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Outthinking disruption - Adapt to the fast-moving digital world or risk irrelevance
The document discusses the challenges telecommunications companies face from non-traditional competitors and the urgent need for digital transformation to remain relevant. It highlights the evolving digital landscape where customer experience, privacy, and regulatory pressures are critical for strategic decision-making. Additionally, it emphasizes the imperative for telecommunications firms to innovate and adapt in the face of significant competition from digital giants and changing consumer behaviors.
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Outthinking disruption - Adapt to the fast-moving digital world or risk irrelevance
- 1. Outthinking disruption –Adapt to the Fast- Moving Digital World or Risk Irrelevance Rob van den Dam Global Telecom Leader IBM Institute for Business Value
- 2. Content 1 | Contextof the industry 2 | Non-traditional competitors 3 | CSP Imperatives 4 | Digital Transformation 5 | Mobile Video 6 | Meanwhile, those damn digital platform companies 7 | And, who’s this guy?
- 3. But first alittle levity… Telstra data guy won’t apologise for downloading content, blames Telstra The man dubbed the “Telstra data guy” says he downloaded $10,000 worth of free data during Telstra’s Free Data Sunday and won’t apologize to critics despite coppingit from the rest of the country for abusing the system. Mr Szaszvari downloaded a whopping 994 gigabytes of data that day, including free software, large backups, TV shows, and movies, despite claiming his ADSL connection suffers at least 15 drop outs per day. News.com.au, April 6, 2016
- 4. Content 1 | Contextof the industry Privacy, regulation, spectrum, acquisitions 2 | Non-traditional competitors 3 | CSP Imperatives 4 | Digital Transformation 5 | Mobile Video 6 | Meanwhile, those damn digital platform companies 7 | And, who’s this guy?
- 5. Singtel users reportseeing other users’ personal details on app TODAYonline, February 29, 2016 FCC Settles With Verizon Over its Stealth 'Super Cookies' DSL Reports, March 7, 2016 FCC unveils mobile broadband privacy proposals Mobile World Live, March 11, 2016 GSMA chief says mobile industry has privacy “obligation” Mobile World Live, May 10, 2016 IoT and big data pose “monumental” risk for operators Mobile World Live, May 10, 2016 Privacy: Continued Breeches and Growing Regulatory Concerns
- 6. Encryption skyrockets asprivacy concerns grow Source: Google transparency report, retrieved 3/21/16 Percent of traffic that is encrypted, by country
- 7. IoT and bigdata pose “monumental” risk for operators With the amount of personal data held by companies growing, and encompassingamong other things financial, location, and health data, futurist Patrick Dixon warnedthat “you have the biggest target for criminal activity that the world has ever seen”. Dixon said, “While there is a clear potential for financial damage through cyber security and fraud, perhaps the bigger issue is the damage that can be done to the brand.” Mobile World Live, May 12, 2016.
- 8. Scrutiny from EuropeanCompetition Commissioner Margrethe Vestager helped derail a deal between Scandinavian telecom operators Telenor ASA and TeliaSonera AB The Wall Street Journal | February 11, 2016 Verizon hit with $1.35M fine for use of “supercookies Mobile World Live, March 8, 2016 Korea’s operators ordered to compensate users for misleading “unlimited” claims Mobile World Live, March 24, 2016 FCC starts Open Cable process BroadbandTV News, March 9, 2016 MTN offers $1.5B to settle Nigeria row Mobile World Live, March 10, 2016 Ofcom study argues consolidation raises prices Mobile World Live, March 15, 2016 India set to allow virtual operators Hindustan Times, March 31, 2016 Regulation: Regulators side with consumers and challengers, seldom with incumbents
- 9. Mexico to raise$2.5 billion in spectrum auction Reuters UK, February 18, 2016 EBU angered over Commission's early 700MHz clearance plans BroadbandTV NewsFebruary 3, 2016 Australian operators spend $385M for 1.8GHz spectrum Mobile World Live, February 5,, 2016 We won’t be able to afford 700 Mhz spectrum: Gopal Vittal, Airtel India CEO MediaNama February 24, 2016 FCC to Sell Maximum Amount in TV Airwave Auction Wall Street Journal, April 29,, 2016 Comcast to Jump Into Airwaves Auction Wall Street Journal, February 23, 2016 SoftBank still looking like a bidder in spectrum auction Seeking Alpha, May 4, 2016 Google opts out of upcoming US spectrum auction Reuters, February 15, 2016 Spectrum: Licensing costs rise, pressuring CSP financials
- 10. Acquisitions: Regulators souron in-country consolidation, but cross-border activity continues Orange abandons bid to buy Bouygues phone unit Gulf News, April 3, 2016 Commission rejects Hutch/O2 UK tie-up Mobile World Live, May 1, 2016 Regulator may further delay decisions over SK-CJ deal The Korea Times,April 7, 2016 BCE-Manitoba Telecom deal seen facing tough regulatory scrutiny 4-Traders, May 2, 2016 Axiata Group buys Nepal's Ncell for $1.36b TelecomAsia, April 11, 2016 Orange to acquire Millicom’s Congo arm MobileWorldLive, February8, 2016 Comcast buys DreamWorks Animation in $3.8b deal Washington Post, April 28, 2016 Comcast buys French startup StickyAds to build out its digital video business for reported $100M ReCode, May9, 2016 Rovi to buy TiVo BroadbandTV News, May2, 2016
- 11. Content 1 | Context 2| Non-traditional competitors Digital Giants, Start-ups and other competitors 3 | CSP Imperatives 4 | Digital Transformation 5 | Mobile Video 6 | Meanwhile, those damn digital platform companies 7 | And, who’s this guy?
- 12. ©2015 IBM Corporation7 September 201612 What’s putting the world’s top executives on edge?
- 13. More competition expected fromother industries Communications industry Cross industry More competition expected from within the same industry ….. any many more Digital Disruptors Business landscape change (in 3 to 5 years) Telco CxOs are terrified of outsiders making a land grab Source: IBM Institute for Business Value Global C-suite Survey (n= 5247, off which 295 CSPs).
- 14. The communications marketis a complex battlefield Independent WiFi providers Network equipment providers Application & Cloud providers Cable/satellite providers Mobile Device providers Low cost entrants Digital Giants Ankle- bitersTraditional CSPs
- 15. OTT Internet giantsand the ‘Uber-type’ ankle-biters are seen as CSPs’ greatest competitive threats OTT Digital Giants Ankle-biters (digital start-ups/unicorns) Mobile device manufacturers Traditional competitors Cable/Satellite providers IndependentWiFi providers New low-cost operators Cloud providers Greatest competitive threat to CSPs over the next five years? Traditional application providers Network equipmentproviders 86% 44% 38% 37% 37% 34% 20% 14% 4% 1% Source: IBM Institute for Business Value Communications 2020 Survey (n= 135).
- 16. April 17, 2015:“Till Q1 2014, WhatsApp had already erased an estimated $33 billion in SMS revenue from wireless operators” February 29, 2014: “Between 2012 and 2018 the entire telecommunications industry will have lost a combined $386 billion because of OTT VoIP” May 27, 2015: “Telco messaging revenues have already taken a 30% hit (India CSPs), thanks to OTT players” August 12, 2015: “Telco messaging revenue has taken a 30% nose dive (in Nigeria) and could decrease by an additional 20% in a few months” These digital invaders - providing better customer experiences - have already destroyed core revenues
- 17. Content 1 | Contextof the industry 2 | Non-traditional competitors 3 | CSP Imperatives Cost Reduction, Customer Experience, New revenue 4 | Digital Transformation 5 | Mobile Video 6 | Meanwhile, those damn digital platform companies 7 | And, who’s this guy?
- 18. Swisscom cuts jobs,call centres amid lower earnings Swissinfo, February04, 2016 KPN targets €300M cost savings in latest strategic plan Mobile World Live, March 7, 2016 Singtel subsidiary Optus announces job cuts amid restructuring CHANNEL NEWSASIA, April 03, 2016 Italia (Brazil) to cut 1,000 jobs The Gulf Today, February 11, 2016 Telecom Italia Raises Cost-Cut Target to $1.8 Billion by 2018 Bloomberg Business, May13, 2016 India’s Airtel, Idea face cashflow challenges in FY16-18 Mobile World Live, March 4, 2016. PLDT outlines 3-year turnaround plan following 35% profit drop BusinessWorld, March 4, 2016. Cost-cutting helps SK Telecom report Q1 profit jump Mobile World Live,April 29, 2016. Rising costs squeeze China Telecom’s Q1 profit Mobile World Live,April 29, 2016 Cost Reduction: a quarterly way-of-life for CSPs
- 19. Source: Apteligent, OpenSignal,STLPartners analysis Mobile network CustomerExperience index VERY LOW NPS = (half of that of most other industries) The average actual customer experience is poor and varies by operator varies by a factor of 3!
- 20. New Revenue: ACautionary Tale? CenturyLink CFO on Telecom Industry Economics “For every dollar that it loses in legacy revenues, CenturyLink must generate two additional revenue dollars in growth areas in order to maintain its earnings level.”, said the company’s CFO Stewart Ewing yesterday. Telecompetitor Blog, March 09, 2016
- 21. CSPs are exploringa range of opportunities to generate new sources of revenue In looking toward the year 2020, CSPs rank ‘increasing their role in the IoT’ as the most important path toward growth 66% 62% 56% 45% 36% 35% 27% 26% 23% 40% Increasing role in IoT/ M2M Becoming a lifestyle enabler Improving customer relationships Improving connectivity offerings Platform for partner applications Revenue from big data / analytics New business models Vertical expansion in other industries Payment services Revenue from cloud services Source: IBM Institute for Business Value Communications 2020 Survey (n= 135).
- 22. New Revenue fromIOT: Hype or Hope? SK Telecom to roll out a nationwide LPWAN Telecom Asia, March 15, 2016 Cisco closes Jasper deal Mobile World Live, March 22, 2016. Jasper study breaks down opex cost for industrial IoT (Mobile World Live, April 26, 2016) Between 35 per cent and 50 per cent of total opex comes from network communications. Rogers introduces Internet of Things as a Service. Hype or hope? Internet Do, April 02, 2016 IoT is “killer app” of big data – Amdocs (Mobile World Live, April 13, 2016) The Internet of Things (IoT) is not just a derivative of data but is the equivalent of a "killer app" of big data. SigFox ‘Internet of Things’ Plan Challenges AT&T, Verizon, T-Mobile and expand its wireless network using unlicensed frequencies to 100 U.S. cities Investors. Com, May 4, 2016
- 23. New Revenue: AdjacentMarkets Telstra bets on e-health to become billion dollar business Telstra has paid $237 million for 15 acquisitions in the past 18 months with the goal of hitting $1 billion in annual revenues by 2020. It's a goal that will require rapid expansion both domestically and abroad – Telstra Health made just $78 million in the year ending June 30. "We've been successful in winning a number of multi-million dollar contracts in Thailand and Malaysia to deliver our integrated hospital information exchange offering," Mr Ballantyne said. "We wouldn't be making an announcement if it wasn't in the range of tens of millions … but it's south of $50 million. Sydney Morning Herald, August 23, 2015
- 24. New Revenue: AdjacentMarkets Is Telstra Health a lame duck? Connect the dots Telstra Health has invested in 20 companies in two years and has been much feted as the company guiding our e-health future. It looks like it just ran aground on the isle of ‘strategic review’…. According to industry sources, Telstra’s senior management decided to halt funding for their Health group following a strategic review of the business…. Telstra Health turns over only about $80 million and is reportedly not profitable. Medical Republic, April 4, 2015
- 25. Content 1 | Context 2| Non-traditional competitors 3 | CSP Imperatives 4 | Digital Transformation Serving today’s digital consumer 5 | Mobile Video 6 | Meanwhile, those damn digital platform companies 7 | And, who’s this guy?
- 26. Transformation: Telefonica seesdigital transformation as “terrifying” but “urgent” Phil Jordan, CIO Telefonica, discussed how the operator is working towards digitalisation across 15 countries, calling the process “the hardest thing you will ever do.” MobileWorldLive, April 14, 2016.
- 27. Transformation: The fastare eating the slow Yesterday, the big ate the small. Now the fast eat the slow. Andrew Penn, CEO of Telstra: "In the future, if a business is not mobile-first and digital to the core, if it does not present on an app or an icon on a customer's handset, then effectively it will simply not exist." ZD Net, May 9, 2016.
- 28. Transformation: PLDT CEOsays digital move will be “difficult and complicated” The Philippines’ largest operator PLDT (owner of Smart) suffered another weak quarter with its profit down sharply and revenue mostly flat. PLDT CEO Manuel Pangilinan said the results for the first quarter confirm that its “digital pivot will be a difficult and complicated process”. MobileWorldLive, May5, 2016.
- 29. Trailblazing companies embraceconsumers’ love for digital to fundamentally change customer experience
- 30. Today’s CSPs facea number of obstacles when implementing customer experience initiatives Siloed processes & divisions Not knowing what makes a ‘good’ experience Lack of CE vision & strategy Difficult business case Limited view of customer Difficulty in measuring CE Lack of required skills Lack of leadership/ commitment Limited budget 68% 71% 43% 49% 31% 26% 19% 24% 34% 49% 42% 32% 25% “The biggest challenge is the company itself; this is a very big and slow boat.” CSP CFO from Spain Source: IBM Institute for Business Value Communications 2020 Survey (n= 135,).
- 31. Online presence Products and services designed for online engagement first Self service Self-service options controlled by the customer, improving their experience and reducing off line channel costs Online Presence Self- Service Digital channels first Call center Reserved for transactions and issues that require more control or customers who choose or need deeper support Experience stores Call Center Omni- channel Engagement in 2020 Experience store Serves as an extension of the online channel,predominantly as a physical show case for digital products subsequently call center and stores A Digital CSP thinks digital first and drives almost all interactions online, putting the customer in control
- 32. It’s time forCSPs to recognize the imperative by becoming digital services providers ±90% sales and service transactions online, omni- channel, high customer experience & NPS Serves all segments, customer-defined purchasing Serves the customer base The Digital Services Provider (DSP) •Provides experience-led services •Contextual actions in the moment •Low cost, agile, automated, intelligent Re-engineer processes for E2E automation, micro-service for agility, low costs Transformed digitally savvy workforce Cognitive analytics, intelligent data
- 33. Transforming the workforceand skill base is crucial for CSPs in the digital era Skills will be needed for areas like: ü digital channels, social media, content management and digital advertizing ü user experience (UX) and user interface (UI) design ü Cloud technology ü Data / Cognitive analytics to be able to work with the wealth of new data captured through digitization Gearing Up for the Cloud, AT&T Tells Its Workers: Adapt, or Else There is a need to retool yourself, and you should not expect to stop,” said Randall Stephenson, the chief and chairman of AT&T. He is reinventing the company for a cloud-heavy future. AT&T’s competitors are not just Verizon and Sprint, but also tech giants like Amazon and Google. For the company to survive in this environment, Mr. Stephenson needs to retrain its 280,000 employees so they ….. New York Times, Feb 13, 2016.
- 34. Content 1 | Context 2| Non-traditional competitors 3 | CSP Imperatives 4 | Digital Transformation 5 | Mobile Video The mobile internet morphing into a video distribution network 6 | Meanwhile, those damn digital platform companies 7 | And, who’s this guy?
- 35. No one “ownsthe TV customer” anymore 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% n = 1,000 UK Internet users Source: Ovum’s Digital Consumer Insights Blue = pay TV Red = SVOD Green = TVOD UK, pay TV and premium OTT video adoption by service, Nov-15 …and that’s not including “free” services
- 36. TV and OTT video as an app: Just one future for consumer video 1 2 13 15 15 16 89 135 141 242 269 502 Social Network Cinema group Retailer Sportsassociation Content producer Online retailer Media group Internet firm Telecoms operator Consumer technology Broadcaster Online video Global, premium OTT-video services by parent company type, Mar-16 Source: Ovum
- 37. Video on themobile is the key driver of mobile data growth 37 65% of Facebook's Video Views Are Now on Mobile Devices Adweek, Jan 7, 2015 Snapchat Hits 7 Billion Mobile Daily Video Views Bloomberg, Jan 11, 2016 It’s official: 50% of YouTube Traffic Now Comes from Mobile RealSEO, Oct 28, 2014 of iPhone users will abondon streaming a video if they have to wait longer than 15 seconds 59% 19% 90% will abandon a video after only a 5 second wait of consumers streaming video on their mobile experience video quality problems every day Procura, OpenWave Mobility, 2015 The internet is gradually morphing into a video distributionnetworkwhere the definition of consumer experience is rapidly changing
- 38. Mobile video hasits challenges, but also provides opportunities 38 KPN is exploring the many new video experience options that LTE Broadcast will allow, for instance in venues like stadiums and concerts hall, providing viewers with instant access to several simultaneous high definition video streams. Verizon has launched its new mobile video service go90, aiming to prove that CSPs can compete with mobile ad titans Google and Facebook. Verizon is in talks with advertisers and brands about content sponsorships and original- content creation Vodafone UK pushes 4G offering with its Netflix partnership. 4G customers are using four times more data than those on 3G, which shows how popular services such as Netflix are with their 4G customers.
- 39. Content 1 | Context 2| Non-traditional competitors 3 | CSP Imperatives 4 | Digital Transformation 5 | Mobile Video 6 | Meanwhile, those damn digital platform companies Serving ecosystems of partners 7 | And, who’s this guy?
- 40. Apple has thousandsof developers and accessory manufacturers continually creating complementary products that work beautifully with Apple’s devices and create increasing demand for them Within 4 years of existence Xiaomi became the 3rd e-commerce company in China – it sells its smartphones at near cost and makes money from commerce services. It is the opposite of Apple, but has the same platform business model Tencent gained revenues from many products and services, but the real success came when Tencent transformed from a product to a platform company Newcomers (such as AirBnB and Uber) are making use of platforms and are becoming the platform of reference in their sector IBM acquisition of The Weather Company marks a recognision of the value and replicability of large scale IoT platforms The rise of platform-based ecosystems built on the internet and ‘as a service’ business model created new markets
- 41. Green = Notin Top 15 in 2004 Red = Gone or not in Top 15 in 2015 The Top 15 born-on-the-internet, (mostly) platform companies have increased in market value almost ten- fold in twelve years
- 42. And platform economicsare superior to infrastructure or product Source: STL Partners, May 2016.
- 43. Providingbest-effort connectivity (connectivity asa commodity) Providingnetwork-optimized connectivity (managed connectivity) Runninga digitalmall (self-run businesses via web/mobile/shop) Exposing/managing an ecosystem platform (for own and partner applications) In looking toward 2020, CSPs envision four capability areas based on the services and assets they provide - three product-based and one platform-based Source: IBM Institute for Business Value Communications 2020 Survey (n= 135).
- 44. Content 1 | Context 2| Non-traditional competitors 3 | CSP Imperatives 4 | Digital Transformation 5 | Mobile Video 6 | Meanwhile, those damn digital platform companies 7 | And, who’s this guy?
- 45. Who’s this guyand what’s he doing with this car?
- 46. LeEco Wants toGive Away Its 'Tesla Killer' for Free, but Questions Remain "On April 14, we held the first free hardwareday in China, when we had sales for our smartphones, TVs on our website. We believe that the world is heading for an ecosystem era, where hardware will be irrelevant and rather users will be more interested in the content, value they can get from a device.” Billionaire entrepreneur Jia Yueting, chief executive and chairman of Chineseconglomerate LeEco (formerly LeTV) Gadgets360, April 23, 2016.
- 47. LeEco in 2ndquarter 2016 Russia set for Chinese Netflix BroadbandTV News, April 6, 2016 LeEco sidelines headphones jack with latest smartphones MWL, April 26, 2016 China’s LeEco opens San Jose HQ to take on Apple, Tesla, Netflix SFGate, April 29, 2016 LeEco launches new smartphone, entertainment services in India Hindustan Times, May 3, 2016. LeEco announces global partnership with Twitter Times of India, May 12, 2016
- 48. By moving toa platform-based business model, CSPs can become a digital services enabler (DSE)
- 49. An open platformwill create new opportunities for DSEs to enable a new wave of sustainable growth Taking a central role in ecosystems and IoT applications, DSEs will capitalize on: § network effects (crossover effects between the different players) and the increasing returns from large platforms § economies of scale § market trust and brand reach § capturing innovationsfrom 3rd parties, app developers and also internet users (platform efficiency is fuelled by the trend of open innovation) § emerging businesses and young startups who see them as the way to get access to the market § high levels of security and privacy that only CSPs can provide
- 50. The 2020 CSPwillemergefrom today’sprovideralong two primary axes: the digital services provider and the digital services enabler Summary
- 51. Ending quote fromAT&T AT&T wants the world to see its software for spinning up services AT&T has revealed details of a software platform that makes it easier for customers to order new services, and the company may release the code as open source for other service providers to use. “We're opening the hood of our network and showing you the engine," Donovan told a hall in Santa Clara, California, that was crowded with engineers from carriers and vendors. PC World, March 15, 2016
- 52. Thank you Rob vanden Dam Global Telecom Industry Leader IBM Institute for Business Value [email protected] www.ibm.com/iibv