Richard Brackstone, Client Director at transformation consultancy Moorhouse comments on the changes telcos must make in order to succeed in the new world created by new infrastructures, innovation and user demand for the services they really want.
The telco industry has had no shortage of seismic shifts in recent years, and is certainly no stranger to the pressures generated by disruptive influences. The news came recently that BT is in talks to buy back O2, a company spun out from the group only a decade or so previously. A return to the fold – or an alternative acquisition of EE – would allow BT to fulfil its “quad play” ambition, bundling together broadband, landlines, mobile and TV in a single offer. This space is a clear opportunity for ‘telcos’ to dominate a converging market. BT is confident enough in its strategy to accuse rivals that have attempted to move into this space of a defensive play.
All this underlines the fluid nature of the telecoms industry, which is experiencing levels of turbulence that present challenges to leaders and managers trying to navigate their organisation through the choppy waters. To carry the metaphor further, they may no longer be entirely sure what kind of craft they are piloting.
The BT talks with O2 also underline that the industry no longer just prizes innovative new content over high-quality delivery. Five years ago who would have predicted that BT would move into the broadcast market? To date the race has been on to develop new product, content and service offerings like this and get them to the market before competitors can, in order to bolster otherwise dwindling customer bases and revenue. Those organisations that exist as ‘pure’ telco companies are finding their margins squeezed as voice/text becomes a commoditised product within a utility service.
But despite investment in new, high quality services, delivery has been patchy at best. Consequently we’re seeing a revival in importance of the more traditional carriage and network providers. High quality services mean nothing if the way they are delivered to customers interferes with their quality. Investment and ownership of infrastructure is still vital.
The rapid changes are putting incredible pressures on telco companies. To survive they have to adapt and change. In reality, this means adopting more customer-centric business models and providing broader services whilst staying the right side of the regulators.
Part of the problem for telcos is that their business has often been built around innovations in technology and the infrastructure these demand. Think back to BT’s costly investment in what was then BT Cellnet. In an increasingly multichannel world a business model is needed that, to all intents and purposes, is designed solely around the customer and their needs. Proof is found in customer complaints; regulators are critical of many parts of the telco industry, but the highest level of consumer complaints are found where the model of delivery does not fit with their lifestyle and demands.
How can telcos solve this problem, and change to a more customer-centric operation?
Part of this lies in recognising which parts of the business yield the highest value to the customer, such as contact centres. Reprioritising these within the business portfolio improves the focus on the customer. No surprise, therefore, that we have seen the growing trend of re-shoring, as businesses recognise the greater importance they have in the value chain. Not only do they help deliver an excellent experience to consumers, they also provide valuable customer data – data that is increasingly perceived as valuable intellectual property and currency in its own right.
A far closer scrutiny of the offer, identity and resulting strategy that falls out of this is required. Our Barometer on Change research found that businesses are struggling as they try to become all things to all people, and as a result find their strategic imperatives confused and fragmented. This is a mistake: those organisations that both achieve and expect stronger financial performance are those that understand they must focus on a clear strategy to differentiate their offer.
Finally, investing in building internal change capability to cope with change and transformation is wise. Many have relied heavily on the external market for this expertise, instead of ensuring proper knowledge transfer and developing their own skills. This is crucial in order to remain agile.
Telcos clearly face enormous challenges on several fronts. Responding proactively will be the defining trait of those organisations that survive.