The need for incumbent Communication Service Providers to transform rapidly to grab a piece of the Over-the-Top market and become Digital Service Providers is no longer an initiative, but a business imperative.
Several predictions followed the advent of smartphones that exposed the threat to incumbent Communication Service Providers of declining to a “thick dumb data pipe” provider with Over-the-Top market players grabbing the attention of consumers. This threat of brand value and revenue devaluation to incumbent GSM operators is now imminent for smart-phone users using less voice and increasing time off-GSM-net with the pervasiveness of WiFi hotspots and other data networks.
To derive new revenue from the value of data flowing through their own thick data pipes and that of their competitors, traditional CSPs need to transform to create new digital services rapidly. This creation will include co-creation with partners, often across industry verticals, which means that change in the CSP market is going to be disruptive if CSPs do not want to be reduced to thick dumb data pipes. On the upside, effective digital service transformation blurs the Telco Industry vertical and creates opportunities for CSPs to drive solutions in multiple industry verticals. Effective digital transformation further also blurs geographical borders, allowing CSPs to diversify globally.
Change management is not easy. The change programs to convert GSM CSPs that have been on a path of success for the past 20 years, by adding subscriber numbers and growing data usage on the back of smartphones, is going to be no simple task. To establish a successful new Digital Service Provider business organically will require a transformational change program in which cultural change is at the heart of the program.
Effective and pervasive digital services, according to Sven Heistermann, Director Telecoms, EMEA Strategic Relationships for Google, adhere to three founding principles:
- It must be accessible to everyone and therefore drive inclusivity
- It must foster collaborative innovation
- It must unlock new partnership ecosystems, often spanning across traditional industry verticals
This represents key challenges to traditional CSPs. While handset penetration has been instrumental in global communication inclusivity, next-generation digital services must pass the three criteria of successful digital services proposed by Heistermann. The huge spin-off and future brand value of inclusivity is more pervasive access to information and for Bottom of the Pyramid income earners to access and use digital services for quality of life improvements. This social responsibility underpinning is a pivotal driver for meaningful digital services.
The transformation of incumbent CSPs to next-generation DSPs is paved with obstacles of which the most significant is arguably the cultural transformation required to adopt a totally different service development and implementation culture. With a multitude of OTT market players that are leveraging their own platforms to create, capture and shift markets, the task may feel daunting and almost impossible. However, with inclusive thought processes to tap into eager partners that can leverage the captive markets that CSPs acquired over many years, fast innovation is possible and even if only one in ten digital services Minimal Viable Products developments lead to new markets, incumbent CSPs can transition from CSPs to disruptive DSPs with shared risk investment from partners.
While a Digital Services strategy is important, the strategy formulation must be mostly emergent using the Mintzberg Strategy Spectrum. This means that CSPs wanting to transform must open their culture to emerging market changes and instil the cultural trait of agile response to disruptive market changes. The CEO of TM Forum, Nik Willetts, recent quote at TM Forum Live! in Nice 2017 that “culture and agility eat strategy for breakfast, lunch and dinner” is, therefore, more than relevant for CSPs to remember in the Digital Services repositioning transformational journey.
While many incumbent CSPs may feel that the task of Digital Service transformation and value creation is overwhelming, a cultural shift to collaborative co-creation with partners that are willing to invest on a risk basis in new ventures can unlock rapid creation of brand new service streams.