Big New AI Business Models, Use Cases, Industries Will Come from Solving New Problems

One question many of us are asking ourselves is where dangers and opportunities are to be found as artificial intelligence is applied to more processes, functions, products and industries. And it might be quite humbling--but accurate--to say that much remains unknown. 

And that is simply the way new technology tends to unfold. Many firms were created using core technology developed at Xerox PARC, including 3Com, Adobe and Synoptics. But “the success of some of these departing spinoffs was largely unforeseen, and unforeseeable,” said Henry Chesrough in Open Innovation. 

Consider what innovations the internet brought that likely were unexpected by most of us, such as social media; crowdsourcing, the sharing economy or search, as well as many innovations that already were in place, such as open source. 

Many other forms of disintermediation, where steps in a value chain were removed, are obvious: e-commerce; education, gaming or user-generated content. 

Other unfolding developments, such as virtual reality or cryptocurrency, are less directly-created by the internet, but generally require its use. 

Innovation	Unexpected Value	Use Cases	Revenue Models	Companies & Industries
Search Engines	Democratization of information, knowledge discovery, access to global resources	Finding anything online, researching topics, exploring new ideas	Advertising, affiliate marketing, premium features	Google, Bing, Yandex, Baidu, search engine marketing agencies
Social Media	Connection & community beyond physical limitations	Sharing experiences, building relationships, expressing oneself, marketing & branding	Advertising, subscriptions, data monetization	Facebook, Twitter, Instagram, Influencer marketing
Sharing economy (e.g., Uber, Airbnb)	Sharing resources & assets for income generation	Transportation, accommodation, peer-to-peer rentals, skills & services	Transaction fees, commissions, advertising, subscriptions	Uber, Airbnb, Lyft, Turo, TaskRabbit
Crowdsourcing	Collective intelligence and distributed problem-solving	Gathering diverse perspectives, generating content, finding solutions, conducting research	Platform fees, micro-transactions, project funding	Wikipedia, Kickstarter, Upwork, Freelancer
E-commerce	Convenient shopping beyond physical stores	Broader product access, competitive pricing, personalized recommendations, 24/7 availability	Online sales, marketplace commissions, product subscriptions	Amazon, Alibaba, Etsy, Online retail in every imaginable niche
Open-source software	Collaborative development and access to free software	Innovation through community involvement, cost-effective solutions, customization, security patches	Donations, sponsorships, enterprise support, premium features	Linux, Apache, WordPress, Open-source frameworks for various fields
Streaming services	On-demand access to vast entertainment libraries	Cord-cutting from traditional media, personalized recommendations, global content reach	Subscriptions, pay-per-view, ad-supported tiers	Netflix, Spotify, YouTube, Streaming platforms for music, games, podcasts, educational content
Online education	Accessible learning beyond geographical and financial constraints	Flexible learning pathways, personalized courses, diverse instructors, upskilling & reskilling	Course fees, subscriptions, micro-credentials, corporate training	Coursera, Udemy, Khan Academy, Online learning for academic degrees, professional development, personal interests
Cryptocurrency	Decentralized financial system and alternative store of value	Peer-to-peer transactions, global reach, inflation resistance, new investment opportunities	Blockchain technology, transaction fees, mining rewards, DeFi applications	Bitcoin, Ethereum, Stablecoins, Cryptocurrency exchanges, NFTs, Blockchain-based financial services
Blogging & personal branding	Sharing individual voice and expertise with a global audience	Building influence, establishing thought leadership, connecting with communities, potential for income generation	Advertising, sponsored content, affiliate marketing, product sales, consulting services	WordPress, Blogger, Medium, Independent creators across various fields

And perhaps one of the lessons of innovation is that big breakthroughs happen mostly when innovators try to solve new problems, not fix existing problems.

And right now, virtually everything we see and hear about AI is how it can help fix some existing process. That’s useful, to be sure. 

But the big, unexpected new use cases, revenue models and value will happen where we are perhaps least expecting it. 

New technology can create entirely new markets and value chains when it is harnessed to meet unmet needs we did not recognize. We did not “know” we needed search or social media. We did not know we needed mobile computing and connectivity devices or personal computing appliances. 

AI undoubtedly will, in context, be viewed as an app, a use case, a function or a capability. But in other cases it will be viewed as a platform to support new business business models, industries and types of firms. 

We just don’t know--yet--how all that will develop.

Beyond Connectivity? Some Do Better than Others

Connectivity service providers might be said to suffer from envy about the valuations earned by application providers compared to mobile operator or telco valuations. After all, a public market valuation creates, or limits, currency that can be used to grow the business. 

On the other hand, firms in distinct industries have different valuation ranges, based in part on revenue growth prospects. And that is where practitioners simply must acknowledge that connectivity operations and asset valuations are closer to those of other capital-intensive, relatively slow-growing businesses including energy utilities, airports, seaports, toll roads, gas and oil pipelines. 

Provider	Expected Revenue Growth Rate	Expected Profit Margin
AT&T	1.5%	10%
Verizon	1.0%	12%
NTT	2.0%	11%
Telefonica	1.0%	9%
Orange	1.5%	10%
BT	1.0%	11%
Deutsche Telekom	1.5%	12%
Telecom Malaysia	2.0%	8%
Jio	3.0%	15%
Vodafone	2.0%	10%

For the better part of two decades, connectivity providers have struggled to recreate themselves as faster-moving entities with higher growth profiles, with mostly modest success. At the very least, firms have tried to position themselves as more-diversified entities with bigger roles in other parts on the internet ecosystem beyond connectivity. 

For the most part, investors harbor few illusions in that regard. Indeed, connectivity assets are valued precisely when they offer the expectation of steady cash flow and some scarcity value. That is the thinking behind private equity and institutional investor interest in “alternative assets” that are relatively uncorrelated with other traditional equity and bond assets. 

The logical implication, however, is that connectivity CxOs--and those who advise them-- probably should stop suggesting that connectivity roles and value are something they are not. 

Which is to say, high-growth vehicles. That does not mean connectivity providers cannot take on additional roles in the value chain: they can. It does mean that even when successful, those assets will likely earn a higher valuation when eventually separated from the connectivity assets. 

In other words, assets often are awarded higher valuations when separated from ownership by entities with lower valuation ratios. Pure plays often are rewarded by higher valuations, compared to the value they bring to owners who have other roles and valuations. 

That might have significant implications for business strategy. If and when connectivity providers move to take on different roles within the value chain, it might also be realistic to assume that, at some point, those assets bring the highest and best value to the owners when the assets can be spun out or sold. 

In other words, moves to create assets in other parts of the value chain should be viewed as assets in a portfolio that always are available for sale, at some point, and not a core operating holding. 

The clear exception is when the new operations are significant enough in magnitude to warrant becoming the foundation of the company’s long-term business. 

We rarely see this in the connectivity business, though. Typically, the newer lines of business are sold or spun out. A connectivity firm does not become a content provider; a retail data center business; an application provider; an entity that earns its core revenue from facilitating transactions, rather than selling connectivity services. 

Firms might change, over time, the services they sell, or the connectivity roles they play. But we have yet to see major evolution away from “connectivity services” to some other permanent role, as the primary revenue driver, for any tier-one telco. 

To be sure, lots of firms might boast significant revenue from services and products other than connectivity. But those always seem to be “nice to have” operations that complement the existing core business.

And even estimates of non-telco revenue can change quickly, as for example when AT&T divested its content, linear video and advertising operations. AT&T's latest quarterly report focuses strictly on connectivity service revenue and operations. In a short year or two period, AT&T can be said to have scaled its “non-telco” revenue back from 19 percent to near zero.  

Even the commonly-cited sources of such “non-telco” revenue are suspect. Jio, for example, is said to make such revenue from home broadband on a fixed network. That makes sense only if Jio is narrowly considered to be a “mobile services” provider, with “non-telco” revenue including any sources on a fixed network. 

That would not be the definition used for other “integrated” providers with both mobile and fixed operations. The same might hold for Telecom Malaysia, BT or KPN. In other cases, non-telco products might also count revenue earned by service provider internal operations that use e-commerce or mobile payment mechanisms. 

Were we to eliminate all other connectivity services, even firms with lots of initiatives in content, apps or devices might show significantly less revenue contribution from non-telco sources. 

Still, JioMart, an e-commerce platform, JioSaavn, the music streaming service and JioMoney could represent 11 percent or more of total non-telco Jio revenues. 

Company	Percentage of Non-Telco Revenue	Examples of Non-Telco Products
Vodafone	18%	Mobile payments, e-commerce, cloud computing, advertising
Jio	30%	Home broadband, DTH, fiber-to-the-home, smart home solutions
Telecom Malaysia	12%	Fixed-line broadband, data center services, cloud computing
Deutsche Telekom	15%	Mobile payments, e-commerce, cloud computing, advertising
BT	10%	Fixed-line broadband, data center services, cloud computing
Orange	14%	Mobile payments, e-commerce, cloud computing, advertising
KPN	11%	Fixed-line broadband, data center services, cloud computing
Telefonica	13%	Mobile payments, e-commerce, cloud computing, advertising
NTT	17%	Mobile payments, e-commerce, cloud computing, advertising
China Mobile	20%	Mobile payments, e-commerce, cloud computing, advertising
China Telecom	18%	Mobile payments, e-commerce, cloud computing, advertising
Verizon	16%	Mobile payments, e-commerce, cloud computing, advertising
AT&T	19%	Mobile payments, e-commerce, cloud computing, advertising

The point is that common citations of “non-telco” revenue tend to be inflated. Connectivity providers “are who they are.” Diversification moves beyond the connectivity function contribute a non-zero amount of revenue. But even that amount tends to be overstated.