The three words that must define the digital strategy of telcos today
Digital transformation is affecting markets in many verticals, as the next generation of digital natives bring ‘on-demand’ requirements to the way services and goods are bought and managed. This transformation offers a profound way to accelerate business activities, connect with today’s consumers, and fully leverage digital technology to impact consumers in a strategic and mutually-beneficial way.
While digital transformation is defined in many different ways, for telcos, real digital transformation requires that each customer journey is simple, fast, precise, tailorable and available at any point in time.
As consumers, we look at companies like Uber, Netflix, and Amazon and revel in the simplicity. We can get what we want, when we want it, with just a few clicks. But what’s lurking behind the scenes is a set of complex interactions, a stunning amount of data, and integrated systems that are designed and crafted to deliver a set of defined services. Geo-localisation, driver monitoring, price monitoring, demand-driven and dynamic pricing and promotions, these are just a few of the complexities that make for a personalised, instant customer experience. With these companies setting the bar, how will mobile providers keep pace with the demands of digital?
McKinsey & Company research shows telecom companies with robust digital capabilities boast a profit margin of 43 percent, compared to their counterparts whose margins hover around 21 percent. This dramatic difference highlights that telecom providers must engage now to transform into digital service providers (DSPs), or miss the greatest window of opportunity to come along in a generation. While it’s true they face a quagmire of obstacles, including outdated legacy infrastructure, cost considerations, and time-to-market concerns, communication service providers (CSPs) can no longer afford to continue to lose ground, nor do they have to.
CSPs have a set of unique capabilities that give them an edge, including: existing billing relationships with millions of customers; the ability to deliver services at a level of scale and security few can rival; network control – they are best positioned to ensure quality and reliability, and to let customers know if there are issues around connectivity; and finally, they are sitting on a gold mine of customer behavior and location data.
So what tricks are they missing? Customers expect instant, real-time engagement with their service provider, and the ability to access and manage their own services with personalised options that deliver value. They want simple self-care, transparent information and the ability to do things like share data, change plans, or try new services when they want.
Digital transformation must provide for end-to-end, multi-channel experiences for customers, while at the same time, changing the infrastructure and business processes to support the three pillars of digital experience: availability, precision and agility.
We live in a digital world in which Gartner predicts by 2017, U.S. customers' mobile engagement will drive mobile commerce revenue up 50 percent. For mobile service providers, this represents a tremendous opportunity for growth and increased revenue. It also presents challenges in that they must be ‘webscale’ to handle this volume of engagement.
McKinsey research shows telecom firms with robust digital capabilities boast a profit margin of 43%, compared to their counterparts at 21%
To manage this, CSPs should be thinking less in terms of billing systems or traditional product catalogues and more about real-time commerce. CSPs need to consider how they can be more transactional, not for purely monetary reasons, but to better serve the way people today like to buy, pay and consume services.
CSPs recognise that digital transformation offers tremendous opportunity to target consumers and customise their buying experiences. With this comes the need to track, process and make available large amounts of data – not just to the business, but directly to your customers.
The beauty of services like Uber, Amazon and Shyp is not only can you customise your experience – you can track the delivery of that experience. Where is my package right now? When will my car arrive? In the same way – mobile customers need to know, how much data am I consuming while I ‘Spotify’? If I upgrade my movie streaming to HD, how much more will that cost? How much faster will I use data?
Just as digital companies have purpose built, complex systems that monitor, track, aggregate and present vast amounts of data, so must the CSP, in real-time, deliver that precise level of information that drives an empowered customer experience.
To be truly digital requires you meet the demands of your consumers while offering targeted, personalised services in real-time. However, that is not the end of the story.
According to Altimeter, digital transformation is as much about the technology as it is about the consumer experience. The question then becomes what kind of digital technology is necessary to move beyond a basic CSP to transition as a truly digital service provider.
One of the challenges CSPs face is implementing new digital grade technology that is built for delivering value-added services, rather than just connectivity. According to Rudolph Moncrieff, a research manager at the GSMA, that process currently takes CSPs an average of three years - several lifetimes over in the era of digital. These old-style big transformation projects cost hundred of millions of dollars and quite often fail - exposing the CSP to risk and huge sunk costs.
Conversely, modern, digital solutions allow businesses to avoid the high cost of total transformation by incorporating a technology stack quickly and easily without the need to overhaul IT departments or legacy infrastructure, essentially sidestepping the need for big and bloated multi-year projects. Although cost reduction and efficiency may drive the business case for starting a transformation initiative, what telcos really want to achieve through digitalisation is to provide the same customer experience as other digital trailblazers.
Today’s telcos cannot ignore digital transformation. More so than any other industry, CSPs have a huge opportunity within the digital marketplace to transform how they do business and redefine what digital transformation means. Telecoms and mobile network operators who embrace this new digital age will find themselves at the forefront of delivering value.
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