This year Panorama launched its new division Necto Telecom at the Mobile World Congress in Barcelona and presented important insights about the future of the Telecom industry and its digital transformation. The future of telecom is going to change dramatically over the next couple of years. Some changes have already begun. The industry is already developing the major technologies that will enable the huge transformation of Telecom in the future. Let’s discuss the insights we shared at the MWC and the trends that were discussed at the world’s biggest congress for telecommunications and media.
Telecom players connect the world. For the last thirty years, telecoms took a major responsibility on their shoulders: connecting people, friends, families, lives, and businesses all around the globe. It started with voice, continued with text, and today, data is prevalent across all our devices and our lives.
Sometimes this makes us feel a bit over-connected. We are overwhelmed with data, connectivity, applications, and usage; but in general, together as an industry, we drove a major increase in global productivity. We helped the world turn around.
The Evolution of Telecom
We will start by going over the evolution of Telecom. For better understanding, we will review it based on five dimensions: Times and years, enabling technology, services provided using those enabling technologies, systems and operations we use internally, and insights and analytics we use to understand customers.
In the 1980’s we provided mostly voice services through manual systems. The enabling technology was 1st generation (1G) and we had no visibility whatsoever about our customers’ needs and wants. The second generation came along. And then the third one (3G) back in the 1990’s, when text became more prevalent. We moved from manual systems to monolithic systems; and from there to holistic systems. We became more aware of what our customers need.
In 2000 to 2010, the fourth generation (4G) came along, and it brought data with it. Not just data, but massive amounts of data and connectivity everywhere. Our holistic systems could not handle it. We needed to scale. The use of virtualized and cloud technologies helped us scale our business. We also needed to understand our customers better and use analytical systems to provide them with the best bundles and packages. Now, when we are heading towards 2020, we see 5G technology coming forward. And, as an industry, we must transform ourselves from a B2C strategy to enablers of the future technology. We will enable other businesses to use and digitize themselves. We are going to own the IoT Revolution. Our system must become autonomous to provide full self-service, full and deep intelligence into our customers’ behavior, and insight into autonomous processes we want to supply.
Evolution or Revolution?
We will now focus on the trends affecting our industry, the evolution or revolution we need to take, and how we can deploy an intelligent system that will help us become catalysts of the digital revolution.
The natural evolution that has happened during the last 30 years was to go from one communication technique to the other. It started with voice, but when profits went down we went into text. Then we charged per text message, but profits went down again. We had to reinvent ourselves with 4G technology and data. This drove significant growth in our business. But today, overall connectivity is commoditized. And because of the saturation and competition in the market, we are seeing that even the profit on data is now eroding. If we add a pro-consumer regulation to the equation, we need to recognize that we cannot continue the status quo. It is not possible to just think about the next communication techniques. We need to find what’s next for us, reinvent ourselves; otherwise our profits will continue to erode and attrition will happen.
The OTT Takeover
Now let’s talk about the major OTT players that entered the industry. Right now, it looks like a boxing fight between the OTT vendors and the Telecoms. Does it have to be this way? We’re not sure. But we know that OTT players are everywhere: in communication, TV, music, technology, content, and productivity. Let’s take international voice as an example. It was a great source of revenue, which is now practically owned by Skype and Viber. Think about text, which was also a great source of revenue, now owned by WhatsApp, WeChat, or Telegram. OTT players are commoditizing the market in areas such as music services, technology, content and productivity; think about Spotify, YouTube, and Netflix.
The Change We Need
So, what’s next? It’s time for a change, and it can’t be a natural evolution. Evolution would be to go from one communication service to another communication service. From voice to text, to text to data. But we have seen that this journey is leading us to eroding profits. We believe that the industry needs a revolution, not an evolution. The good news is that we have the enabling technologies and the need in the market to create the revolution. Let’s discuss the opportunities of this revolution and the roadmap that a Telecom needs to take to differentiate itself from its competition.
Telecoms need to own a plan for business transformation, from strategy to operation, from processes to personnel. Business transformation is a must. And the biggest technology enabler that is going to help that business transformation is 5G, which is literally right around the corner. 5G is going to be the enabler of the biggest revolution since the Industrial Revolution or the Internet Revolution. It is like TCP/IP, when Internet just started. It is like machinery when the Industrial Revolution just started. Because it is going to enable the revolution of the Smart World.
The Smart World Revolution: a 0.5T$ Opportunity
When we speak about Smart World, we speak about Smart Cities, Smart Homes, Smart Buildings, Smart Health, Smart Industry… smarter lives. The Smart World Revolution is now estimated as a 0.5T$ digitization opportunity which is now for grabs by the Telecom providers. So today, Telecom providers have two options. One is to go down the connectivity route. And the connectivity route is very clear: to provide connectivity to that revolution. If a Telecom chooses this road, it means that its profit will erode over time; it is a dead-end road. There is a great road ahead of us that will allow Telecoms to increase market share, to revolutionize the industry and to own part of the Smart World Revolution.
We see a roadmap that starts with a short-term investment, mid-term, and long-term transformation. In the short-term, Telecom should focus on omnichannel, cross-sell, retention, and mainly automation and insights into those key processes. In the mid-term, Telecom will have to leverage the IoT Revolution and provide IoT services, not just connectivity, using also data applications and monetize their data with the industry. And in the long-term, Telecom will become the digital transformation partner for the industry. Telecom will evolve from a B2C focus to a B2B focus, enabling other industries to digitalize themselves.
Digital Transformation Starts With Telecom
To be able to digitalize other industries, we as an industry must digitalize ourselves. We need to embrace the digital transformation that many telecoms are already going through. What does digital transformation really mean? To reach digital transformation, you need to touch on four key pillars: Empower employees with knowledge, understand customer behavior and conduct better engagement, use data to optimize your operations, and use insights to transform products. This is a system of insights. It is a connected system that creates insights across the business.
TM Forum describes digital transformation with the following pyramid. The key part of the pyramid for digital transformation is “KPI and Insights”. This is key for every digital transformation. It’s about choosing the right KPI to transform yourself and the right insight to help you invent new business processes that create better engagement with your customers.
Data Insights on OSS & BSS Are the Fuel for Digital Transformation
We believe that digital transformation means analytics creating new business processes. Insight is the only ingredient in any business that can create new business processes. It’s not about manual processes anymore, it’s not about a person sitting and inventing new business processes. It’s about getting insights based on customer engagement, on workforce management, on the investment strategy, and on the supply chain, that help you invent new business processes that are more profitable for your business.
Nowadays, OSS and BSS systems are deployed in a fragmented way. To achieve digital transformation, Telecom needs to focus on four key business processes, fix them, and optimize them. The first is Concept to Market Acceleration. We cannot think in a matter of years, we cannot event think in a matter of months anymore, when we deal with an industry that is now owned by OTT service providers. We need to be super-fast.
Insights on Key Business Processes
Acceleration of Concept to Market can only happen with the right insights. More than that, Lead to Cash Optimization is how we grow and manage our business and create profit. There must be a holistic view of Lead to Cash throughout the business, throughout products, throughout channels. This is a key process for Telecoms today, to enable ourselves to invest in the next generation technology. Another key process is Problem to Resolution analytics. Customers do not have patience anymore. First-time resolution through self-service channels is key, and there are tons of analytics that need to go into that business process. And finally: Customer Life-Time Value Improvement. It’s about the right bundle, the right basket, the right interaction, the right commerce platform that allows us to drive the life-time value up.
To be able to do that, you need to have a very scalable and flexible data model that connects to your OSS and BSS systems. It should help you model those business questions and drive insights based on those questions. It can be fragmented and you can look at each process in silos. Or you can look at them through a holistic view of all your business and transform all your data into insights.
ISS: Insights Support System
The next big thing in the operational systems for Telecom is to bring a new layer of what we call ISS. Network is there, OSS and BSS systems are already deployed in most cases, even in a holistic and convergent manner. But now, a new ISS layer must run on top of those systems. It will provide OSS and BSS analytics, customer 360 view and LTV/Churn analytics. But the main essence of it is to become an autonomous intelligence domain that empowers and drives processes in other layers of OSS and BSS down to the network layer.
The benefits from driving insights and using them to get ready for the next big trends are enormous. By analyzing data inside of the business process, telecoms can make data-driven decisions, use insights to improve the customer journey, increase customer satisfaction and off course, reduce churn, improve ARPU and even optimize networks. But it does not stop there, external benefits are enormous as well. Telecoms can start monetizing their data. Telecoms have amazing subscriber data, network data, and over the long-term, they can monetize such data to drive significant revenue growth. Think about the fact that the biggest competition for telecoms today are not telecoms. They are players like Amazon. And to beat companies like Amazon in the interaction layer, we need to use subscriber data and network data to create that ongoing interaction.
Embracing the Digital Transformation
To summarize, we must embrace the digital transformation. We must be the change that enables the digitization of other industries. There is a 0.5T$ opportunity out for grabs by Telecom operators. The choice is in the telecoms’ hands. If to continue as a connectivity provider which will be commoditized as we saw it happen with text, voice, and data. Or to grow into an omnichannel provider, an IoT data and application enabler, and last, a B2B digital transformation catalyst. We believe that telecoms today are standing in front of the biggest revolution in the last 30 years. With 5G technology as an enabler and the Smart World opportunity standing in front of us, telecoms stand a major chance to conquer the industry, to succeed against OTT providers, and to create massive growth for their stake holders.