the brazilian opportunity and telefonica's case (microsoft iop conference - madrid - 2011)
TRANSCRIPT
0Brazil Innovation Center
The Brazilian OpportunityTelefonica’s innovation story in Brazil
November 17th, 2011
Cristiano CairoliInnovation Center Brazil
2Brazil Innovation Center
Brazil’s potential is quite obvious
5th largest country in the worldBigger than the entire European continent
Exuberant Natural ResourcesWorld’s greatest biodiversity Petroleum ReservesHidro-electricity and Ethanol
190 million inhabitants19 MM in São Paulo metropolitan area8 other regions with +3 MMDiverse culture from secular immigration and Miscegenation
7th largest GDP of the worldUS$ 2.09 trillion (2010 IMF)
Source: International Monetary Fund
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Source: Goldman Sachs. Global Economics. Commodities and Strategy Research. Global Economics Paper No: 192. The Long-Term Outlook for the BRICs and N-11 Post Crisis. Dec 2009. UNCTAD
Brazil got the investment grade
During 2008 global economic crisis:
Steady GDP Growth5th largest consumer market
5th biggest FDI destination
3rd world stock market in value
GDP per capita more than tripled since 2002
Ernest Young; UKTI.gov.uk
Is it Finally Happening?
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Still a long way to go
Room (and need) for improvement
#54 in Global Competitiveness Report, only #6 in South America
Gaps in basic Infrastructure, specially transportation
Bureaucracy, high tax burden and interest rate spread discourage entrepreneurship
A country of Contrasts
21.4% of the population below poverty line in 2009.
#84 in HDI (human development index), #7 in South America
Public safety improving, but still a major concern
Source: IPEA
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Middle classes are already 50% of the population, 10 p.p. more than 5 years ago
30 million people (16% of the population) have surpassed the US$2/day poverty basin in the last 5 years
GINI coefficient for income distribution had a significant decrease in the last years, reaching 0.530 in 2010
The expanding middle
**
GINI Coefficient
0,596 0,589 0,5830,572 0,569 0,563 0,556
0,548
2001 2002 2003 2004 2005 2006 2007 2008
Sources FVG: IBGE, IPEA** Estimated
The good news: Brazil’s Growth is being accompanied by a better income distribution
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Sources: Innovalatino based on data from Pyramid research
Growth of Fixed, Mobile and Internet User in Latin America
(as % of population)
How connected is Brazil now
Teleco – nov/10 ; relatório Vivo
55,7%
65,0%
70,6%
0,3%
1,3%
44,1%
44,2%
Oper E
Oper D
Oper C
Oper B
Oper A
Vivo
Total
3G Coverage (as % of population - 2010)
Smartphones representnow 5,8% of sales, versus
3,4% in 2010.
Mobile Apps usage up369% in 1 year, #6 rate in
the world Flury – China the new mobile app dragon
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5th largest internet presence in the worldNumber of internet users and internet hosts
Social Networking
Highest percentage (86%) of Internet users visiting social networks
An average of 5h/month on social networks and blogs
Sources: Nielsen
Inside FacebookInternetworldstats.com
Orkut is no longer king in Brazil
327% growth of Facebook user base since Sept 2010, reaching 25.8 MM users.
Source: Ernest Young; UKTI.gov.uk
Brazilian internet users are the #1 in use of social networks
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“Classe C” is driving growth – of the internet as well
“Classe C is the majority of the population– and the fastest growing. Theyunderstand that the educational system in their country is awful and so they are working extremely hard to educatethemselves. More than any other class, they are adding skills and moving up theeconomic ladder the fastest. And the maindriving force of all of this is the Internet and digital media.”
They are the ones impulsingcomsumption in most industries fromtelecom to tourism
They are the ones buying computersand ADSL lines.
They know and explore the value ofthe internet.
From 2009, half of the Brazilianinternet users already belong to
the emerging classes.
Lan Houses still represent 15% ofuse, but loosing space to cheaper
smartphones and data plans
“Classe C” de conectados – DataPopular“The Stampede” RazorFish and Terra
Fecomercio -Joe Crump, Senior VP Razorfish
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Telefonica in Brazil
Operating since 1998
More than US$ 100 Billion invested in Latam
4th largest company – R$ 45 Bi in revenues (*)
Now the group’s largest operation in the world
(*) http://exame.abril.com.br/negocios/noticias-melhores-e-maiores/noticias/as-50-maiores
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Why go beyond the core business?
Back in 2006, most profit stil came from a saturated fixed telephonyservice (Vivo was a separated joint venture)
Operation was fully focused on growing fixed broadband and fightingcompetitors.
Innitiatives with potential to go beyond access and infrastructure were notbeing prioritized
Telefonica Brazil decides to create a Strategic Innovation area, withindependent funding and focused in new, high potential products
beyond, but leveraged by, the core business.
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Innovating in a big company is not exactly easy
We tried thisbefore
This has notworked in mature
markets
It’s not our culture
It’s not goingto work
Another area hasthe “same” project
I think our VP won’t like this Too late to enter
this market
We are too slow to compete
This projectkeeps changing
I see possiblecannibalization
I want to see thenumbers first
It’s too risky
Let’s keep doing it, we already got this
far
It’s not our core business
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Telefonica Brazil’s initial approach on Innovation
A business Focus: Innovation = different + promissing + profitable
Traditional “stage-gate” process, where products could be“incubated” until ready for OB or spin-off.
Identify people with the desireable entrepreneaurial skills andprovide them ownership of the project.
Still part of Telefonica, but with a “license” to escape companysystems and processes when necessary (and possible).
Colisãode idéias
Priorizaçãodos temas
Busca deinformações W
orkshopsIteraçãocontínu
a
Justaposição
de fragmentos
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Telefonica Brazil’s model for incubation
Strategy and Perspectives
Scientific Research Ideas
GenerationIncubation
Technology Transfer Incubation
Innovation Area
Proof of Concept
Ideas To OB orSpin/off
Continuous and interactive innovation process
Test the product with real customers as soon as possible
Forget, Borrow, Learn fast
The fastest way to succeedis to double your failure rate.
Thomas J. Watson Sr.,fundador da IBM
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Banda Larga Popular – Broadband for low income customers
Wi-Mesh Technology with ADSL or Cablebackend. Lower A
Prepaid service, through customized cardssold at local commerce.
R$ 29,80 per 1 month, no fixed linerequirement
+70k Households covered
+10k Customers, with little advertising.
Successfully being handed-over to OB, for scale.
WI-MESHADSL
CABLE
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Successful new lines of business were developed using the incubation model
Audio, Video and Computers support
2011 figures: 50 K packages / month
Forecasted revenue for 2011: R$ 40 MM
Home AutomationHome automation services (audio, video, ambiences, security) for high-end residential buildings.
More than 2.000 projects sold in the first year (2010)
Specialized support
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1 . The potential target area of innovation dramatically increased
82 MM
Combined Customers
Important changes had great impact on this innovation model
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2 . Telefonica R&D expansion beyond Spain
UK
Brazil
Brazil innovation center is focused on technology differentiation to create
global products and services, within the framework of an Open Innovation model.
Innovation area joins forces with a new, reorganized, Telefonica I+D
Tel Aviv
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3 . Telefonica’s new approach – Telefonica Digital
“Im honoured to have been asked by César to lead the new Telefónica Digital unit. Its
mission is simple:
create the power for Telefónicato outperform in the digital world,
significantly boosting our growth potential.”
Mathew Key, 5th September 201
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Three things are necessary to make great things happen
CustomerCustomerDesirabilityDesirability
TechnologicalDifferentiation
Business Viability
Leading edge researchDifferentiated technologyExcellence in software developmentAgile methodologies versus waterfal
Customer InsightsCo-creationBest customerexperienceCustomerDriven InnovationStrong UX team
Market researchBusiness casesUnderstanding of Operating Business priorities
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ü Customized solution that fulfills the Brazilian market requirements
ü Know how in the Brazil Innovation Center
ü Ability and technology to develop new projects
Engagement of projects with the OpCo,
using R+D existing technology / solutions s
PROJECT
R+D SOLUTION
SET UP OF
LOCAL TEAM
KNOW HOW R+D
Temporary transfer of R+D people to Brazil, to manage
projects and to transfer know-how
Creation of a local team in Brazil to implement the
project
Transferring know how from Spain to the local team to develop / customize solutions for the Brazilian Market
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The process generates expertise, with focus in the highest potential areas for the Brazilian market
eHEALTHFINANCIAL SERVICESM2M
VIDEO SERVICES
• 190 MM Habitants
• 227,0 MM mobile phones
• 15,2 MM Fixed Wideband
• Only 11,9 MM pay TV
Customers
Source Teleco – 3Q 2011
• Cisco: 15 Billion connected devices
by 2015 ww
• Gartner: 30 / 40 percent growth yoy in the near
future
• Big opportunity in a big country
Source Larry Lannon - B/ossinsider blog
• 79% of adult population (115,2 MM) have relationship with financial Institutions
(+27% than 2006)
• 37,8 MM customers use internet banking
(+38% than 2006)
•628 MM credit / debit cards (+61% than 2006)
• Big market, bigger growth
Source Febraban June 2011
• Private Sector: 60,1 MM users,
31.000 MM Euros revenue (+75% than
2006)
• 130 MM users served by the public sector
• Opportunity for a better service at a lower cost
Source ANS
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Video: On-demand Content through broadband
Example –developments in video
“Guia Imagine” – a TV Guide for mobile phones with enhanced social features
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Adding R&D to existing incubations
Home automation control by hands
movement
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Universities
Entrepreneurs
Innovators
Venture Capitals
Developers
Research Associations
Incubators
.. to establish Telefonica as a strong player in the Brazilian innovation eco-system
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…having Wayra as one of the fundamental initiatives
Start up acceleration initiative
Capture Latin America talent in Latin America
Develop the full entrepreneurship potential of the region
Colombia Spain Mexico Argentina Venezuela Chile Peru Brazil
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In summary, our challenge is to..
Fuel Innovation in Telefonica Brazil, with business orientation and technologically differentiation.
Use open Innovation to create roots in the Brazilian innovation eco-system, thus leveraging Telefonica’sinnovation power
Create the power for Telefonica to outperform in thedigital world