What should telcos do to be successful in the future (especially smaller ones like Telekom Slovenije)?
Telco companies today face stagnating and even falling revenues – which comes with being in a mature industry. Currently telco companies’ almost only option is to grow with acquisitions (in their home market or abroad), because although they introduce technical improvements in their networks and they offer new services on top of those improvements their ARPU is mostly falling. To be honest, growth with acquisitions is feasible only for larger telcos – for smaller telcos (like Slovenian Telekom Slovenije) it is not an option.
Chart – revenues of EU telco industry and Slovenia’s largest telco Telekom Slovenije
Additionally, telco companies face more and more competition, which usually uses telcos’ services (web access) to reach their customers. This competition comes in the form of Whats apps, Facebooks, Googles and even Apples of this world. The problem telcos are facing is that their business model (and with it the telco industry) is outdated and by using it they cannot compete with above-mentioned newcomers. This is the reason, why majority of telcos – from big to small – are trying to incorporate more and more services in their offerings, trying to invest in and buy promising start-ups etc. Majority of such experiments fail today and will continue to fail… unless…
…unless telcos change their business model. Because all telcos are by default large companies (even small ones have at least few hundred employees), there are only two ways they can change their business model:
- via complete company restructuring – which is not feasible for majority of telcos, because their revenues are still relatively high and they still generate profits, which means there is not immediate sense of urgency among all stakeholders, which in turn is required to successfully implement restructuring
- via building additional business vertical, which will generate revenue growth for telco in the future and which will use new business models from day one onwards
One really needs to understand, that if telcos will not change their business model, they will become prey to Googles, Apples and Facebooks of the world – they will either buy them or make them irrelevant (both Google and Facebook are working on their own telco alternatives – internet enabling balloons etc.).
So, what exactly should telcos do?
In order to build a new business vertical telcos should take a look at their properties and figure out, what do they have that is unique, that presents added value and what their web only competitors are already trying to use. The answer to this question is the fact, that telcos already have the data, which Google, Facebook, Apple and others are building from scratch – and which presents added value of Google, Facebook etc. This is the data that consists of what apps people use every day, what websites do they visit, what do they buy, where do they move around in real world, what devices do they use, who do they talk to, who do they communicate with the most etc. Google, Facebook, Apple and others gather such data via their websites, devices and apps – the more (usually uneducated) users use those websites, devices and apps, the more data on individuals they have. Telcos on the other hand already have this data, but do not exploit it. Yet they should… If they want to remain relevant tomorrow.
It is true that privacy issues burden such data. Nevertheless, there are a few ways telcos could go about it to clear those privacy issues – I won’t go into too much detail here, but the easiest way would be to give incentives for users willing to enable use of their particular data (discounts and similar come to mind). Anyway, even the data already available could be anonymized and then used as such.
Once telco has data at hand, they should not use this data themselves. They should instead let other companies – start-ups – tap into that data and build novel services on top. Remember that telcos need to change their business model – and if they do not go into complete restructuring (which above all for telcos means firing relatively high percentage of their old-school employees), they do not have internal competence to build such novel services from within their organization. This is the reason why they should let start-ups do that for them. They should also have appropriate strategy in place how to acquire the most promising of such start-ups, because these companies will provide their growth (and relevance) in the future. In addition, when they acquire selected start-ups, they should not assimilate them in their organization. They should let them operate independently, because only this way will they be able to generate meaningful growth and innovation for years to come.
Obviously, telcos have a number of challenges in front of them. The above is only one part of the challenge, because it does not answer what telcos should do with their current business and business models – if it still brings in meaningful revenues and profits, what should they do about it (if anything at all). We at BUDS can help telcos and other companies answer such questions, re-shape their strategies and define best ways to execute them. We can do this, because we understand start-ups and we understand corporations. We have expertise from both worlds and we know how to define successful strategies and operational plans, which support them. We have relevant experience from very diverse industries – from marketing to production, from web to controlling, from publishing to utilities. All of this puts us in unique position to help companies improve their strategies and better prepare for the future. All you have to do is contact us.
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