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A Business Model for the Smart Home Using the STOF Method and Scenario Analysis to Design a Business Model for KPN

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A Business Model for the Smart Home Using the STOF Method and Scenario Analysis to Design a Business Model for KPN A business model for the Smart Home Using the STOF method and scenario analysis to design a business model for KPN Faculty of technology, policy and management, Delft university of Technology SPM9510 MSc. Thesis Lars de Jonge 1074504 Chairman STOF model and futures research TBM: Dr. Harry Bouwman Chairman Smart living and transsector innovation EWI: Prof. Dr. Ir. Nico Baken 1st Supervisor TU Delft TBM: Ir. Mark de Reuver 2nd supervisor TU Delft TBM: Dr. Patrick van der Duin Supervisor KPN & TU Delft EWI: Ing. Edgar van Boven MSc Thesis: A business model for the smart home Preface This thesis is the last part of my master’s degree in Systems Engineering, Policy Analysis and Management (SEPAM) from Delft University of Technology. This research was conducted over 9 months within KPN in their headquarters in The Hague. This research was conducted with the help of many people and I would like to acknowledge certain individuals for this. First of all I would like to thank the chairman of my commission, Harry Bouwman. Being known for giving critical feedback I was surprised at the usefulness of such feedback. Although the meetings where few, they gave me sufficient information and motivation to deliver something superior then I had expected. The whole idea of writing my thesis about the smart home and the changes which will be seen within the home in the coming years came from Nico Baken. I want to thank you for the inspirational meetings which always left me a little flabbergasted, but hugely enthusiastic to go on and develop new concepts and ideas. I hope to have embodied a little of your vision within my thesis. Throughout the process I was supported by Edgar van Boven, Mark de Reuver and Patrick van der Duin as my direct supervisors. Mark, thank you for your extremely clear feedback, and of course the time you spend to help in your free time and having just become a father! Edgar, in between your full time job, and your own research towards your PhD I was always able to bother you for brainstorm sessions, general advice, and of course more input and changes to my thesis. I don’t think you are ever without another idea and this also helped me to deliver a better result. Patrick, your advice on futures research, and articles written in your time at KPN were a great help when I was stuck not knowing exactly what to do next. Lara, my sister, who acted as my main editor, thanks for the immensely helpful and fast feedback you gave me! On multiple occasions did you spend the hours checking my work so I could continue in the morning. I don’t think my thesis would be as readable if you hadn’t suffered through all my spelling and grammar mistakes. The hours spend in the office at KPN would not have been as much fun without the whole Technology and Innovation team within Wholesale and Operations. Thank you all for giving me ideas, asking me questions and having the patience before you finally get to see my results. I would also like to thank all the people at KPN and outside whom I interviewed. Thank you for your time and ideas, a list can be found in the third appendix. 1 May 2009 The Hague, Lars de Jonge II MSc Thesis: A business model for the smart home Executive summary KPN is the Dutch incumbent telecom provider. Through the years it has turned into a multi service provider by offering such services as internet and digital television to its customers. Due to fierce competition from mobile operators and cable companies KPN is looking for ways to increase revenues through new services. Within the home, technology and in‐home networks are increasing the possibilities to provide new services. The home of the future or ‘smart home’ is an age old promise which still hasn’t materialized. Currently there is reason to believe that the smart home is on the verge of becoming a reality, and this brings along chances for companies such as KPN. This has led to the main research question, namely: What is a robust smart home business model design for KPN in the future, and which sectors play an important role? The first step in answering this question was to do a full scan of the current possibilities within the smart home domain. This domain description has a strong technological focus. In this description I covered topics such as energy use, telemedicine, entertainment and home automation. Current standards, house cleaning robots and different forms of access technologies are named and discussed. To gain insight as to where the smart home is headed, research initiatives such as Philips ExperienceLab, two MIT research projects amongst other research initiatives, and even passionate hobbyists were visited and studied. This led to the findings that ubiquitous computing, the idea that computers are becoming cheaper, faster and more abundant, is quickly becoming reality. Together with increased intelligence and more intuitive control interfaces the technology is not the most problematic component in the realization of the smart home. Instead the greatest uncertainties lie in the standards that need to be agreed upon for such things as in home networking protocols. This standardization problem leads to integration problems of different areas within the home. Lighting, energy, media and communication are all based on their own standards and to make a complete smart home possible, these need to be integrated. Concurrently market demand is also still uncertain. If one looks at the high end home automation companies it is clear that huge sums of money are currently being spent on increasing living comfort, while new developments within the energy sector are focusing on lowering peoples bills. Together these uncertainties overshadow the fact that the technology is no longer the main bottleneck in making the smart home a reality. Moving forward I conducted futures research in the form of a trend forecast and scenario analysis. This was done based on my previous findings and the trend forecast served to create a vision of the possibilities of the future smart home, the so called future vision. Scenario analysis was used to find the most influential uncertainties over which KPN has no control. The scenarios gave an insight as to the forces which drive the factors that will affect the business model. These were III MSc Thesis: A business model for the smart home based on the previously found uncertainties, the first being market demand, otherwise known as the market push or market pull. The second uncertainty came in the way innovation will be taking place. The first axis within my scenario framework had one extreme in which organizations innovate together across sectors and boundaries to develop highly innovative and disruptive products. The other extreme is that companies continue to focus on their own segments and operate in isolation within their so called stovepipes. These scenario axes left me with four distinct scenarios which I used later on to test the business models viability and robustness. The third step was to design the actual service and corresponding business model based on my findings surrounding the smart home domain. It was essential to create a service which, just as internet and television, can be sold to the masses instead of only being interesting for the early adopters and tech savvy individuals. To help me design a service concept I used a general design methodology. This service concept served as input for the STOF method, a business model theory which goes through the Service, Technology, Organization and Financial aspects to create a full business model. This method has been specifically created to design ICT based business models for new services. The design is a service delivery platform, in which KPN offers smart home services to the customer in order to promote Smart Living. These services are to be provided by third party firms and can be browsed and bought by the customer from the comfort of their own home. KPN is responsible for providing the access network, and managing the technological complexity within the home through their ‘ServiceThuis’ service. By setting transparent and clear criteria they can offer service providers high quality access to their large customer base. Based around fiber to the home access technology and experts solving customers in home technology based problems, KPN offers its customers a one‐stop‐shop where they can pick and choose services to provide a custom built service feeling. The services to be provided over such a platform come in a large variety within all the sectors that play a role within the home. Examples are governments, energy suppliers, media providers, telemedicine firms and many more. KPN will be providing the platform to offer these services, sharing in the profits of the services sold over this platform by third party firms. To make sure this business model is viable in the uncertainties the future holds, I evaluated its robustness in the different scenarios. Through critical design issues KPN can influence the critical success factors to maximize viability. The most critical success factor showed to be partner selection. The reason is that the selected partners define the services which are available over the smart home service delivery platform. Thus, in different environments it is crucial to select the partners which are going to deliver the services which are needed under the circumstances. The advice given in the end of this research gives an overview of in which sectors KPN needs to look for specific partners under the changing conditions. As an example, it is obvious that in economically uncertain times customers are less willing to purchase expensive entertainment and comfort increasing solutions, while electricity minimizing services can have a cost lowering impact.
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