MIPS
--
> 200 MIPS
30 MIPS
50 MIPS
> 200 MIPS
16-32 bit ARM
[1] Source: Nokia announcement, Electronics Times, March 12 2001,page 65.
Current Battery Technology -> Power Requirement:
Analysis by Sonny Wu, MIT & Nortel
< 200-250 mW
Technology Curves for E2PROM, Java Card and NetCardio[1] Module
Metric
E2PROM
Java Card
NetCardio Module
Memory
Size
Access Time
Energy per 32b write[2]
R/W Cycle
Voltage
CPU
ClockSpeed
Current Cost
FLASH
8-30KB
100mSec
1J
500K
5V
Embedded Flash
64KB
100mSec
2J
500K
3.0 V
FeRAM
4-8MB
100 nSec
1nJ
1010
1.5 V
None
8-16 bit ARM/MIPS
32bit ARM
5-10 Mhz
$0.50
50Mhz
$3-5
100Mhz
$10*[3]
[1] NetCardio is an MIT start up by the Author and other Sloan and EECS students working on next generation
Smart modules for wireless applications using low power Encryption and FeRAM technology.
[2] Data Source: “A survey of Circuit Innovation in Ferroelectric RAM” by A. Sheikholeslami, Proceedings of The IEEE, Vol.88,No 5, May 2000
[3] Cost estimated by David Lim of Sloan ( from Chartered Semiconductors) using Flash memory processing data.
Analysis by Sonny Wu, MIT & Nortel
Intelligent Wireless Module®
Subsystem Spec
Die Size:
Performance:
Power:
Die Cost:
Packaging:
Testing:
Overhead:[1]
Subtotal Cost
Radio/DSP
10 mm2
1000 MIPs
100 mW
$5
$2
$3
$2-$5
$12-15
Encryption
50 mm2
1024 bit RSA
100 mW
FeRAM
100 mm2
4 MB
50 mW
Pricing of Module
$20-25 each
[1] assume volume scale of 200M to 500M units/year: equivalent to $1.0 B US of amortization of R&D and Mfg O/H
1. Low Cost Single Chip Module
2. Interoperate with wireless appliances
3. Enabler for Customized wireless services
Analysis by Sonny Wu, MIT & Nortel
Intelligent Wireless Module®
Subsystem Spec
Die Size:
Performance:
Power:
Die Cost:
Packaging:
Testing:
Overhead:[1]
Subtotal Cost
Radio/DSP
10 mm2
1000 MIPs
100 mW
$5
$2
$3
$2-$5
$12-15
Encryption
50 mm2
1024 bit RSA
100 mW
FeRAM
100 mm2
4 MB
50 mW
Pricing of Module
$20-25 each
[1] assume volume scale of 200M to 500M units/year: equivalent to $1.0 B US of amortization of R&D and Mfg O/H
1. Low Cost Single Chip Module
2. Interoperate with wireless appliances
3. Enabler for Customized wireless services
Analysis by Sonny Wu, MIT & Nortel
Mobile Industry Evolution: THE DOUBLE HELIX
Are we moving horizontally and towards modular products?
AT&T & Motorola
NICHE
COMPETITORS
INTEGRAL PRODUCT
VERTICAL INDUSTRY
Sprint, AT&T,
Cingular,
Voicestream,
BT,DT,FT,
MODULAR PRODUCT
HORIZONTAL INDUSTRY
GPRS, 3G, IP
AMPRS-QoS
TECHNICAL
ADVANCES
Flextronics & EMS
HIGHDIMENSIONAL
COMPLEXITY
ORGANIZATIONAL
RIGIDITIES
Nokia, Ericsson,
Motorola,
Siemens, Sanyo,
Panasonic,
Cisco, Nortel,
SUPPLIER
MARKET
POWER
PRESSURE TO
DIS-INTEGRATE
PRESSURE TO
INTEGRATE
2G-Digital, FCC
PCS Licenses
PROPRIETARY
SYSTEM
PROFITABILITY
Qualcomms CDMA, WCDMA, CDMA 2000
WILL MOBILE INTERNET BRING BACK
VERTICAL INTEGRATION
AND MARKET POWER?
CHOSEN
CONTENT
PRIVATE
NETWORK
CHOSEN
CONTENT
PRIVATE
NETWORK
CHOSEN
CONTENT
PRIVATE
NETWORK
CHOSEN
CONTENT
PRIVATE
NETWORK
OR WILL OPEN-ARCHITECTURE
VOICE PORTALS REINVIGORATE
THE HOURGLASS
SHOPPING, PORTALS, SEARCH,
MUSIC, VIDEOS, JOKES, CHAT, EMAIL,
PORNOGRAPHY, DATA, ETC.ETC.
IP/3G/POTS
FIBER OPTIC NETWORKS, CABLE MODEMS,
DSL CONNECTORS, SWITCHING
SUBSTATIONS, ETC.ETC.
WIRELESS VALUE CHAIN:MINI CASE EXAMPLE
Wireless Base Stations (WSB’S) comprise 4 key subsystems:
Radio
Part
Digital Signal
Processing
Modem
WSB architectures are
-integral & proprietary
Suppliers include: Nortel,
Moto, Ericsson, Siemens, Nokia
Disruptive Modem advances
(e.g., MUD) can double
Base Station Capacity
Transmission
Interface
Fiber &
WireBased
Network
Modular WSB’s might
(1) Stimulate new WSB entrants (ala Dell)
(2) Stimulate standard subsystem suppliers
(3) lower prices to the network operators
(4) Speed base station performance imp.
(5) Increase demand for basestations due
to improved price-performance ratios.
Wireless Marketplace
(J. Gower & S. Constance, MIT & Siemens)
Trends in the Standard Adoption
Clockspeed
Networks
Spider webs around standards are becoming sticker
Standards contracting towards a data solution
Wireless LAN—Death of Home RF
Slow
Narrow bandwidth vs. Broad bandwidth
Devices
Convergence moving towards a single chip
Components are shared among devices
Quicker
Middleware
Carriers moving towards outsourcing
The race is on for a operating system standard
 Will the operating system run on all devices
 Will software radio become the disruptive tech.
Fast!
Are ASPs back with wireless applications & solutions?
Wireless Study
(J. Gower & S. Constance, MIT & Siemens)
Present Map of Wireless Investment in Standards
Networks
1.0 G
AMPS
2.0 G
CDMA IS-95
2.5 G
CDMA 2000
3.0 G
LAN
NAMPS
TDMA
GSM
GPRS-eGSM
Middleware
Home RF
Wi-Fi
ESP
RAM
SRAMs
FeRAM
FLASH
NOR-FLASH
EPOC
WAP/WML
HTML
HSCSD
PDAs
PalmDSP
SDRAM
Windows CE
CDPD
iMode
DSP1609ND
SDRAM
NAND-FLASH
Palm OS
IDEN
Bluetooth
Phones
TI-TMS320C54
AP
EDGE-eTDMA
PDC
wCDMA
DSP
OS
IDEN
CDMA 2000
Pagers
Devices
FDMA
SST-SuperFLASH
MLinux
FLEX
NMS
SMS
MeXe
IASw
Wireless Study (J. Gower & S. Constance, MIT & Siemens)
Trends within the value-chain
Networks
Spider webs around standards are becoming stickier
Standards contracting towards a data solution
Wireless LAN may drive standard convergence
Narrow bandwidth vs. Broad bandwidth
Devices
Convergence moving towards a single chip
Components are shared among devices
Carriers moving out of manufacturing components
Middleware
The race is on for a operating system standard
 Will the operating system run on all devices
ASPs are back with wireless applications
Value Chain of Mobile Virtual
Network Operator (MVNO)
Integrated
Spectrum
& Radio
Infrastructure
Switches
Authentication
Center
Distinct
Number
Series
SIM
Cards
Billing,
Customer
Service
Sales &
Marketing
Less
Integrated
MVNO:
- Does not have Spectrum & Radio Infrastructure
- Needs a host network
- Has at least Billing, Customer Service, Sales
and Marketing
Eelco de Jong, MIT
MVNO Example 1: Virgin Mobile
-Launched in Nov. 1999 in UK,
wants to become a global player,
leveraging its worldwide brand
-Host network: One 2 One (Deutsche Telekom)
Virgin purchases wholesale minutes from One 2 One
-Virgin does not require customers to buy a new handset only a Virgin SIM card (for US$ 20).
Little handset subsidization. Simple pricing structure
-Extensive content offering, targeting the mass-market
-Low ARPU, but also low customer acquisition costs
Eelco de Jong, MIT
MVNO Example 2: Financial
Times & Carphone Warehouse
Announced in March 2001,
joint venture between FT, Carphone and BT Cellnet
Targeting business consumers, who will receive
a WAP-enabled FT-branded phone
- Financial Times will provide content
- The retailer Carphone will provide billing, customer service,
leveraging existing services in this area
- Cellnet will provide the host network
Eelco de Jong, MIT
All Conclusions are Temporary
Clockspeeds are increasing almost everywhere
eCommerce is a clockspeed driver
Value chain design is a key competency
Study of eFlies can help with crafting strategy