Charles Wright predicts what's next for Telco
Slow, slow, quick, quick, slow
In the last few decades, we have seen four big waves of branding and rebranding in the telecoms sector: privatisation, new technologies, mergers & acquisition, and brand rationalisation. The mix and the order vary by country. But telcos have always been restless in their hunt for the next big thing that can promise growth and wealth.
Hold onto your hats
Well guess what: it looks like the industry is at yet another inflection point, with the convergence of communications and entertainment amplified by the availability at scale of new disruptive technologies. Verizon describe it well on their website: Virtual reality, augmented reality, the Internet of Things, automation, advanced robotics, drones, and many others will change almost every facet of our society. Things are about to change dramatically, and it will happen right before our eyes.
It’s not just Verizon that are getting excited. On the other side of the world in Abu Dhabi, the Chairman of Etisalat wrote in his most recent annual report that Etisalat envisions 5G as a stepping-stone to unlimited potential, a technology that will enable new use cases, widen possibilities, and enhance value creation.
Heady stuff! But we should take seriously what Verizon, Etisalat and most of their peers are telling us. Let’s assume we are indeed on the threshold of a major change. Not just 5G but maybe even Telco 5.0.
Version one of a telco was the fixed line business, v2.0 came with the introduction of mobile and broadband, v3.0 saw the formation of communication conglomerates and v4.0 has been about the telcos pushing beyond communications into other businesses- and vice versa, with all sorts of OTT and media players emerging as competitors.
Each of these four waves required quite a different style and structure of brand. So it is reasonable to imagine that v5.0 will require a new approach again. What questions will telcos need to ask themselves to get their brands fit for purpose again? Or as Vodafone says with its tagline, The future is exciting. Ready?
Q1. Why should I believe you?
This question might appear an odd place to start given the apparently unlimited upside promised by Verizon and Etisalat. But workers and investors in the industry, who should know, seem unsure. Their sentiment towards major telcos in the USA, Europe and the Middle East is strikingly similar to that they show for electric utilities. Judging by data from Glassdoor (1) and Reuters (2). It is no exaggeration to say that telcos now seem more like utilities rather than the tech players they aspire to be. This scepticism is the first obstacle to overcome if the future really is to be bright (sorry, Orange).
1 Glassdoor: around 40-60% of staff at telcos and utilities are positive about their business outlook
2 Reuters: telcos and utilities are similar in terms of modest market to book value, high gearing, low growth, steady margins and high dividend yields
Q2. How can you help me?
Removing the scepticism means reframing the meaning of ‘utility’. From a provider of essential, but rather dull, infrastructure to a partner adding real value to whatever people are trying to do.
The Business Roundtable gave us a quick answer to which ‘people’ Telco 5.0 brands are for. Their statement this last August about the purpose of a corporation says: “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country. Thinking this way will make us address staff and investors, not just customers.”
The more interesting challenge is ‘value’. Almost every telco has at the heart of its strategy some version of the same three pillars: delivering a differentiated customer experience, transforming operations through digitisation, and deleveraging the balance sheet though optimising capital tied up in the network.
The third is simple financial engineering. But the first two are much more important for branding. They also have the potential for conflict.
Most of the so-called transformation programmes we have seen in Telcos boil down to automating and streamlining customer service with an added gloss of personalisation. Where customer service means problem resolution. Rather than anything more constructive to do with redefining and delivering a new kind of ‘value’.
Even in the narrow sense of customer experience, rather than new value for a wider set of stakeholders, few Telcos seem to have grasped that the industry-wide rush towards screen-based self-help may not mean a differentiated experience. Telcos should be worried that many of the tech players that have disrupted their industry in the last decade are now looking for ways to create more human interaction with their customers, not less. Precisely to re-establish engagement.
Q3. What do you do?
To re-engage me, you need to help me. To help me, you need to understand me. To help me, you also need to present, in a simple way, the range of ways in which you can help me. So that I can understand you. A simple example of a firm that does this well is TaskRabbit. They follow an approach pioneered by Clayton Christensen, which he called ‘Jobs to be done’.
The IT industry long ago used the term ‘solutions’ to describe a similar approach. Some Telcos, at least, are beginning to make progress towards a solutions mindset with business customers. But sadly, when it comes to consumers, most are still stuck in a prehistoric world where complex and quasi-branded tariffs masquerade as services.
This issue gets much worse when we add a layer of new technology. We see all Telcos reverting to a snowstorm of acronyms and technical jargon, with IoT as the extreme and best example.
Q4. What makes you special?
This complexity is already bad enough. But it gets many times worse in the larger Telcos by the time you get up to the group level. Because most large groups are really a new version of an old-fashioned conglomerate.
Apparently, the only way to make sense of a jumble of more or less loosely connected set of businesses is to abstract in search of some commonality. Ideally, this is a higher purpose:
Integrated telecommunications (3), Enabling the digital society (4) , Ensuring meaningful progress (5), Inspiring human progress (6), Making a better world (7), Making the world more human (8), and so on and so forth.
Verizon stands out by being more practical: Connecting you to everything the digital world has to offer.
We can link this point back to the scepticism of workers and investors. While the Telco groups indulge themselves with grandiose rhetoric, Glassdoor and Reuters describe most of them as ‘telecom’ and ‘communication’ service providers respectively.
The Economist magazine is even more down to earth, describing Orange as France’s biggest telecoms operator and Telefonica as Spain’s largest telecoms company. We suspect that Verizon would be flattered to know it is simply The telecoms giant.
3 Deutsche Telekom
Q5. Why will you succeed?
Assume for a minute that you can answer the first four questions. The toughest challenge of all is to show why you, of all players, will succeed- and make money. A few months ago, the ‘make money’ was an option if the growth story was strong enough. After WeWork pulled its IPO, it is fair to imagine that the option is fast becoming a necessity.
It is possible that Telco 5.0 may prove to be like the dot.com boom. In the sense that the predictions about the transformative impact of the internet proved true- but it took a decade longer to materialise and make money for a new set of players.
One of those was Apple and it is now clear that the launch of the iPhone in 2007 marked the start of a long decline in the confidence, growth and brand performance of most Telcos. We see few signs of an early recovery, despite the industry’s enthusiasm about convergence, technology and some widely trumpeted reductions in churn rates.
These five questions reflect our experience working with both Telcos and Tech disrupters. They are intended as a lens through which to re-consider how fit for purpose your brand is. We believe Telco 5.0 will be a big deal. We just don’t know how soon. But we do know that unless you can explain and demonstrate your role in that new world of convergence and technology, then your growth, confidence and brand will continue to languish.