Strategies beyond selling technology
For insight into how service providers can leverage content to boost revenue, Telecom Asia asked four telecom executives for their input on the opportunities and challenges for collaborating with the other players in the digital ecosystem, playing the role of service broker and capitalizing on the demand for personalized customer experiences.
In interviews with Tolaga Research, Stratecast, CSL and CSG, a key theme emerged that telcos need to recognize the age-old business model of selling just technology no longer works. The digital content revolution requires a new way of thinking about business that allows telcos to deal with the disruptive organizational changes they face and use customer data in ways that gain their trust and attention.
Phil Marshall, chief research officer at Tolaga Research, says the shiftfrom being product centric to being consumer centric is necessary to respond to the rapidly expanding demands of consumers. With a product-centric approach service providers remain too focused on service innovation, as opposed to leveraging the innovations of other ecosystem players. "In the extreme case this results in 'walled gardens' which have stifled market development and fueled disruptive innovations from new entrant players such as Apple and Google."
Karl Whitelock, director of OSS/BSS strategy at Stratecast, notes that the technology sales model that supported the global industry so well for the past 110 years can no longer provide profitable returns. "This stems from advances in network technologies, especially mobile technology, device evolution, changing regulations, the blending of communications capabilities with other industries such as computing IT, the rise of mobile applications, customer preferences tied to entertainment (music and video) and the continued use of social media in ways that continue to expand."
CSL CEO Joseph O'Konek says more customers are looking for bespoke mobile services that cater to their personal lifestyle. "Everyone’s mobile service needs are different and an increased focus on customer centricity will provide customers with a positive experience, which has become more important than the device or product itself."
He says being consumer-centric involves choosing the right content and ensuring it works smoothly, designing a simple and easy to understand pricing strategy, and enabling customers to get their preferred content in their preferred mode and means. "A consumer-centric focus means service providers can increase the stickiness of their service. This in turn increases loyalty toward the brand and makes consumers less price-sensitive, which increases the profit for the operator."
While ARPU is on the decline, Jim Benz, VP of Content Direct at CSG International, says traffic on networks continues to increase, most often attributable to consumers purchasing and viewing content from third-party providers. This means operators must continue to invest in their networks to support increased content traffic, but they do not receive the corresponding revenue from that investment.
"CSPs are realizing that they need to offer revenue generating services that consumers are demanding. This shift to a consumer-centric approach is vital to the financial success of CSPs as their customers are, and will continue to be, content-focused consumers," Benz says.
Marshall says the challenge of playing the role of a service broker for operators, which have traditionally been in full control of the value chain, is that command and control is an integral part of their corporate DNA. "The biggest challenges they face are the disruptive organizational changes that they must pursue – such as accepting blurring roles between CTO and CIO, and eliminating traditional product management silos."
Benz notes that the traditional content value chain has been completely turned upside down in the last two years. "It seems that just about everyone wants a piece of the OTT revenue pie. CSPs are well positioned to dominate this quickly growing market by leveraging the many advantages they have over competitors."
He says they have a history of delivering content and services via direct-to-consumer models; an understanding of how consumers use services – across a broad range of communications offerings, content types and devices; an existing billing arrangement; and a deep understanding of managing and growing a customer relationship across multiple customer support channels.
O'Konek agrees, noting operators know customers well in terms of their profile, behavior and preference.
"We have advantages in reaching customers across platforms through touch points such as retail outlets, handsets, email newsletters and bills. We also control the quality of service for the last mile data/SMS access to mobile customers. These advantages keep operators playing a key role in the value chain of overall mobile service delivery."
He noted that many developers still approach CSL for distributing apps despite the fact that they have a presence in multiple app stores.
Stratecast's Whitelock points out that CSPs can succeed if they invest in ways to change their business strategy. "This means recognizing that the age-old business model of selling just technology no longer works. It means they must have flexible ways to sell, especially in pricing how services work and can be delivered."
This requires engaging with partners to the level that loyalty programs make sense with the customer, and providing real-time analysis of customer usage compared with budgeted or prepaid pricing plans. "Above all, they must look at everything from the customer’s perspective and not from the position of 'how can I make the most money now'. Taking that pathway may yield profitable results at the price of long-term business success."
To capitalize on the demand for a personalized customer experience, Benz says CSPs should leverage their valuable history of data records that lets them understand each consumer’s preferences, opening an opportunity to create targeted offers for services and content those consumers might find compelling. "A critical part of success in delivering content is to understand customers’ preferences and interests and tailor offerings directly to them."
Whitelock says consumer demand individualized service options because they have a choice as to which organization can best provide the things they want. "They want everything to work together as it was intended, first time, every time, with no interruption, and no interference from previously downloaded apps or content. Ignoring this evolution will have major financial impacts for any organization in the months ahead."
Tolaga's Marshall argues the demand is somewhat fluid as the market continues to define itself, but several areas are emerging where service providers can achieve sustained value creation.
These include: creating an environment that seamlessly integrates and personalizes service silos; abstracting and protecting key subscriber and service attributes (covering identity management and security but also the ability to enable multiple personas depending on predefined policies); and transaction management by capitalizing on the trusted relationship that service providers have with the consumer and the quality of the contextual information they have about the consumer. He says here service providers need to take a leaf out of Amazon’s book in terms of becoming the go-to place for commerce and Visa which has taken a single capability from which it has created a multitude of products.
O'Konek says tailoring the user experience on different devices, such as by optimizing the layout and preferences, like CSL does with its MyNet, in giving higher priority to content that customers always click on, helps to personalize the customer experience, providing more convenience and better service recommendations.
The launch of the 1O1O and one2free Service App on both iPhone and Android devices he says helps it to improve the user experience by enabling consumers to check personal information like billing, usage patterns and loyalty program rewards, as well as having a map showing the location of the nearest shop for assistance.
A difficult path
Marshall says it's been difficult for telcos to make money from content largely because they are not structured to take advantage of the opportunity. Internally the objectives and incentives that service providers have put in place, he says, are largely in conflict with the emerging-market opportunities. "It is similar to what would happen if a company like Walmart or Tesco tried to compete head-to-head with Proctor & Gamble in product innovation."
Whitelock points to a lack of imagination and a lack of marketing insight even though they have abundant data about the customer.
"But most importantly it's due to a blatant neglect to see things from the customer’s perspective," he insists. "Fixed-line provider and more recently mobile providers believed the only competition they would have in their respective serving areas would be another service provider just like them. Content suppliers that deliver what customers want have taken the industry by storm. As long as innovation continues, these content suppliers will be in control and the CSPs will have no chance to catch up."
He says the CSP community blew it when they had the chance. "Instead of working collaboratively with the application developers several years ago, they dictated and demanded. It is no wonder then that the app market, which really makes end-user devices become attractive, will go out of its way to deal with any organization except a CSP because CSPs think they are in control of the customer but really aren’t."
Until recently, Benz from CSG says key technologies like screen resolutions, broadband speeds, digital rights management and adaptive streaming capabilities were not advanced to the point where CSPs could charge a premium for digital content. The rapid adoption of tablets and smartphones has made portable content viewing a reality, and consumers are now willing to pay for that premium experience."
But for CSPs to take make the most of this opportunity, Benz says they need tools that will enable them make the most of every customer interaction to ensure that they increase revenue with new digital content while providing the best experience possible and keeping operational costs to a minimum by allowing consumers to browse, buy and self-manage their experience and account.
O'Konek says the uptake of smartphones and tablets has made it easier to develop and publish content than in the SMS and WAP decade.
What is needed for operators to collaborate with others in the digital ecosystem, Whitelock says, is having a new way of thinking about business in general in order to gain customer attention and trust.
"This means generating new services in hours and days, not months as in the past. It means including partner-based capabilities. It also means providing customers with choice, not just in terms of end-to-end service plans, but in the very fabric of how a service package is designed and offered. Personalization in user device configuration, service options, mobile applications and even billing plans is the 'secret sauce' that many CSPs have sought."
O'Konek says joint marketing promotions, co-launches with supported handsets and payment options are the keys for partnering and collaborating to gain customers. "The value of content tailored to local needs and providing the best in customer experience are essential to drive success for mobile operators," he says.
Marshall says this requires partnership orchestration and management solutions that are tiered depending on the complexity of the solution. For simple offerings, these solutions could be fully automated and for more complex solutions service providers would have structured programs to ensure the solutions are implemented reliably and the brand positioning is appropriately aligned.
Benz suggests forging relationships with content providers that will give operators the distribution rights to various types of content. In this way, content creators won’t have to only go to third parties to get their content into the hands of consumers, opening the door for CSPs to become the center of the digital ecosystem.