Tag Archives: telco

The global telco dream is over: Mark Gregory, Chief Economist EY gives me his perspective.

The Great Telco Debate is all about putting the industry trends into context. Mark Gregory of EY can’t join us this time around but he sent the following in reply to my questions about the telecoms industry, its dynamics, broader economics and future industry structures. It is great food for thought ahead of November 29th when we next assemble for the debate.  

Image result for mark gregory Ey Mark Gregory, Chief Economist UK & Ireland EY

With telcos under pressure in a complex world…

As the first sector to be liberalised and privatised at scale across countries, telecoms has been in the vanguard of change for 4 decades but now needs to consider where it goes next.

With the freedom to develop, the telecoms industry has changed out of all recognition in its search for profitable growth. Telcos today tend to be a mix of businesses with very different economic characteristics ranging from utility like local network operations to fast-moving, constantly changing content provision. These complex business combinations have grown out of a desire to capture more of the value that the telco enables but they risk destroying value by making the company both hard to manage and difficult for investors to value accurately.

The slowing economic global outlook as identified by the IMF recently will create extra pressure on telco business models and at the same time increase the political risk that companies in the sector face. Confronted with slower economic growth and increasingly squeezed consumers, politicians will look at industries that account for significant shares of consumer spending and corporate costs for opportunities for short-term political gain. The recent introduction of a retail price cap in UK energy and the proposal to nationalise certain UK utilities are good examples of possible ad-hoc intervention.

There is also a growing disparity between the largely national operations of telcos and the multinational scale and scope of their suppliers. With the seemingly never ending process of innovation, telcos risk losing control over their technology roadmaps to companies with much greater resources and economies of scale.

…time for a new stakeholder led model…

The low growth economy without any real productivity improvement is not going to provide much if any support to telco growth ambitions. It is time to change the model and for telcos to consider how they can best contribute to economic growth and increased prosperity. In particular, how to drive improvements in labour markets as these are where so many of the issues underpinning today’s economic and political challenges originate from.

In many countries, concern over the “left behind” have become increasingly prominent in the political debate – the people in traditional industrial towns who find themselves on the margins of the modern economy. Typically these groups live outside of cities and larger towns and struggle to participate in the workforce. One option might be to take investment to these people with the telcos leading the way. Rather than starting the roll out of technologies in the major population centres, telcos could look to reach further out and bring people into the labour market providing the infrastructure for remote working. People would be given the chance to participate electronically in the labour market, reducing the level of transport infrastructure investment required and in so doing enhancing productivity and growth in the economy.

Telcos could also use their national presence and knowledge in the digital arena to support wider digital skills development at a local level. Again remote learning could be part of this approach with the aim being to increase significantly the level and number of digitally skilled people in the economy. This would serve to improve the skills pool available to telcos but also provide a platform for faster digital growth with the benefits accruing to all.

Greater local reach and capability would also open the door to cross-sector collaboration with other utility like providers such as power and water and with other major sectors such as health. As Bell Labs showed, cross-sectoral digital innovation could provide a major leg up for economic growth in local markets. Working closely across sectors at a local level would provide telcos with the opportunity to identify new applications and to participate in developing and deploying these.

…in a brave new world.

Telcos have been at the forefront of economic change in the last 4 decades, innovating with a range of business strategies. It is increasingly clear that the global telco dream is over and that the core business is of providing connectivity that enables economic activity. In this context, telcos should focus on how best they can help increase the rate of economic activity across the full geography of their markets building stakeholder centric telcos.

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A ‘brand’ view of the telecoms industry

Tim Pritchard, Kantar TNS at the Great Telco Debate

In the spirit of getting outside perspectives on the evolving telecoms market, Tim Pritchard from Kantar TNS, the WPP company which is the largest custom research business in the world, joined the Great Telco Debate on the role of telecoms in the digital economy. The brand perspective raised some very interesting and contradicting themes:

GTD17_027

  • The customer is changing. Traditional segmentation is no longer valid. ‘Generation CX’ (young, old, educated, working class – a slice of everyone) is the new reality and brands either listen and respond to customer feedback or risk becoming irrelevant.
  • It is widely accepted that customer loyalty drives profitable revenue growth. As such, customer experience (CX) is non-negotiable. But how does it fit in with today’s telecoms ‘product’ given the world of apps and over-the-top content consumption?
  • Corporate mission statements and brand values tend not to include the customer – you’ll be amazed how few companies, even those spending tens of millions each year on CX, have an agreed customer strategy. Get it written down and socialised across the business so that everyone from the janitor to the CEO knows it, and uses it to frame their work, their thinking, and their daily behaviour.
  • WPP’s 2017 Global BrandZ  shows that 8 of the world’s most valuable 50 brands are telcos. A further 15 are technology companies. You’ve had the power for a long time, but have you leveraged that power? I would say not.
  • Most Telcos have adopted NPS (Net Promoter System) yet their NPS scores are among the lowest of any industry. Virtual network providers often enter markets and quickly start to outperform the network owners, sometimes by as much as 20-30 NPS points. It shouldn’t be that easy – there is something clearly amiss among incumbent telcos to afford disruptor brands that opportunity to create true CX differentiation.
  • A focus on self-serve business models may help to save telcos money but, aside from the customer groups who actively prefer to self-serve, tend to harm rather than enhance brand building efforts.
  • The customer voice is vital, and capturing customer feedback on specific interactions (preferably in real-time) provides critical input for both tactical response and strategy development, as well as brand building

There are 3 basic rules:

  • Don’t let customer down, especially at critical times (i.e. the moments that really matter)
  • Deliver emotional and functional experiences that stimulate long-lasting feelings for the brand
  • Do things that reinforce brand choice and deliver services to customers in a personal, relevant, and needs-satisfying manner

In short, the role of brand is changing with the digital market. Telcos and tech companies benefit hugely from high brand valuations yet typically suffer from poor customer service, reflected in low NPS scores. Part of the challenge is identifying what role the telco plays in the lives of ‘Generation CX’. Identifying, enunciating and promoting a clear customer strategy is vital to re-positioning the telco for the coming generations.

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An Economist’s perspective on the future of telecoms

Getting external perspectives always adds to the richness of the Great Telco Debate.  Mark Gregory, Chief Economist at EY in London and I discussed the economic realities of telecoms and the digital economy going forward. Here are the key themes that emerged:

  • Measuring productivity in traditional economic terms has been challenged by the Gig economy and its processes: ubiquitous connectivity is destroying traditional value such as in the taxi, hotel or retail markets but is creating new value as different parties are brought together on the exploding number of platforms for consumer and business use
  • ‘Digital’ was formerly about hidden components such as semi-conductors, servers and 3D printing. It’s now all pervasive and, from an economist’s perspective, it’s about how all industries work, the potential impact of technology and where value is created
  • The potential ubiquity of ultra broadband diminishes the relative value of connectivity since scarcity tends to create value
  • Telecoms is in the group of General Purpose Technologies (GPT) as described by Robert Gordon in his assessment of the impact of IT on productivity. It may be a disproportionately important enabler in a more digital world, but it is nonetheless an enabler
  • Telecoms (broadband) should have a relatively bigger role going forward but that depends on how it evolves and how it allows other industries to evolve
  • Telecoms first of all has to deliver its role into the digital economy as an enabler. Moves into content delivery and other services have been only variously successful
  • Telecoms must think about how it can enable other value chains rather than dominate them by underpinning new processes and allowing new apps to flourish.
  • Politics is becoming extremely important for the future of telecoms. Regulators have to get out of the mindset of capping prices if they are going to allow the telecoms industry to evolve into its new digital economy support role. The telcos have to be able to benefit in terms of value capture if they are going to be incentivised to invest for the future.
  • 5G is what some of the financial community are most worried about in terms of another big chunk of investment being required.
  • Digital skills are important as automation shifts the focus for human roles in the digital economy
  • As we look at Brexit some sectors are clearly going to be impacted:
    • Financial services and Life Sciences because of the regulatory environment.
    • Automotive could be impacted but this is still not clear
    • Telecoms does not appear to be in the high impact category.
    • Data protection will be a major focus given European regulation.
    • The labour force is the one to keep an eye on – digital skills and a more flexible work force capable of coping with the the dynamics of a digital market will be vital.

Here is the full interview:

Keep November 29th 2018 free for the next Great Telco Debate. If you have topics you think are shaping the future of the industry and would like to contribute as an ‘expert witness’ please drop me a line.

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The future Telco CIO: Serving whom & delivering what?

Whenever discussing telco CIOs I set the following challenge: “Think of a chart with Stalin to the Dali Lama on the X axis; and a Server and a business suit on the Y axis. Where do you plot yourself or your CIO client?”

STalin

After the initial groans of recognition of the problem, the concensus tends to be that historically, the majority of CIOs have been in the lower left hand quadrant: These Stalinist Server Huggers have been trying to control the technology being used to build the network, as well as how the network is used and what is allowed onto it. This is an engineering and network-centric view of the world. Many factors are shifting the focus upwards and right towards the crossover point of the 2 axis, driven by:

  • The convergence between network and IT
  • A more software-centric view of the telco future
  • Virtualisation, Consumerisation and managed services
  • A new flexible business model

Moving to the top right (to a business laissez faire attitude) would lead to mayhem. There is no doubt that a degree of control is required in this shifting world, but it must not lead to a restricted offering internally or externally.

Shaping the network and the IT systems supporting it to reflect the changing world needs a fundamentally different approach from Management. No longer can the telco dictate the types of services or usage patterns that its ultimate customers adopt. Indeed, the necessity to allow for ever-shifting eco systems of partners and channels means that this new ICT infrastructure has got to be manageable to the nth degree on a cost efficient basis.

The knock-on effect on the role of the telco CIO is radical:

Firstly, is it a CTO or CIO issue? Telcos have traditionally held the CTO role as being above that of the CIO.  As we shift towards a software-oriented telco this cannot continue. The interrelationship between all of the IT systems, network operations and ultimate customer service have got to be viewed holistically, hence the CIO takes the upper hand. Or is that true? Given the changing nature of the telco itself and the different Lines Of Business (LOBs) and their relative power, perhaps the CIO ends up subservient to the LOBs and their need to get services more closely matched with their differing customer bases.

Secondly, the CIO has a changing set of relationships with suppliers. The all-IP network and the importance of the data centre mean sacrifices have to be made.  Fewer suppliers is a goal for most. Turning equipment and software into services to be purchased is a realistic target for the CIO. The emergence of cloud-based offerings mean that the CIO can source building blocks for the network and the IT infrastructure on a much more flexible and cost efficient basis.

So, what should the CIO concentrate on?

The fact of the matter is that everything is tending towards software and a virtual environment. Hence the telco CIO needs a very different set of skills. Should the network engineer-oriented  or IT services-oriented C-level be in charge? Probably neither, unless they can truly embrace the shifting demands coming from the business as a whole and the Lines of Business (LOBs).

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