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Integrated world is creating a momentum of change

Peter Elliott and Tim Devine
Financial Times
8 December 2009

We are at a tipping point in the evolution of new ways of doing business. Today’s integrated and interconnected world is fundamentally changing the relationship between businesses and their customers.

Those customers are mobile, well informed, technologically aware and highly demanding. For businesses to survive and succeed they need to recognise and respond to that changing world.

The new customer wants innovative products and services. They want to buy these products and services in different ways and, as the music industry discovered, are not always willing to pay for them.

From using mobile telephones for banking services, to smart meters that allow consumers to control their energy consumption, to entirely new cities that bring services together, this integrated world is changing the business landscape.

This is not an overnight phenomenon but one that has been emerging for the last five years.

It is, however, important to recognise that this new world is less about very new technology and more about the value that can be created from integrating existing technologies. It is about leveraging the benefits of connecting up the internet, mobile devices and developments in software, to provide improved and new products and services.

This will be demanding for businesses because in this interconnected, or smart, world there will be more transparency and more competition.

That competition may come from unexpected directions: start-ups, new entrants from other sectors, existing technology leaders or even consumers doing things for themselves, as we have already seen in the holiday industry.


This change in behaviour, and therefore demand for services, has been enabled by technology and the interconnection between that technology. We have all become used to the internet and the changes that it has brought to both consumer behaviour and the High Street.

However, it is clear that this is only the start. The scale and pace of change to business models is going to increase further.

The numbers are striking, globally, internet users currently stand at 1.6bn, almost a third of the world’s population, and a figure that has almost tripled in 10 years.

It is not just that those people access the internet occasionally but that it has now become an essential part of their everyday lives. People make use of the internet for an ever increasing range of activities.

As a result, internet traffic is also growing rapidly. By 2013 internet traffic is expected to be the equivalent of the complete written works of humankind flowing through the internet 27 times a day.

The same dramatic growth can be seen in the use of mobile telephones. In 1995 mobile subscriptions stood at 907,000. By 2013 they will number around 6bn. Again, people are using their telephones for a growing range of activities.

This, added to the increasing interconnection between the Internet and mobile devices and the fact that they are getting cheaper and more reliable, means yet more traffic and that business can be conducted anywhere at anytime.

Being smart

The businesses which get it right will flourish. Embracing a smart way of doing business has led to a number of industries and companies gaining market share.

These range from computer companies who have entered the mobile phone market to the construction of new smart cities in Dubai. By integrating services from electricity to entertainment, building owners have been able to charge premium prices.

Revenues can also be generated from consumers and utility companies paying the smart city network operator subscription fees to gain access to the network, producing significant income streams.

In work PA Consulting Group has done on the development of a new smart city of 1.5m people we project that within 10 years revenues from the smart city infrastructure will reach $300m a year.

Under President Barack Obama’s administration’s stimulus package, Congress has authorised $4.5bn to propel smart-grid development. Utilities in California and Texas alone are spending $6bn on advanced, digital meters and related systems, a key building block in a smart electric grid.

To win smart-grid business from utilities, wireless companies are slashing the monthly fee they charge to provide the communications link, in some cases providing that service for pennies a month per meter.

As a result, the latest technology is being pushed down to the household level instead of being restricted to commercial or industrial customers, who typically paid about $5 a month for that service.

New smart meters installed in customers’ homes will allow utilities to read meters remotely and frequently, receive alerts about outages and terminate or restore service remotely.

Customers will be able to sign up for rate plans with peak and off-peak prices, or set appliances and lighting to turn on and off with the help of controllers installed on appliances or electric outlets.

Equally, companies that have ignored the changing world have seen their business models crumble. We have seen this in the music, publishing and photographic industries.

The good news is that to adjust to a smart world does not require massive investment. Business leaders simply need to look at their business from a broader perspective, recognise change is coming and identify where the missing links may lie.

Once the missing links have been identified they can be joined up to deliver value to the organisation.

The bad news is that this does require constant attention. The pace of change is such that even companies that have been ahead of the field can find new competitors and products undermining their value.

The impact on the share price of existing providers of sat nav services when Google announced its free sat nav application for mobile phones is a telling example of how the landscape can be altered overnight, even for technologically advanced companies.

All this means that the world is changing. In this new world, however, economic downturns and governments are no longer the driving force behind long term global change. People are employing interconnected technology to interact with companies and governments and this is truly changing how we do business, forever.

Peter Elliott is smart infrastructure specialist at PA Consulting Group, and Tim Devine is smart communications expert, PA Consulting Group.

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