Capturing value in a new 2,7 trillion dollar market: a conversation between Gilles Négrel and Guillaume Villon de Benveniste

Telecommunications companies have seen their business model undermined. And yet, they have the opportunity to make the most of a new and promising market: the Internet of Things. McKinsey expects the Internet of Things to create 2,7 trillion dollars in value by 2025.

I/ The creation of value in the healthcare industry is migrating from products to data

Pharmaceutical companies are seeing their molecule-based business model going bust, according to Bain. Today, large pharmaceutical companies like Merck, are launching new molecules as they were doing in the past. They perform clinical trials, tests their new drug with thousands of patients and, when their molecule is approved, they launch it on their markets. But, healthcare and insurance companies, like California-based Kaiser pharmaceuticals, are using mobile devices and a portfolio of drugs, to improve the healthcare of their clients.

Mobile devices provides insurance companies with healthcare data (drug usage, frequency), which is critical in understanding the therapeutic value of drugs. Today, some healthcare insurance companies know more about the therapeutic value of their drugs than the drug manufacturers themselves. This provides them with a better understanding of healthcare benefits. As a result, they have a better understanding of where value is created in the industry. As a consequence, healthcare companies are investing in healthcare data (data collection, aggregation, harmonization, and interpretation) in order to acquire more healthcare knowledge. Merck for example is investing $250 million to build this capacity.

II/ The creation of value in the energy industry is migrating from products to data

In another industry, Schneider is also moving for a product-based business model to solution-based business model, much like Merck. Their products create energy-related data, such as:

• energy consumption
• time and duration of energy consumption
• location of energy consumption

III/ Data-driven companies want to capture value in healthcare and energy markets

Today, large energy management players fear that new players, such as data driven companies like Microsoft, Google, and Accenture, will take most of their value in the energy data interpretation market. In other words, knowing more about how energy is being consumed is critical to developing energy solutions that help to optimize energy consumption. But, energy product manufacturers, such as Schneider, and Johnson Controls, fear that data driven companies will take their business.

At the same time, Google, according to Gilles, is holding conferences around the world showcasing how they’re able to predict future events based on big data. For example, Google Flu is apparently able to predict how fast a disease may propagate based on what people search for in Google search engines. Google is also able to predict whether a movie will be a commercial success or a flop based on Google searches.

IV/ Capturing value in a new 2,7 trillion dollar market

Overall, connecting objects to one another, whether it’s energy objects, or healthcare objects, is a $2,7 trillion market according to McKinsey. And yet, all of this data is transmitted through telecommunications network that are operated by a large telecommunications players. How can large telecommunication players make the most of this kind of data? How can they capture a portion of the $4 trillion that will be created in the next 10 years?

These are some of the questions that remained, as my conversation with Gilles came to an end.

Further readings:

• For another discussion on how Telecommunication companies can capture value in the Internet of Things, please refer here
• For a press conference of Stéphane Richard, the CEO of Orange, please refer here
• For an assessment of future markets, especially the mobile Internet market and the Internet of things, please refer to McKinsey study, here.
• For a practical example showing how clients, smartphone manufacturers, and telecommunications operators are pitted one against another in order to capture the value, please refer to the competition between Xavier Niel, Google and Fleur Pellerin, here
• For a presentation of Schneider solutions-based business model, please refer here; for a presentation of performance contracting, please refer here
• For a presentation of value-creating disruptive technologies, please refer here