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How CSPs Must Change

Francesco Venturini
12/29/2017
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The telecommunications industry is at a critical point. The role that communications service providers (CSPs) have played in accelerating digital business and service models for the world has not translated into new value for the operators themselves. In fact, the World Economic Forum Digital Transformation of Industries' latest analysis found that operators' share of the global industry profit pool has fallen from 58% in 2010 to 47% in 2015. And that share is forecast to drop further to 45% in 2018.

This is the harsh reality. But it doesn't necessarily mean the death knell if CSPs make changes to their businesses now.

The shorter-term play
A mobile model that offers digital services is the purest play to make, but it demands an innovative, agile organization that can adapt rapidly to provide timely offers and new services to meet swiftly evolving consumer demand. Providers must be able to quickly adjust pricing and make their operating model primarily digital, lowering costs and increasing responsiveness, particularly when it comes to customer care.

One company embracing and already winning with this new approach is Reliance Jio , which has significantly shaken up the Indian market. Reliance Jio understands the real revenue drivers are data, video streaming and content, so it jumped into the marketplace as an aggressive, low-price provider that undercut others with 4G deals, and offered free phones and calls. Once it built market share, Jio then raised its prices.

Another option is to become a vertically integrated service provider, perhaps the most familiar model and the likely development path for traditional CSP giants because it requires large capital investments. An example of this is operators that acquire rights to high-demand, exclusive content and digital services and deliver them on top of their existing services. This model is focused on boosting average revenue per user (ARPU), which remains the key measure of success. It requires investment in technology with a strong omni-channel strategy and a focus on analytics, because success will be realized through bundling relevant, effective and personalized commercial offers.

Taking a longer-term approach
Some may choose the infrastructure play to become a pervasive network platform provider. This is a commodity play and there are few winners. The modern network platform provider will need to have a hyper-lean operating model and provide secure, reliable and smart connectivity with open APIs. This will allow customers to benefit from digital network services supported by specialized clouds and artificial intelligence (AI), realized by shared partner networks.

The most sophisticated approach is the multi-sided platform model. The CSP owns the customer relationship and the ecosystem of connectivity through which the customer accesses the digital world. These ecosystems must do away with traditional sector and regional borders, and require everyone to develop diverse partnerships across the breadth of their value chains. Thus, the platform owner becomes the broker and partner for the whole ecosystem.

Owning the platform requires a leap to API-driven, agile and open platforms with strong identity management capabilities and a different competitive approach. CSPs historically thought about internal processes first and offered business partners application software, professional services, platform provisioning and operations on a cloud-based platform. But to be successful in the future, that needs to flip and an outside-in approach should be taken. Platform players must think about the customer needs first, allowing all ecosystem partners to provide new services quickly and easily, creating a customer-centric and open ecosystem that delivers secure, personalized services.

There is fierce competition to become platform providers but the future of these ecosystems has not yet been defined. Large incumbent businesses have competitive advantages to shape them; trust, brand, data and capital. They can become essential partners but they must prepare to operate differently, across a broader universe, if they wish to succeed.

The way to win
Whatever the chosen play, there are two initiatives that can sustain the core business while building the foundations for new growth: improve customer engagement and embed intelligence at the core.

The potential to improve customer engagement is vast -- creating an omni-channel customer experience capability across all products and touchpoints to drive conversion and retention.

Operators should embed intelligence at the core of their business, built as a cognitive technology platform so vast amounts of data can be processed and insights can be delivered rapidly. This becomes a new sustainable competitive advantage. As it learns about the customers in the ecosystem and their propensity to use new services, its microservices architecture and AI capabilities enable it to quickly shape and validate new ecosystem services.

This puts CSPs in a leading position because it empowers them with data such as identity, quality of experience, security, billing relationships -- and allows them to monetize that information by leveraging it with partners across the ecosystem. In turn, these partners can use the data to better enhance the services they offer.

Of course, there is no rule book that says CSPs must choose just one play. Many are adopting one model while building towards their long-term state. Others are choosing to play across multiple scenarios. But they all have one thing in common: significant transformation. Making a long-term pivot takes more than creating a plan, investing in technology and acquiring fresh skills. Without a change in approach, their businesses will eventually become extinct.

— Francesco Venturini, Global Industry Managing Director for Communications & Media, Accenture

This is the second in a series of blog posts that will cover the transition to becoming a platform provider.

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