Digital transformation – Communication Service Providers (CSPs) time to turn the table

For long Communication Service Providers (CSPs) around the world has been termed as ‘Fat dumb pipe’ and a mere provider of network connectivity, who has managed to progress well around upgrading their infrastructure with time to accommodate new wireless and wired technologies by investing billions, but could not really leverage it for their own benefit and provide a new digital experience to their customers, while other industries reap the benefits.

Organisations across other industry domains like Banking, Healthcare, Retail, Insurance and internet startups from e-commerce and social media domain (like Uber, AirBnB, Flipkart, Alibaba, Facebook and WhatsApp) has managed to utilize the underlying technology and infrastructure provided by TSPs to their full extent and provide an exceptional customer delight to their clients and end users via online and mobile experiences. As per IDC, by 2020 percentage of enterprises creating advanced digital transformation initiatives will more than double, from todays 22% to almost 50%. All These organizations have one major thing in common: ‘They don’t own anything, yet they have everything’.

These organizations have committed themselves to successfully transform their products, services, support services and internal operations by taking a structured approach to digital transformation. And the results are apparent when they compare their current service, product offering and business operations 5-10 years ago with today. This has resulted in more customers, higher revenues, better EBITDA margins, higher stock prices and happy investors. As per Gartner, CEOs across industry domains expect their digital revenues to increase by more than 80% by 2020.

What is Digital Transformation?
So, what exactly is digital transformation? Is it really an early hype created by ICT industry groups like it has done so many times in the past (read SMAC, Big Data, Cloud etc.) to sustain in the world economy and prove their existence to other industries or is it really something that other industries need to acknowledge?

An organisation or an industry as a whole will be compelled to transform if they face any of these three challenges: Change in consumer needs, Change in underlying technology, Change in competition. If the organisation do not react to these changes then their survival and relevance in the market will be challenged and finally they will tip over the edge.

An organisation is said to have transformed if there is a whole scale change to their business model, product and service line up, support services, internal business processes and operations. The prefix ‘digital’ simply means that organisation has made an effective use of all IP network provided by the Telco’s and new integrated IT architecture comprising Cloud, big data analytics engine and Social media platform/channel.

Why CSP’s need to transform ‘digitally’?

  1. Traditional CSP business has saturated: There was a time when CSPs were in a defensible position because of the competitive advantage they had of owning the network infrastructure and providing Voice, SMS and Data services over them to their customers and end users. But with advent of competition in the market, especially in developed markets like US and Western Europe and with no service differentiation among them, customer loyalty got hit; leading to customer churn and reducing CSPs to compete with one another on price alone. There is still some hope for growth in emerging markets of Asia and Africa where there is still lot of scope for the CSPs to increase the customer base and have more revenue from traditional connectivity services.
  2. Changing ICT market landscape: ICT market landscape is now rapidly shifting to third platform which is driven by Social, Mobility, Cloud and Big Data analytics, providing connectivity to billions of users and things worldwide. CSPs will be interested in generating revenues from connectivity services, but they should also be interested in providing third platform solution services to enterprises/consumers.

How CSPs can embrace digitization?
For CSPs to succeed in digitization race, they first need to carve out a clear cut strategy with a well-defined scope, objectives and a framework to use digital technology to transform their interaction with their customers (B2B or B2C).

Secondly, they need to understand their customers. Customers are at the heart of the digital transformation. They are the ones who are driving the demand for smarter devices, online connectivity and generating billions of GB of data. Some telco operators have understood the need of their customers and has made efforts to digitize their experiences by developing their internet based online sales channel, online customer care and increased social media presence. But this is not digital transformation. A telco will be said to have transformed digitally, when they are able to integrate all the customer touch points: be it online based, mobile based, app based, social media or stores, and provide a true Omni channel experience to their customers. A customer should be recognized at once and a personalized sales and services should be offered based on the entry channel, history, and profile of the customer. A powerful Big Data analytical engine can help in identifying useful insights about the customer which can be used to create targeted marketing campaigns, promotions, cross-sale/up-sale offers.

Thirdly, they have to come up with new digital products. Telcos has to look beyond their traditional product offerings of voice, data and broadband service at a competitive price, but should look at the ways in personalizing these plans depending on the type of device used by the customers like basic phone, smartphone, and tablet etc. providing much wider and flexible choice of voice and data plans for these products.

Moreover, telcos should also focus on providing digital product offerings like cloud storage, music/video streaming, games and other cross-vertical offerings like e-payments, m-payments, e-health, e-wellness by partnering with other players in the ecosystem and providing a platform for other developers to build their services on it; there by doing away from a walled-garden proprietary services approach, but, retaining control over customer relationship. This way customer will be benefitted with richer service offering and telco will be benefitted with wider and immediate access to customer data, which could be used to refine and improve its offerings.

One of the major Australian operator, Telstra launched a digital service called ‘Crowdsupport’ an online customer service platform which is a community forum where Telstra’s users and others can put questions and answer questions to help each other. This application was made interesting by adding elements of gamification including ‘badges’, ‘status levels’, ‘points’ etc. This fast moving application allowed to provide a better customer experience and acquire data of prospective customers.

Conclusion
A pressing need has arisen for the industry that has provided the backbone to digitization – telecommunications – to digitize its internal operations and reap the benefits. The industry is already saturated and free riders have taken away large chunk of customers and revenue. The only answer to increase profit and growth is by embracing digitization. This will not be an easy task for larger organisations who are slow movers and late adopters, but, this has to change if they want to survive in this digital ecosystem.

Kailash Nath Pandey

Senior Executive - Business Consulting, Virtusa. Kailash is a telecom business professional having more than 4 years of experience in Requirement gathering, Business Analysis, Testing, Implementation, Product and Domain Training for various global telco and product based clients. At Virtusa, Kailash is part of growing telco practice and currently working as a business analyst in a large scale digital transformation project. Kailash is a MBA graduate from Symbiosis Institute of Telecom Management, Pune.

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