Why delay in digital transformation makes weaker telecoms?

Consumers expect more contextual and personal interaction from brands. Consumers also want all brands including telecom operators to become a Facebook, Google or Amazon and invest in new technologies.

All telecom operators are not investing in digital transformation at present. In fact, CSPs are lagging in investment. Digital native brands like Facebook, Google, Uber, Amazon, WeChat and other digital giants are posing challenges to telecoms.

CSPs should target 6-8 percent margin improvements from digital transformation, says research firm Strategy Analytics in its report called “Digital Transformation: Customer Centricity Crucial for CSPs”.

Customer centric digital engagement should target key KPI improvements that impact the bottom line.
“One percentage point improvement in customer churn would reduce customer acquisition costs by an amount equivalent to 0.5 percent of service revenue, with a similar scale of saving available from a 20 percent reduction in calls to customer care,” said Phil Kendall, executive director, Operator Strategies at Strategy Analytics.

ALSO READ: Strategy Analytics report on digital transformation

If telecoms cannot become more customer-centric and offer improved digital engagement, they will lose wireless subscribers. Customer churn will be significantly higher for telecoms without a strong investment strategy in digital transformation.
CSPs in developed markets spend 10-15 percent of service revenue on customer acquisition and 2-3 percent of revenue on customer service. The benefits that a more agile and customer-centric experience can drive up sales conversion rates and reduce churn and reduce call load at customer service centers. Strategy Analytics said these cost structures provide significant room for efficiency gains.

“Telecoms can also miss opportunities for revenue growth through new digital service offerings and earn poor customer satisfaction ratings leading to weaker market positioning and brand perception,” Strategy Analytics said.

How to succeed with digital transformation will be a big topic of focus at the upcoming TM Forum Live on May 15-18, 2017, at the Acropolis in Nice, France.

Strategy Analytics believes digital transformation gains relating to customer-facing costs in the range of 2-3 percent of service revenue should be targeted, with upside potential in revenue from cross-selling and up-selling products and features and further operational efficiencies.

CSPs seeking to increase digital engagement with their users need to consider interrelated dimensions of digital transformation, including strategy and organizational culture and structure.

Strategy Analytics said CSPs may want to introduce new agile cloud-based solutions to support the operational dimension needed for digital customer engagement, rather than start with a more lengthy upgrade and transition to the entire set of legacy OSS/BSS solutions.

“CSPs have an opportunity to focus beyond the early adopters on the next wave of users—for example the broader family, the small enterprise—by adding value and incentives for digital engagement plus ease of use, security and privacy,” said Susan Welsh Grimaldo, director, Operator Strategies at Strategy Analytics.

Sue Rudd, director, Networks & Platforms at Strategy Analytics said great network infrastructure is table stakes but no longer enough to succeed and differentiate. The network needs to become a key enabler to enhance the customer’s digital lifestyle.