Why Telecoms must Reinvent Themselves
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Everyday our digital world is filled with Facebook, Snapchat, Instagram, KakaoTalk and Whatsapp. Our loyalty to these brands is so strong that we wonder how could life exist without them. While these users run into the billions, these social media gems enjoy the benefit of the telecom networks that handle their traffic. Many like to think it’s a symbiotic relationship between telecoms and OTT (over the top) providers.
It is true, the telecom network operators needs the traffic from OTT applications and OTT need these same telecom network operators to maintain their networks by improving the quality of service by enhancing the speed and volume of data. But the reality is OTT providers are eroding away revenue at the once mighty telecommunication giants. London-based research and analytics firm Ovum, reports the telecommunications industry will lose a combined $386 billion between 2012-2018 from customers using OTT applications. The key areas include core voice, messaging and video calls. Telecoms know they must react but the options of retreating, partnering or competing become very complex.
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We all know telecommunication companies for their mobile, value added services (backup and gaming), premium content and their quad play (mobile, broadband, tv and fixed line). But the reality is the core of their business is their network and connectivity. They have invested heavily and will continue to do so to meet the needs of their customers. Upgrades vary from infrastructure, hardware to software all in the name of connectivity. And this connectivity is promising but is it enough to sustain the telecom in this disruptive shift.
As OTT providers have already taken over voice, messaging and video calls through free services; other areas threatened include the traditional telecom quad play bundling (broadband, tv, fixed line, mobile) as media OTT providers such as Netflix and Hula continue to dominate. Many telecoms see this threat of disruption as the big problem but this is the reality of changing times. Telecoms must learn to embrace this problem as an opportunity to redefine the industry approach and reinvent their position and direction as a telecom.
Reinvent Core Values
Customer Centric Approach – Telecoms must start from a customer centric approach instead of this engineering driven approach. It all starts with the customer and an integrated seamless customer experience. Telecoms will tell you they are customer centric but the reality is they are revenue driven (trying to make up for lost revenue to OTT providers). It is important to understand the entire customer journey not just touchpoints. How does it relate to social, mobile and cloud technology? How does this fit in with the lifestyles of the customer? What do customers expect from their telecom? This is the approach telecoms must embrace. For example, in South Korea, one telecom listened to its customers and created discounted mobile programs for students and the elderly which led to better customer satisfaction in the long run instead of quick revenue. By understanding your customer, you can create opportunities to help solve your customer problems.
Think like an OTT – Telecoms must be agile, lean customer focused players like their disruptive counterparts. The OTT provider approach is simple: identify customer needs, build it, create a base and monetize it, while understanding the customer journey. The key is to hire young and entrepreneurial-minded thinkers to help drive the innovation process and understand the customer’s problems. This approach should not be afraid to test, experiment and learn through iteration. The other area to focus on is the culture of the telecom organization. While you can hire young talented staff, the culture must embrace this new innovative thinking. Upper management must drive and support this change from the top down to effectively leverage its benefits.
Telecoms are entrenched in their legacy systems. They must learn to simplify and automate backbone IT processes and systems such as server deployment, load balancing, and service-ticket management through a software driven environment, thus reducing costs and enhancing their ability to adjust capacity and load volumes. They must learn to apply analytics and leverage big data to reduce churn, make better marketing decisions, improve collections and optimize network design. Utilizing technology-automated systems and social driven platforms will make customers happy through real time solutions and customer engagement social media program which also reduces call volume. This will make the core business super slim, cost efficient and more agile.
The six key disruptive forces in the market today include mobile, analytics, cyber security, social, gaming and cloud. Telecoms must understand how they can leverage existing technology to tap into these areas more and learn how to create a footprint into new areas.
Connectivity – Telecoms don’t want to be stuck in only infrastructure. The reminder of the dumb pipe analogy continues to haunt them. Luckily, connectivity alone is a big opportunity. The IoE (Internet of Everything) looks to offer telecoms entry to an array of opportunities from the foundation expansion of smartphones to watches, shoes, apparel and glasses on the B2C side. On the B2B side, we see opportunities with machine to machine learning (M2M) with the automobile, aerospace, building and artificial intelligence sectors. This connectivity business looks promising but high investment is still required to maintain and upgrade these networks to handle the necessary speed and data volume to make customers happy.
Big Data Analytics – Telecoms have access to large amounts of customer data but have little big data architectures and analytics in place to gain insight. Plus privacy issues and regulation make it difficult to data mine this opportunity without losing customer trust. As mentioned before, telecoms should leverage the use of data and analytics internally to make business decisions regarding what the customer wants and needs. This will help them better understand how to improve service, reduce churn and be relevant to the customer. They should also use big data to analyze periods of network usage especially from video streaming. This helps relieve traffic congestion.
Another analytical insight is machine learning based on sociodemographic, customer touch points (call centers & social media) and data on network usage. This helps identify in real time, customer defects or even paying their bills on time, which could lead to reducing churn through marketing programs to address key discovery points.
B2C – Many feel the B2C market is now lost to the OTT providers but some areas do still exist that may offer some value for customers. For example, connected platforms for smart homes, entertainment, cloud and data services for consumers. The advantage for telecoms may still be a package offering similar to the quad play approach.
B2B – Areas within intelligent networks, ICT, cloud, analytics, IoE platforms and security offer value from telecoms to the B2B user. Leveraging connectivity with these platforms can attract new customers to its value added services. An example of this opportunity could be smart city solutions that tie back into connectivity.
Enterprise – As privacy becomes an issue for data mining telecom customer’s personal data, another area could be location and movement data for government and enterprise entities looking for models to predict and understand infrastructure, growth and transportation in urban cities. A simple subscription model could be implemented to attract potential customers who need data on an as needed basis.
Partnerships for the Future
While it may make sense to develop their own R&D like Telefonica and Verizon, it may be better to also create new partnerships with young, up and coming companies to bring in platform-based solutions in the disruptive fields. This is a great approach but it requires investment and patience. A Korean telecom initiated this approach five years ago but did not have the patience or funding to see its efforts through. Startup Incubator programs are also another direction for telecoms to tap into innovation as many large telecoms with resources are now implementing.
As telecoms look at IoE connectivity opportunities, it would make sense to also partner with manufacturers who need help to understand the data communication opportunities. Ideally this could be watchmakers, apparel (clothing and shoe) and medical devices. Partnering with AI developers could also be a new direction that possibly could create a connected ecosystem platform through the network.
As we move forward, this disruptive approach-taking place will only intensify with the proliferation of new ideas through the OTT market and startups everywhere. Telecoms must reinvent their core but also their mindset to remain competitive beyond the infrastructure boundaries. Not only must they search for new technology driven solutions but also new audiences unless they wish to remain the dinosaurs of technology.
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