Telecom operators worldwide are struggling with the disruptive forces of the burgeoning digital economy. This trend is creating an environment of heightened innovation that favors companies like Apple, Google and Facebook, whose solutions dis-intermediate and commoditize many of the traditional network services that are the basis of the telcos’ business models.
The dynamics of the digital economy are further complicated with disruption amongst new entrant players, such as Facebook’s rapid insurgence into Google’s territory with social networking and Google’s comeback with its own social network, and stiff competition between the Apple iOS and Google Android device platforms.
As the digital economy continues to take hold, telcos cannot sustain their product centric legacy, which has formed the mainstay of legacy services, but now languish as customer centric service innovation continues to accelerate.
To survive and thrive in a digital economy, telcos must transition from product-centric to converged consumer-centric offers. This transition is not trivial and requires the elimination of organizational, operational and technology silos that have been honed and refined over many decades to support product centric market offers. Given its complexities, consumer centricity cannot be achieved in a single iteration, but requires several evolutionary steps towards the ultimate goal. As telcos transition through these evolutionary steps, they must:
· Embrace and capitalize on technology standardization and network convergence, most notably web services, cloud computing, all-IP network architectures and application environments that benefit from large developer communities.
· Anticipate emerging business models that are displacing subscription based approaches, such as ad-supported business models which capitalize on large well understood audiences, and low cost telephony services that create communication centric communities. As these business models emerge, telcos cannot afford to go head –to-head with Internet heavy-weights like Google, but rather must focus on how they can add value to the services and applications that these companies create.
· Expect users to demand greater service variety and increasingly take a direct role in service creation. As this occurs, the digital economy will become a fundamental part of consumer lifestyles and affect most aspects of enterprise operations. The need for reliable, secure and flexible services will be unprecedented and creates a variety of new business models for telcos.
· Recognize the growing need for service brokers. Brokering roles will emerge as service environments become more complicated. This will create opportunities for telcos in a variety of areas including service integration and security, privacy and identity management, subscriber and service data management, and transaction orchestration and settlement.
· Capitalize on demand for personalized customer experiences. This is particularly relevant to mobile broadband services where tremendous opportunities are emerging for service personalization. It is fueled by a variety of factors including the proliferation of smartphones, growth in social networking, rich application environments and key service enablers such as location and presence.
· Anticipate increased variation in device form factors and functionality. This is particularly the case in mobile markets, where consumer demands are driven as much by fashion as they are by functionality.
· Adopt a strategic focus towards partnerships. A requirement for many of the emerging business models will be partnerships and collaboration with players throughout entire digital ecosystems. This requires standardized partnership models that are sufficiently efficient and transparent to all parties involved. It also demands telcos to deliver reliable and differentiated customer experiences in environments where they lack end-to-end ecosystem control – a challenge for AT&T with the original launch of the iPhone.
· Expect the digital economy to yield increased volumes of low value transactions and drive the proliferation of both business-to-consumer and machine-to-machine services. This will drive the need for increased automation, particularly in service orchestration and transaction management.
As the digital economy takes hold, there is a lot at stake for telcos. Those who are successful in transforming from product to consumer centricity will achieve sustained differentiation in a variety of areas including service brokering and personalization, security and convergence. telcos that resist transformation will either perish under the weight of commoditization or be forced to transform in haste.
Phil Marshall, PhD is Chief Research Officer at Tolaga Research. For more information contact: [email protected] or go to www.tolaga.com/