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Telecoms: Profiting from your own Infrastructure

30 May 2012

Luc Jacobs has led an international career in telecoms and media. He has been particularly active in mobile media ventures and industry partnerships. Luc has held senior sales, marketing and general management roles. Today he brings his experience to MCE’s portfolio of services for the telecom industry. Luc sat down to discuss with us the challenges to the telecom industry and possible responses.  

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What are the key drivers of business growth in telecoms for the coming years?

There is tremendous growth opportunity in services – cloud services, social media, video content – all of these require a huge amount of bandwidth to deliver. It will not be just one service to build growth on, but a “killer cocktail “ of services.

What are some of the threats?

Telecom companies primarily see themselves as technical companies. And they have done a great job in the last years innovating in a huge technical infrastructure that is today a key enabler of the global economy. However, the telcos’ position in this economy has become more and more that of the commodity provider, just running the networks.
There is a convergence of forces that keep telco providers in the commodity role of mere bitpipe providers. The Internet world has no borders; this undermines the national licences that the telecom industry likes to make its living from. New technologies: first there was wifi and connectivity, but now we are seeing 4G, and next-generation data networks. Network technology is being completely commoditized. Anybody can manage it! So you can’t really stand out from the competition by managing the technologies. You can’t capitalize on your assets that way. Telecom companies remain at the bottom of the value proposition. Other industries and even entrepreneurs build their value proposition on top of yours, and they get the biggest value out of it.

How is competition evolving?

Most telecom companies see competition only within their industry – the company just like you fighting for market share.
Increasingly, they realize the real competitor is coming from other industries encroaching on your business - they are fighting overall share of customer value. A typical example is banks trying to get control of mobile payments.

How can telecom providers compete with this?

Telecom operators have tried everything from bundling to price discounts to keep customers. They need to try new ingredients to get more value.
For example, they could build on their regional/national brand strength, on being a locally trusted brand (of course, trust depends on how you have been treating your customers), to provide more services beyond connection.
In mobile money, customers may trust banks (although the banking crisis has damaged much of this trust). But why could telecom providers not also build trust with customers for mobile payments? Trust in data security and transaction speed, for example.
There are more things telcos could do in e-commerce, e-government and e-healthcare. All these new e-services could be provided in partner value networks.
There is an emerging “BYOD” trend, meaning Bring Your Own Device. Companies are experimenting with putting all their IT services and data in the cloud. Instead of arming everyone with the same laptops and smart phones, employees supply and support their own devices. The companies then only have manage their information and systems, not devices. This drives more data into the cloud and creates more opportunity for telecoms. If telecoms can show they can be trusted in confidential data storage and protection, their local advantage and trust advantage works well for B2B services.

What about the core business?

Telecom operators have overpriced mobile data traffic. As a consequence, consumers have avoided using it. They try to find alternative, cheaper ways to connect. This boosts the penetration of WIFI. If mobile connection would not have been so expensive, consumers would have been willing to pay for it, they would not rely in internet WIFI so much for data transfer. Today they could have been using 3G without thinking about it, if it would have been more affordable.
Why was it so expensive? Because technologists were afraid they would be flooded with demand, they tried to close the gates rather opening. They should have opened up, created the demand and dealt with the demand, and then proposed services they could have monetized on top of the demand. This is the internet-based business model.
“Technology has limitations” is the wrong argument! When the company is driven by technologists, it becomes difficult to operate on future opportunity, it keeps you stuck within current limitations.
The sooner you adopt and develop a new technology, the sooner services can emerge.
Cloud services like on-line data storage would have been unthinkable only a few years ago. Everyone was afraid the pipe would be clogged with demand. But it works today, and everyone thinks it’s normal. Where are the telecom operators profiting in this story? Nowhere.
Another case is mobile music – Apple could do it with iTunes because they made agreements with providers and they could create demand with customers. Telcos were too divided and could not make these partnerships/or attract customers. They were too busy fighting internally, fighting other telcos to create something.

How does technological discontinuity affect the telecom industry?

The risk of becoming a dinosaur is real for telecoms. Even when you are innovating, you may still fail. Look at the example of Kodak. They fought the last 10 years with a lot of innovation. Unfortunately, it wasn’t what customers really wanted or valued. They were always late, they were there but couldn’t lead. Digital cameras, digital kiosks – it wasn’t bad but it was too little, too late.
You have to be able to execute and implement quickly, get to market fast enough to lead rather than follow. The ones who lead new markets are the ones who are good at execution. Look at Facebook. They executed better than their predecessors. They are bright people who learned from their mistakes and did not have the disease of complacency.
The combination of complacency and wrong execution means your innovative people are always undermined. Good innovative ideas do not get the needed support of senior management. They also miss the possibility to focus on one or two good ideas out of a chaos of ideas. It is better to focus resources and attention on one or two ideas so you can do it better than everyone else and be “great” at it. Just good enough is no longer accepted by the market. In the 80s it was OK. Today it’s not. If you get a few bad criticisms on influential blogs and there goes your product, dying in its infancy.

How do telcos have to change if they want to grow again?

First, really listen to your customers!!!! Do you know what it means to be customer-centric? Not just measuring satisfaction looking in the rear-view mirror to justify what you have done, but looking forward to see what you could more of the good things you already do today and what you should stop doing.
If only you just stop harming your relationship with customers, that would already improve your customer relationships.
Once you know what customers want, you can start innovating to do things differently. Innovation is often doing old things in a new way. How can you make people’s lives easier? Why was Facebook or Cloud services not invented by telecom? People need it, they use it, why did you not think about it?
Telecom executives have sometimes what I call a “goldmine” mindset. They exploit “goldmines” until they are empty – just milking cow (e.g. licenses) but then there is nothing left afterward and they are vulnerable to risks or changes in the business environment. They need to develop more a “gateway” mindset. How can you facilitate the exchange between two parties and make some money in between? There is less exposure to risk with this approach because there are many things you can facilitate. Google is the perfect example for that. How can you become the local Google?
Finally, Innovation goes with empowerment. People have to be aligned to strategy and the KPIs (assuming you have the right KPI’s that encourage the right behaviours). How about your commercial contracts, are you damaging customer relationships with small prints? Do you think your customers don’t notice? Might a competitor offer something more friendly and attractive to your customers? 90% of strategy implementation is about having the right mindset. If people feel empowered, they will bring better ideas and be more supportive of turning ideas into action and results.


I don’t want to make the picture too dismal. There is hope, a lot of hope! Telecoms have proven in the past that they are great innovators and implementors. They have made an important contribution, they have built an engine that powers the economy and society. The value-added from their creation is tremendous. Now telecoms have the opportunity to take more of the value they have created, instead of having their lunch eaten by other industries, if they can get back their innovative muscle. For Telecom companies willing to learn, un-learn and re-learn, the future is definitely bright!

For more on the changing trends in the telecom industry, please visit our section on Implementing Strategy in the Telecom Industry
Luc Jacobs is part of an MCE team of Senior Associates with long experience in the Telecom Industry. MCE can consult with your senior management team on telecom growth strategy and implementation of that strategy. We provide business transformation and strategy implementation services. We can also develop the skills of your managers at all levels in the organization to build their capabilities to implement strategy, working with your corporate learning and development team. Mentoring and coaching services are available for managers struggling with a particular issue. Finally, MCE runs a series of open-enrolment workshops specifically for individual telecom managers. For details, please visit our Telecom Industry Workshops.


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