Smooth operator: Telecoms’ digital transformation
By Danny Karam DUBAI:
In a world where technology never sleeps, the telecommunications industry finds itself at a turning point. The digital wave is growing ever-stronger, and as it does, operators are confronted with the perennial question of how to stay relevant while protecting their core services. As data becomes commoditized and internet solutions draw basic telecoms services into a fight for survival, digitization is transforming the industry. Now, operators must decide how to act-and their response could determine if they sink or swim. A new era is dawning. At present, 2.7 billion people are online with four billion new internet users set to join them by 2025. Meanwhile, it is estimated that there will be 50 billion connected devices globally by 2020-that’s six to seven per person. With digitization now an essential component of daily life, the digital services market is expected to reach $1.1 trillion globally by 2018-$20 billion in MENA. In the face of compelling statistics, the call to action is clear: with the demand and digital platforms in place, telecom operators must create the services to match. Fortunately, the scope for doing so is broad. From Open Data to The Internet of Things, several trends are driving progress amongst operators that choose to embrace the digital transformation-but there is no ‘one size fits all’ approach.
Logical strategy
For operators with adequate resources, developing in-house digital units may be the logical strategy, but in the absence of such capabilities, partnering provides an effective alternative. Here, operators should expand the partnership ecosystem to include academia, innovation labs, accelerators, private equity firms and other organizations with the power to fill the creativity and resource gaps. For more adventurous operators, meanwhile, investing in technology companies provides access to the innovation needed to stay ahead. But as operators look outside, creativity can be closer than they think. Instilling an internal culture of innovation that nurtures idea-sharing and collaboration can be equally-if not more-rewarding. Of course, creating such a culture requires the right team. To build the best possible workforce, operators must hire carefully, focusing on intelligence, creativity and dynamism.
In developing their human and data capabilities, operators are also creating a digital asset. Leveraging operators’ data for analytical purposes can optimize their existing and planned infrastructure, while offering analytics services to other companies presents opportunities to monetize their new digital resource.
Existential challenges
Fully capitalizing on data, however, involves a careful balancing act. Operators must stay true to the company values, while delineating their digital unit from their main corporate entities. Such autonomy is a necessity: telecom operators rarely possess the agility required to respond to rapidly changing market demand, yet this is the very quality that digital units need to thrive.
Here, the responsibility rests with the company as a whole. As digital units delineate, operators should strive to create agile business models that retain the requisite core components, while providing scope for revenue share and private equity.
Executing such fundamental transformations is no mean feat, but for industry constantly at the forefront of change, existential challenges are nothing new. In the 1990s it was mobile that dominated the debate. Then came broadband and questions of data, penetration and connectivity. Now, with digitization at the forefront of telecom transformations, multiple operators have risen to the challenge. Deutsche Telekom took the plunge back in 2000 with the launch of its digital unit, T-Systems.
Orange then followed in 2006-its new unit earning the French operator almost $8.65 billion in digital revenues in 2013. Since then, several other operators have developed digital capabilities, including Saudi Arabia’s STC in 2014. Where STC and other regional and global players have headed, others must now follow. As the wave of technological innovation continues to digitize life, treading water is simply not an option in a world in which digital reigns.