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Future Horizons: Digital Transformation of Telecoms Is a $2 Trillion Opportunity for Industry and Society
A series of digital, industry and customer trends is accelerating digital transformation in telecommunications. the industry is gearing up for a massive increase in demand from other industries. Customer expectations are crossing industry boundaries and raising the bar across industries, forcing telecom operators to redefine customer experience. Networks themselves will evolve from being differentiated on proprietary hardware to an era of software-defined systems. And pressures on traditional revenues have meant that operators are looking at new digital business models and service areas, with areas such as IoT likely to emerge as new battlegrounds.
Everybody talks about digital transformation. It has become a buzzword – especially within the telecom industry, which is in real need of change. While many sectors moved into digital long ago, including banking, airline and even furniture and clothing, telecom – despite having a significant technological advantage – stands still. It’s time for us to move, too, and shift into digital gear.
There is an obvious need to transform and improve the services telecom companies provide and the way they do business, but providers need to understand what they are doing and why. They need to establish what digital transformation means, embrace this vision and let it drive changes in the sector and empower the customer.
Looking at the fundamentals, digital transformation is dramatically changing the paradigm of typical ways of working for telecom companies. Three key dimensions are driving this change: purpose, mindset, and culture.
1. Purpose
Telecom providers need to build an interface to free up “customer data flow” that will allow them to tap into customers’ digital universe. Take the network, for example, it could be 2G, 3G, 4G or Wi-Fi – the customer doesn’t care if providers combine bandwidth or switch to an available channel, as long as their experience is seamless.
2. Mindset
The second dimension the industry needs to tackle in order to disrupt is the mindset. It is time to drop incremental business models. Having the full programmed value chain in every country from design, planning, and deployment to operations is not efficient in today’s consumer era.
Telecoms should learn and borrow from other industries that have undergone disruption – for example, retailers who centralize design, architecture, and operations so that local stores benefit from the latest clothing designs, and can plan and cost-efficient turnaround times. I call it “clean sheet” thinking: being fresh, innovative, agile and thinking out of silos.
3. Culture
Finally, clean sheet thinking should become a part of a cultural change within global organizations. Disrupting the “continue to do what we did yesterday” mentality and really challenging people to think about new ways of looking at an issue or process will produce much more interesting results. A new spirit which encourages efficiency and enrichment is what will get people behind real change.
Virtualizing the network and functions is not an easy task. But companies need to make their network assets work better for them, make them more cost-efficient to run and easier to maintain, upgrade and operate. They should be able to roll out new services easier and faster. This is how networks operators will compete in the future.
The telecom industry is embarking on the journey of transformation to benefit from the opportunities digital disruption brings. It will succeed only if embraces these three dimensions – focusing on the customer, adopting a mindset open to innovation, and promoting a culture of openness and efficiency – as fundamentals for all its endeavors.
Encumbered by legacy
The telecom industry’s largest assets – physical infrastructure, the national scale of operations and sophisticated front-end (BSS) and back-end (OSS) systems – are turning into one of their largest inhibitors to rapid innovation.Large, clunky and disjointed IT stacks, modular operating company (“op-co”) organizational structures, and operating models built around large physical assets have left them with little flexibility and agility to deploy enterprise-wide or global digital businesses. Efforts to launch seamless digital experiences or services for customers are often blocked by a lack of integration between BSS and OSS systems. A focus on maintaining legacy assets means there is limited cost flexibility to focus on innovation. Telcos can invest only about 10%-15% of their revenue in customer experience and product innovations, compared with 35% for digital businesses and 70% for a traditional consumer products company.
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