EY today released the industry report, Unlocking business model innovation with 5G. It was discussed in the report that vertical industries are increasingly concerned about the real-time service-oriented function of 5G to transform business operations, unleash innovation and disrupt competition. The COVID-19 crisis will continue to impact all industries in the long-term and will speed up the digital transformation of enterprises. Companies will need to take advantage of this historic opportunity to rethink business models that will keep them at the forefront of their industry.
5G technology is touted as the connectivity fabric that will fundamentally reshape the future of business. 5G empowers IoT and pushes rising technologies such as AI and augmented reality (AR) to their limits, leading toward an era of intelligent connectivity which will translate into numerous commercial benefits for businesses. 5G is a real game changer with the potential to unleash limitless possibilities. Unlike previous mobile generations, 5G is coming at a time when open source and automation will make it relatively easier and cheaper to install and run its own networks within the confines of factories and warehouses. It thus offers a wide scope of private 5G networking to enterprises. In EY’s released 5G enterprise study¹, 28% of Chinese enterprises respondents agreed that private and secure network capability is the greatest benefit they perceived for 5G. Businesses can start leveraging 5G strategy to transform business operations and disrupt competition.
Steve Lo, EY Asia-Pacific Chief Innovation Officer, EY Greater China Technology, Media & Entertainment and Telecommunications (TMT) Managing Partner said, “As China has stepped up 5G network buildout during the pandemic, a highly dynamic environment was created. Selected sectors such as health care and education have catalyzed the commercial use of 5G applications to combat the pandemic. The top-priority status given by the new government strategy on new infrastructure is set to spur investment on the technology, unleashing new 5G use case scenarios and applications. This is going to trigger the exploration of new business models for a number of verticals, with manufacturing, health care, entertainment and automotive sectors expecting to see the highest impact in the near-term.”
Impact of 5G application on industries
In the near-term, 5G networks are expected to transform a host of industries in China delivering new forms of online education, gaming, telehealth, remote working, live-streaming and e-commerce.
- Manufacturing: 5G is an enormous breakthrough for this sector, allowing them to lower manual labor, speed up automation, lower production costs, and eventually it will help to leapfrog into Industry 4.0. Broadly speaking, there are two ways 5G benefits the manufacturing industry: improving industry access to connectivity and enabling new use cases and applications. A new set of use cases will make a significant difference to a manufacturer’s business model. For example, 5G will enable automated guided vehicles (AGVs) to operate in unstructured environments and adapt routes according to their surroundings using data from multiple sensors interacting with intelligent systems.
- Health care: During the COVID-19 pandemic, health care is the primary sector in China that has taken substantial advantage of 5G. More than a dozen of 5G applications have been implemented in multiple Chinese provinces to combat the outbreak and prevent the spread of COVID-19. Some of these examples are teleconsultation for diagnosis and treatment services, infra-red temperature measurement system, as well as cloud-based intelligent robots that undertake remote nursing, cleaning and drug delivery. These applications marked the earliest examples that 5G can build on to innovate the health care sector by providing sufficient bandwidth through enhanced mobile broadband capabilities. In the longer term, 5G will transform the health care sector even more profoundly than remote diagnostics and consultation. 5G will be the breeding ground for technologies like AR/VR in the health care environment, and will allow the widespread deployment of AI, which will transform current manual processes into smart automated workflows.
- Entertainment and collaboration: 5G is hailed as a new wave of media technology, which promotes the evolution of traditional media to new media. 5G is set to unleash another wave of innovation and potential disruption on the existing value chain as video consumption and even production have increasingly become more mobile. Taking advantage of 5G strengths, ultra-high definition video, cloud gaming and AR/VR are some of the earliest scenarios where people can experience the 5G network. We have already witnessed the use of 5G for the distribution of live high-definition broadcast in big events, such as the construction of two major temporary hospitals in Wuhan during the pandemic and will increasingly see it innovating in the domain of the next generation stadium experience through in-stadium AR.
- Automotive: 5G is envisioned to enable two aspects in the automotive industry – connected & automated cars and in-car entertainment. The 3rd Generation Partnership Project’s Release 16 which also includes specifications around cellular V2X (C-V2X). 5G will accelerate the realization of this enabling connectivity technology, which is designed to connect vehicles to vehicles, roadside infrastructure, road users and cloud services, to improve transportation experience and quality of life. China has already piloted real 5G connected vehicles. Telecom operators, technological companies and vehicle manufacturers also cooperated in exploring automatic driving, “Internet of Vehicles” and other 5G applications.
Realizing business model innovation in industries
EY² Greater China TMT Consulting Leader, Paul Cheung said, “5G not only offers new possibilities for industries, but will also give rise to completely new concepts for connected assets and contextualized services, offering a new wave of innovation for businesses. Service providers will also be able to tap into new business models with the data generated as a result of the new mobile standard and the innovations it produces. According to EY’s enterprise study³, exploring future business models is among the top three priorities on 5G investments for Chinese companies, while other priorities are adapting IoT strategy and assessing relationship with other emerging technologies.”
In the coming years, EY envisages many different business models to arise in the 5G enterprise space. We divide them into four major categories that vary on the scale of business and implementation cost.
- Ecosystem curator: 5G will likely drive a new wave of applications and devices that should spur the emergence of multi-tenant and on-demand platforms. In a platform model, businesses will build an ecosystem connecting consumers with suppliers of 5G-enabled IoT products or services through cloud-based IT infrastructure. Platform businesses will reap the benefits of huge data traffic generated, which then allows them to develop deep customer insights to customize additional services and expand into new lines of businesses. For instance, a large health system could aggregate multiple 5G health care services by third parties to become a platform provider. Harnessing 5G’s high speed and low latency, the platform can offer value-added services such as care management and health coaching. The scale of platforms would enable providers to manage and monetize different services, and control the relationship with customers. On this respect, large IoT manufacturers may have an advantage in creating their own platforms as well as opening them to smaller suppliers.
- Groundbreaking product: Many businesses such as product manufacturers have been rushing to introduce new disruptive products in a short time that can gain huge acceptance by the mass market. These products are usually either groundbreaking at a premium or come with strong features but at a very reasonable price point. These businesses are able to develop new service models and achieve scale by reducing the cost of production through process optimization or subsidizing with other value-added services. The promise of 5G offers a golden opportunity to drive technological innovation. Businesses may exploit the low latency of 5G and guaranteed quality of service apart from attaching huge value to high-speed connectivity to find completely new use cases that deliver life-changing experience, in a way like the introduction of touchscreen smartphones in the last decade.
- Professional slice: Some enterprises may take on a specialist role to offer dedicated service to a particular sub-segment in their sector, assisting those companies or SMEs to quickly get aboard the 5G bandwagon. To achieve this, they will leverage network slicing to set apart a virtual network for a specific use case scenario. The network characteristics can in turn manifest as Service Level Agreements (SLAs) and points of definable control that enterprises can in turn monetize as service providers. The focused investment in developing a dedicated 5G service scenario will usually incur a higher cost of implementation. As an example, a media company may open up its network to create a standard slice for high-definition VR solutions based on 5G and edge computing. This enables other companies in the sector to offer new services such as immersive media and cloud gaming. Such network slice may control and manage Quality of service (QoS), as well as supporting low latency requirements that can be charged on a monthly cost basis.
- Value extender: Connected products in the in-service lifecycle provide an opportunity to build new business models for the sector, some of which are beginning to be explored. In this model, businesses harness 5G to offer valued enhancement to their existing products or services. With a slim investment, this provides a light step for enterprises to take on 5G, as they can offer products as a service and provide remote maintenance to monitor IoT products after they have been delivered to the customer. Alternatively, enterprises may also exploit 5G to automate and improve their process in a way to achieve greater operational efficiency during their production. For instance, capitalizing on the mMTC and URLLC capabilities of 5G, empowering businesses with connected devices and assets to extract machine usage-specific insights for predictive maintenance; and allowing manufacturers to remotely upgrade products via software without replacing the products themselves.
However, to maximize the impact, there is a number of key considerations they need to be aware of in implementing successful business model innovation. First and foremost, companies must leverage the ecosystem effectively. Embracing multiple partnerships with different parts of the ecosystem is key to succeed in the 5G era. Developing a new business model also needs to embrace a customer-focused mindset. Enterprises should avoid falling into the technology trap and focus on solving the customer problem by rendering a compelling customer experience. To engage the innovation process, enterprises have to mind the skills gap of their personnel. Enterprises need to acquire key skills such as business process, cloud, security and big data analytics.
Successful 5G business model innovation also requires a holistic cloud strategy to establish a strong cloud infrastructure with enhanced security and more powerful functions. Enterprises should harness and integrate data analytics into the new business model. However, the data boom will create a greatly expanded, multidimensional cyberattack vulnerability. The new network ecosystem requires companies to redefine cyber strategy and develop a new cyber-awareness culture.
Paul Cheung believes that COVID-19 will continue to have implications. Businesses must find a way to leave behind the fear of change and innovate their business models to turn this reality into an opportunity and protect themselves. 5G sheds some light on this matter which could elicit endless possibilities. 5G is a co-innovation process, unlike previous mobile generations, that requires close interaction between enterprises, operators and the broader ecosystem. Those who succeed will have a green field of opportunities to innovate and capitalize on what is next for their industries.
¹ 5G enterprise study, EY, 2020.
² Ernst & Young (China) Advisory Limited
³ Unlocking business model innovation with 5G, EY, March 2020.
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This news release is issued by the EY China practice, a part of the Ernst & Young global network.