By Brendan O’Brien, Co-founder & Chief Innovation Officer, Aria Systems
The era of digital transformation is upon us, and CIOs in every industry from transportation to telecom are facing pressure to meet ever-increasing customer demands. While the degree of digitization varies from industry to industry, they all face similar infrastructure challenges on the way to becoming digital companies.
Many legacy companies built their business models and back-office systems for the world where products were physical and designed for one-time sales. New customer acquisition was the focus, and mobility of accounts and services were an afterthought —if the thought of at all.
Today, customers are demanding more choice and flexibility in how and when they pay for products. At the same time, they expect flawless self-service and instant gratification. All of these things work in concert to flummox the technology professionals who must service their customers, handle billing, invoicing, provisioning, and accounting. Technological innovation is important, but it now revolves around the needs of the customer instead of traditional development cycles. And the two could not be more out of sync.
A Customer-Centric Approach to Innovation
Because there are fewer barriers to switching, customers are flocking to sellers that let them choose how to buy. In the midst of this customer-first revolution, many companies are following suit, enabling customers to choose their product, packaging, consumption, and payment options.
To meet this need and improve revenue predictability, the market is moving to recurring revenue models. Successful companies are going a step further and enabling multi-dimensional customer choice. It’s the Burger King “Have it Your Way” of pricing. Companies like Amazon are developing an a la carte Chinese menu of subscriptions and usage-based models with flexible payment options and timing. The thought is that more people will buy if you can give them the terms they want. And it’s working. Amazon stock is priced at an awe-inspiring $761.56 — up over 18% in the last 12 months.
Many enterprises are still taking the “this is the technology we will use to serve our customers” approach, hoping that it works instead of the other way around – choosing the technology that meets their customers’ needs
According to the Altimeter 2016 State of Digital Transformation report, 55 percent of those responsible for digital transformation cite “evolving customer behaviors and preferences” as their primary catalyst for transformation. But only half (54 percent) of survey respondents have completely mapped out the customer journey within the last year or are in the process of doing so. And only 20 percent of digital transformation leaders are studying the mobile customer journey and designing for real-time “micro-moments.” This doesn’t bode well for providing the experience today’s customers are seeking.
Communications Service Providers as a Case Study
You may think of communications service providers (CSPs) as digitally-native companies because of the mobile device in your hand and the connection services they provide to make them work. But just ten years ago, they were largely dependent on land lines, long-distance service and dial-up internet connections for revenue. Today, the services they provide (and desire to provide) have diversified to the nth degree, but they are still hampered by trying to make the decade’s old back-end systems work today.
CSPs have two daunting roadblocks before them — one social and one technical — before there’s any hope of reaching the DSP promised land. On the social side, they must overcome massive general dissatisfaction among their customer base. A recent study by Accenture and Salesforce.com found that among CSPs across the globe, their Net Promoter Score (or ‘NPS,’ a measurement of customer satisfaction on a scale from -100 to +100) was a paltry average of 6. Yes, 6. On the other hand, that same study uncovered an average NPS of 74 among the “born digital” DSPs like Amazon and Netflix, the same companies against whom the traditional CSPs aspire to compete.
The technical challenge for CSPs, not unrelated to the social challenge, is the highly fragmented, often monolithic, and largely outdated systems upon which they’ve built their infrastructure over decades. Designed in the 80s and 90s, these systems were intended to serve the world where services were inextricably linked to a single physical location or device. Moreover, trying to construct support for services that are fluid and flexible in and around these platforms has only increased the technical “debt” that CSPs must pay down before emerging into the new age.
Gartner weighs in with their recent Market Trends report titled “A Strong Ecosystem is Vital for CSPs to Succeed in the Internet of Things”. CSPs must rapidly modernize their infrastructure, primarily by turning away from the “suite-based” behemoth on-premises systems that were built for the traditional “triple play” offerings and little more.
They must turn instead to building coalition systems comprised of agile (and largely cloud-based) best-of-breed systems to overcome the technical hurdle before them. By doing so with haste (following the lead, as Gartner cites, of companies like Amazon Web Services and yes…..Microsoft) the hope is that their woefully low NPS will then start to inch up, and CSPs can avoid the fate of merely being regarded as the providers of internet plumbing.
The Agile Solution to Digital Problems
This is highly instructive because almost any legacy company shooting for digital transformation is facing the same struggle. The path for transformation is by and large dictated by marketing, but it must be artfully executed by IT.
Significant risk looms. Stick with the status quo and wither away, or stick your neck out for the axe when you rip-and-replace old systems to compete. There is some reprieve to those that must successfully add digital services and serve “need it now” customers at market speed.
The reprieve comes in the form of adding an agility platform to legacy systems. This allows companies to continue the use of existing systems for what they are very good at—traditional, high-volume services. It’s a cap and grow strategy which “caps” the footprint of the old on-premises BSS and adopts the cloud-based platform for the speed and agility required to “grow” new businesses.
Done successfully, both companies and their customers can take a very long ride into their collective sunsets.
Brendan can be reached at email@example.com, LinkedIn – O’Brien and Twitter@brendan0606.