With the arrival of smart devices and use-cases such as smart homes, smart cars, smart cities and with analytics and artificial intelligence set to play an increasingly important role in business and personal life, the future looks to be fraught with disruption. While this will be largely good for consumers, telecom operators will have to ride these new waves of disruption to stay relevant. Not only will they face more competition, they will be forced to up their investments into technology and marketing, to prevent customer migration.
There are at least three complexities in their digitization journey. First, the rate of digitization, innovation and disruption is constantly speeding up. This accelerated pace presents a steep growth curve for telecom operators who not only face competition from fellow industry players, but also startups and midsized companies pushing the disruption envelope. They must be prepared to constantly update their products and services portfolio along with evolving consumer demands, at times without clear returns on investment. To avoid yet another round of disintermediation like what the OTT messaging apps have done, telcos would need to plan further ahead in recruiting the right talent to design products, partnerships and manage integrations, or develop the disruptive tech in-house.
Second, digitization is expanding the business model rapidly, blurring horizontal and vertical expansion along the traditional value chains. Traditional hardware, software and service players see their businesses being encroached upon by consumer-facing technology companies. For example, WeChat – what is still one of the largest chatting platform in the world – is no longer just a chat platform. Year on year, the company evolved from connecting people, to gaming, payments, travel, bookings, e-commerce and even government transactions! In the future, it may even offer its own operating system or platform for a “WeChat phone”. This all-in-one business model makes it very attractive for customers who want to transact and interact without leaving the platform.
This leads to the third complexity. While digitization has enabled operators to venture into other areas, such as content distribution, this conversely enables competitors to offer products – mostly improved – enticing customers to become operator-agnostic. This incumbent is displaced from being the primary owner of the customer relationship. This competition is not limited to the telecom industry and related services anymore. Telecom operators are going to see even more encroachment from startups and other players expanding into the telecom industry.
In short, digitization imposes multiple, complex strategic arbitrages, both short- and long-term, which has varying degrees of profitability uncertainty. Digitization also risks cannibalization of a telecom’s traditional business, where for instance, data calls have replaced voice calls in data heavy markets. With the pace of innovation, developments in digital can quickly upset dominant strongholds, as we have seen Google do to Yahoo!, in the search business.
Strategic changes; and fast
Since digitization is a necessity, business leaders should view this as an opportunity to convince shareholders and the board to invest. However, they must also communicate a concise and precise vision of their goals and articulate the business opportunities that come with digitization.
The business vision will dictate direction of the new business ecosystem for the company. The operator must be decisive in what to embrace and which businesses to exit. Operators should also consider building partnerships with clients and suppliers (perhaps even with competitors), or building new ecosystems that would allow the operator to play a different role in the value chain.
To get to their goals, they must also identify the right talent and operating model. The operator needs to be able to demonstrate agility and to integrate new digitized business models. Lean management techniques should be used because these provide for far more flexibility in a constantly evolving environment.
In most cases, enabling a digital perspective would need a relook at the organization structure itself. An organization that allows digital services to be core enablers and growth differentiators can be built through identifying efficiency and digital levers as key success factors. Eventually, KPIs as well as management style should be recalibrated to allow for disruptive thought to thrive.
Above all, organizations should allow some chaos to ensue, for the very fact that innovation – if it is to be promoted by top management – is not controlled from above, but is created by a convergence of talents and primarily grown bottom-up. They must allow for leeway and make passion a major part of the work. Gmail and Google AdSense, for example, were spawned from employees working on independent projects of their choice at the giant, for a day a week.
While digitization is a double edged sword, operators must remember that success can only come from failures. Our observation indicates that operators knew the power of digitization even in the early 2000s, but tried, failed and did not put effort into trying again. After all, there is no better time to digitize, than now.
Mr. Dujacquier and Mr. Gidwani are Senior Partner and Principal at Roland Berger, a global consulting firm.
Senior Partner, Singapore
Head of Telecom, Media and Technology, South-East Asia
Damien is Senior Partner at Roland Berger. Based in Singapore, he covers markets in South-East Asia, including nascent but prominent ones such as Myanmar and Indonesia.
He has extensive experience in the telecommunications, media and technology industries. He has recognized expertise in strategic planning, growth and entry strategies, sales performance, organizational redesign as well as private equity. In his capacity at Roland Berger, he has advised fixed and mobile operators, regulators and governments.
Prior to joining Roland Berger in 2000, he spent three years at Orange. Damien has a Master of Science from Télécom ParisTech.
Mohit Gidwani is a Principal at the Singapore office. He has worked in countries in the Indian Subcontinent and Southeast Asia, primarily consulting on telecom, media and technology industries.
At Roland Berger, Mohit works with telecom operators in the region on strategy and long-term transformation on topics spanning marketing and distribution strategy, branding, ecommerce and mobile payments, organization evolution and due diligence / regulatory support, and has also led various launch programs for new business units. Recently, Mohit has led the transformation of the largest telecom operator in Myanmar, advising on commercial and organization evolution.
Prior to Roland Berger, he worked at SingTel, Southeast Asia’s largest operator group, working with the management on enterprise and IT services strategy projects, with specific focus on India and on mergers & acquisitions.
Mohit has a Bachelor of Technology from the Indian Institute of Technology, Bombay and an MBA from the Indian Institute of Management, Ahmedabad.