Digital Disruption in the telecoms business
By Ville Syrjänen, Vice President, Europe
Digital disruption is nowadays a catch phase touted in many board rooms. It permeates all industries and changes many business ecosystems. What is it and how does it impact the communications services business? A few pointers below about this strategic change from the point of view of the scope of business, business model and how the customer relationship is changing.
The scope of the telecom business has changed. Communications and connectivity become deeply embedded in other value chains. Witness Spotify or WhatsApp embedded in a mobile subscription, an HBO package embedded in a household broadband subscription. The household as a subscription unit is moving far beyond triple or quadplay - a typical home will have 10-15 connected devices and a doubling of ARPU to over 100€ is within reach. This means that telecoms is becoming a channel partner or orchestrator of digital goods to the home.
On the B2B side, digital delivery, self-care and the general promise of the internet of things (IoT) keeps the ICT market on a steady path of new value creation. Analysts project the large ICT market to continue its +10..20% CAGR (compound annual growth rate, IDC, McKinsey 2014), almost doubling in size compared to the current 3,5tr€ by 2020. This compares with the roughly flat traditional telecoms market at 1,2tr€. To succeed, telcos must focus on creating new core capabilities around business solutions design & delivery, hosting, and e2e service SLA execution.
Business models for the connected home and the ICT provider of the future are radically different from the traditional telco. Subscriptions built up of multiple value components are becoming the norm. Customer’s require form-fitting, full solutions and incremental value-add propositions fitting their specific needs. For the CSP, sharing the customer, creating added value in every step of the value chain, and investing in core capabilities are the building blocks of the business.
Meeting end-user needs requires a high degree of segmentation, subbranding and ultimately offerings targeted at a segment of one. To match the needs, flexible, modular commercial offerings are required. Continuous experimenting with offerings is needed to keep abreast of fast changing market needs. Machine learning and analytics can now be applied to make real-time recommendations to meet emerging customer needs in huge scale. Think AirBnB and where-to-go served in real-time by a digital assistant like Apple Siri or Intel Glass!
The customer relationship is changing from an individual based or organizational buyer based to a hybrid relationship of enabling user-individuals, accompanied by service provider accountability towards the key users. This means a new hierarchical structure for the customer concept. End-users expect direct access to services, instant provisioning and support. Omnichannel customer journeys imply that all customer facing systems have access to the 360 customer view. And, fragmentation of markets and providing a personalized experience requires that customer journeys be configurable and supported with automated intelligence.
So, all in all, digital disruption affects telecoms from all and many angles: embedded connectivity and communications, changing business models, IoT, customer sharing, end-user needs, and even the customer relationship is changing. How are you as an operator equipped for these changes?