Digital transformation is undoubtedly the challenge of this generation of Telco executives, and how well we handle it will determine the shape of the Telco industry for decades to come. If we handle it poorly, we will watch the Telco influence being stripped away year on year, until it has little to offer beyond being a communications utility that competes primarily on price. If we handle it well, we will see multiple new types of Telcos emerge, each one ready and able to compete with the rest of the digital economy.
In my latest book, ‘Transforming the Telco’, I take an holistic view of the challenge presented by Digital Transformation. From the evolution towards an autonomously managed, virtualized infrastructure, to the business model changes required to compete effectively in new digital service arenas, to the process reengineering required to manage customers and exploit data at the speed of the digital economy, digital transformation impacts on every part of the Telco. And underpinning all of this are the fundamental cultural and organizational changes needed to survive in this new competitive environment.
In this series of blogs, I discuss different concepts raised in my book starting with:
the 10 transformation journeys of the telco
There is an ancient parable about a group of blind men examining an elephant and trying to work out what sort of creature it really is. Each touches the elephant in a different place, the trunk, the tusk, the leg, the tail, etc., and each comes to a radically different conclusion about what sort of animal they are dealing with. Some believe it is a snake, some think it is a bull, some a wall, some a rope. While this parable has its root in texts over 2000 years old, it continues to express a universal truth. When we don’t manage to take in the full picture we can end up drawing wildly diverse conclusions.
Digital transformation runs into the same problem. We all become obsessed with the pieces we are interested in, and accordingly, we see transformation as primarily: a technology challenge; or a new digital service opportunity; or a cultural change; or a customer engagement issue. Transformation is all of the above, and more.
I tend to view transformation in terms of 10 distinct journeys that embrace every aspect of the Telco. Each journey represents a distinct transformation challenge that the Telco must address to fully deal with digital transformation. However, while each journey represents a distinct challenge, there are close inter-dependencies between the various journeys which for many Telcos means that several journey capabilities will need to be matured in parallel. I mention capabilities because like the experienced traveler, the Telco on a transformational journey will over time, build and mature their organizational capabilities to travel that journey successfully. Some of the journeys have a technology aspect, while others are more focused on transforming how the business runs. Some journeys tend to have an inward ‘face’ looking into the organization, others look out towards the customers and the wider ecosystem. These journeys embrace every aspect of the Telco and each journey represents a distinct transformation challenge that the Telco must address to fully deal with digital transformation.
Journey 1: From discrete network elements to an autonomously managed, virtualized communications and cloud infrastructure: While I go to some lengths to continuously reinforce the point throughout this book that transformation is not simply a technology challenge, there is undeniably a core technology element. During transformation, the Telco’s infrastructure must evolve from the expensive and difficult-to-manage set of discrete network elements, to a virtualized communications and cloud infrastructure, which can be managed in a highly autonomous fashion, at extremely low cost. Network Function Virtualization and Software Defined Networking (NFV/SDN) are making this first journey a reality for many Telcos, but there is a very long way to go in making this technology manageable, and the cost, complexity, and disruption are huge. And all the time, 5G is drawing ever nearer with its next generation network capabilities that require NFV/SDN, with its associated investment costs and disruption!
Journey 2: From reactive product-specific security to uniformly orchestrated security. While nobody would try to claim that security is a little discussed topic in modern day communications – the security discussion is surprisingly disconnected from the transformation discussion. As the Telco embraces new technology, new business models, new partners, new vertical markets and entirely new customer engagement expectations, the management of security must become a central transformation consideration. Third parties will increasingly be involved in the delivery of new digital services across channels provided by Telcos. In many cases, these services will have higher security requirements that necessitate complete business-wide security transformation covering the full technology stack, the data, the service creation process, the partners, the physical environment and a change to a security aware culture. Finally, the emergence of IoT is presenting an enormous potential security issue as it exponentially extends the security perimeter that needs to be managed. Designing security transformation in anticipation of all of these aspects, is central to all genuine transformation programs.
Journey 3: From limited data exploitation to a uniformly orchestrated data-centric enterprise.Sitting at the heart of digital transformation is an entirely new way of understanding and exploiting data within new forms of Enterprise Information Architecture, and business cultures utilizing predictive analytics. During transformation, a key journey for the Telco involves the development of a single coordinated approach for the collection, analysis, distribution, security, and monetization of data, which will be derived from infrastructure, services, social channels, business, and third-party sources. The success of all entities in the digital economy will largely depend on how well they use data, both for internal business optimization and external monetization.
Journey 4: From closed management systems to an open API platform architecture. The IT architecture of the Telco has always been based on the implicit assumption that it is there to enable the Telco to deliver its ‘own services’ to its ‘own customers’. Digital transformation is fundamentally challenging that assumption. To allow the Telco to compete in the digital services world, the Telco must evolve from a closed IT architecture to an open platform architecture – accessed through openly available APIs. This open platform will be expected to support the development of both internally developed Telco services, and externally developed third-party services.
Journey 5: From a limited portfolio of traditional services, to a diverse portfolio of digital services. A key part of the transformation journey will involve the Telco learning how to effectively expand their service portfolios to offer new suites of digital services, that address new vertical markets with strong revenue growth potential. The Telco must learn which service niches best suit their competencies, and ultimately transform their operations to enable them to efficiently manage these diverse service portfolios whilst minimizing operational complexity.
Journey 6: From managing a limited set of suppliers, to existing in a vibrant ecosystem of partners. For the past century, the Telco has had the luxury of operating in relative isolation from the wider industry. It certainly has had many vendors and partners, but by-and-large, the speed and depth of the partnering relationship has always been dictated by the Telco. In the digital economy, the Telco will need to surrender that luxury. In order to compete with the numerous OTT digital services providers in multiple verticals, it will require a step change in the number and variety of partners and sophistication in the way they are managed. This will require a fundamental transformation of the way it engages with and governs this ecosystem of partners. Ecosystem partner governance will need to become a strong and core capability to manage Open Innovation and extensive collaboration in multiple verticals balanced with strategic IP Management.
Journey 7: From a limited set of Business Models, to utilizing multiple Business Models in core and adjacent markets-.A firm’s Business Model is defined by how it creates value for its customers (i.e. its Value Proposition), and by how it captures value (i.e. how it extracts money for its services). The right Business Model can turn a prosaic service concept into a success, while the wrong Business Model can kill an otherwise excellent service offering. As the Telco explores a larger portfolio of digital service opportunities in new vertical markets, it will need to develop a new flexibility in how it creates value in these digital service markets, and how it captures value from the delivery of these services in competition and/or cooperation with other ecosystem players. Optimizing the value of new Business Models will require new Operating Models that work synergistically in parallel with existing Business and Operating Models. This transformation journey will require new, lean operational and IT architectures to be designed that give the Telco the flexibility to support multiple Business Models at scale, without significantly increasing operational complexity and cost. New organizational and IT architectures will require a fundamental lean transformation of numerous internal process and financial, physical and informational flows to ecosystem partners. Total Cost of Ownership (TCO) and Benefits Assessment and Realization (BAR) are management practices that will be needed to effectively manage the enterprise cost base.
Journey 8: From a traditional Telco organization and culture, to a digital organization and culture. Few would disagree that the traditional Telco organization and culture will not be fit-for-purpose in the digital economy. The culture that worked for typically stable infrastructure-centric organizations that offered a limited portfolio of traditional services in competition with other Telcos, will be very different from the organization and culture needed to offer a wide portfolio of digital services in competition with internet and over-the-top (OTT) players. This is probably the most difficult transformation journey to map and the most painful to travel, as it impacts on peoples’ skills and behaviors.
Journey 9: From focusing on traditional channels, to adopting multiple channels to market. The way a digital Telco sells will be very different from the traditional approach of today’s Telco. With a digital services portfolio that expands across multiple vertical markets, a digital Telco will need to open up new communications and partner channels to market its brand and to maximize its digital services and products revenues, while simultaneously enhancing traditional channels to market. These channels will require new operating processes, new ways of incentivizing employees/partners, and new paths for aligning business criteria to vertical market expectations, rather than sticking to Telco norms.
Journey 10: From one dimensional management of customer relationships, to 360o omni-channel management of the customer experience. Both business and consumer customer expectations are evolving to be more demanding! Their expectations are based on their experiences with the numerous Internet and OTT players that provide seamless integrated experiences on their phones every day, rather than by their experiences with other Telcos. The benefits of this transformation journey include increased customer satisfaction and reduced customer churn. The need for change is urgent and in many Telcos this journey is already underway. It involves implementing changes to the systems, processes, data-management, skills and culture across the Telco, to ultimately align customer engagement experience with the best-in-class across all other consumer verticals.
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