Blog article

What is Digital Transformation in telecoms?

5 Aug 2020

What is Digital Transformation?

If you Google “Digital Transformation”, and I doubt most of us have because we presume that we already know what the term means, you’ll get a fair number of variations in response, albeit mostly on a similar theme.

In the telecoms industry, the process of digital transformation is well established. Successive generations of network infrastructure (presently manifested in the rollout of 5G mobile) have delivered the platform on which digital services can be delivered. However, a common challenge remains.

Commonality suggests the nub of it lies in a foundational change in how an organization delivers value to its customers. While that definition may suffice if we’re painting a picture with only the broadest of brushes the reality is unsurprisingly more complex. For a start, Digital Transformation has at least two familiar components; first, the transformation of networks or systems so that they support digitalised business processes and secondly, the transformation of the processes themselves.

What is Digital Transformation in telecoms? – The helicopter view

In the telecoms industry, the process of digital transformation is well established. Successive generations of network infrastructure (presently manifested in the rollout of 5G mobile) have delivered the platform on which digital services can be delivered. However, a common challenge remains. All too often across the industry, the delivery (and therefore promise) of digital services hasn’t caught up.

Look at it through the prism of a metaphor to clearly understand the landscape. Telcos have invested millions in a supersonic jet that shaves half the time off a flight to New York. But frequently, they’re flying it at sub-sonic speeds. Where’s the sense in that?  Many CSPs have thus only partially digitally transformed themselves. They’ve got the kit, but they’re failing to use it to maximal effect.

What is Digital Transformation in telecoms? – Under the hood

Let’s backtrack a little, however, and take a deeper dive into what digital transformation involves. Leading industry body, the TeleManagement Forum, suggests that it involves the following:

  1. A shift from discrete network elements to an independently managed, virtualised communications and cloud infrastructure. The benefit here is a shift from expensive and hard-to-manage discrete network elements to a virtualised environment that’s easily more run at a far lower cost. The first manifestations of this transition were driven by Network Function Virtualisation and Software Defined Networking.
  2. The move to uniformly orchestrated security. Digital services have higher security requirements, so security needs to support the full technology stack, the data, the service creation process, the partners, and the physical environment. The increasing importance of IoT adds to this challenge.
  3. Changes in data usage, from limited to a uniformly orchestrated, data-driven enterprise. Central to the digitally transformed telco is a consistent approach to the collection, analysis, distribution, security, and monetization of data collected from multiple sources. Digital success is largely dependent on how well data is leveraged, both for internal business optimization and external monetization.
  4. The emergence of an Open API platform architecture. Digital transformation means an end to traditional telco closed IT architectures. Open platforms and easily accessible APIs are required to support the development of both internally developed own-brand services, and externally developed third-party services.
  5. The service revolution, meaning a diverse portfolio of digital services. Digital transformation means telcos expanding their service portfolios to offer new suites of digital services, addressing new vertical markets, with strong revenue growth potential.
  6. Building and supporting a vibrant ecosystem of partners. Transformation means CSPs ceding control of traditional relationships with vendors and partners and replacing it with a more diverse ecosystem in which partner relationships are managed in new ways.  
  7. Replacing a limited set of business models with multiple, innovating business models across the market. It’s critical for telcos to develop new flexibility in how they create value for both themselves and their partners. This means new operational models and new business processes are table stakes.
  8. Culture change. Taking all of the above into account, culture change – the shift from being a traditional, network-centric organisation to partner-driven, diverse service portfolio company requires a totally new mindset, particularly to compete effectively with OTT players.
  9. Abandoning tradition and leveraging new ways to market. Digital Transformation revolutionises how telcos sell. Fining new communications and partner channels to drive the CSP’s brand, maximize digital services and products revenues, is critical to success.
  10. 360-degree omnichannel customer experience must replace traditional, more limited, relationships. User expectations increase in the digital world and to meet them, seamless, integrated experiences must be supported if the telco is to accrue benefits in increased customer satisfaction and reduced customer churn.

Why is digital transformation important?

All of this, of course, matters. The success of infrastructure investment to support Digital Transformation is ultimately measured in ROI. And just as its pointless buying the supersonic jet we referred to earlier and then flying it manually (tip: you won’t sell any more tickets with that business model), so the investment in progressive digital network technology falls far short of achieving the impact it should have if it’s not used to drive fundamental business process change. We’ve seen that at base level digital transformation has the power to make your customers happier so the question is, why are so many telcos who could do that still falling short of the mark, despite increasingly having digital infrastructures in place?

What are the benefits of digital transformation?

This brings us to an enumeration of the benefits of Digital Transformation which, by now, should already be clear. Foremost among them are:

The promise of Digital Transformation is that it delivers an easier life via technology (think social media, apps, and so on). Customers are helped to address problems quickly and efficiently. This means re-designing digitized customer journeys, increasing the speed and agility with which insights are accrued, driving the adoption of these new journeys by customers, and providing agility within the journeys themselves.

Arguably the greatest benefit of Digital Transformation is the ability to track metrics and analyze data surrounding the customer relationship. Doing this means gaining insights that let telcos optimise their strategies and process to achieve ever-better results. To do this, telcos need to leverage both structured and unstructured data and use it in both innovative and decisive ways. The reward is dramatically increased RoI.

  • Collaboration: A new telco emerges

When pretty much all a business processes and strategies are re-invented, organizational culture change is the inevitable by-product. While Digital Transformation may be a demanding process, the telco that emerges from it successfully will be better placed than ever before to compete effectively in the modern, commercial landscape.

Fast and continual improvement in the ability to both to meet customer needs and to operate effectively are fundamental benefit of Digital Transformation. As a result, the ability to adapt to market changes and lead in innovation are inevitable by-products of the shift. Success in the digital landscape translates exactly to the degree of agility enabled.

  • Specialization is achieved

Successful Digital Transformation means staying ahead of the curve in an exponentially changing landscape where Artificial Intelligence, Machine Learning, Augmented Reality, advances in Analytics, and other trends are coming into play at pace. These are opportunities the telco must leverage to protect and expand itself both now and, even more importantly in the short-term future.

  • Consolidation of process and operations

Digital Transformation brings both workforces and technology together to better connect with both customers and prospects. This creates an organization that is outward- rather than inward-looking and in so doing focuses the organisation precisely on commercial success.

How Digital Transformation Drives Customer Experience

Traditional (pre-Digital) telco loyalty and customer engagement programs generally fell short of driving long term customer relationships or delivering a positive brand impact.  The consequences of this have been the failure to lower RoI and the erosion of brand value. Digital Transformation changes the equation by enabling the CSP lto design innovative customer experience programs that become essential components of their brand strategies and key enablers of compelling and consistent long-term relationships.

To achieve this, CSPs must define what compelling customer value is at each stage of the customer life cycle, drive personalised and interactive experiences and rewards and get top management buy-in to activate all departments around the brand loyalty strategy goals. Ultimately, the results of successfully achieving these aims enables CSPs to:

  • Foster higher engagement and advocacy
  • Increase cross and up sell
  • Define service and product features that adjust to evolving customer behaviour
  • Deliver higher customer value across categories and channels
  • Enhanced performance in contract renewals, service upgrade and retention journeys

One example of Digital Transformation

Recognising the landscape emerging as a result of Digital Transformation, a Tier-1 telco in Europe and customer of Evolving Systems acknowledged the need to revitalise its approach to customer loyalty. Its existing programs weren’t delivering the desired outcomes and additionally were providing little, if any, brand differentiation. Plus, the appearance of aggressive new competitors in the market as well as regulatory changes relating to the mobile industry meant that a new approach was urgently needed to protect and improve the company’s market position. This is a common challenge faced by many present-day telcos.

As the company’s own Customer Engagement Manger said, “We knew we could make ‘standard’ offers like increasing megabytes but we also knew such offers were easily imitated and did little to really build strong relationships with our subscribers”. 

Working with Evolving, the telco designed a program based on the premise that “your loyalty doesn't expire every two years”. Telco customers are traditionally used to points systems (for instance, spend 100 euros, get 100 points. After two years, get a coffee machine for 100 points.) These sorts of very linear but low-impact approaches were exactly the model that the CSP wanted to break as they are proving increasingly ineffective in a Digitally Transformed world that affords new opportunities to meet customer requirements.

As a result of the innovative, digital loyalty program created the telco now has a 50% customer engagement rate - engagement defined as customers redeeming in the last 12 months – far exceeding the industry average. Typically, traditional points-based loyalty programs achieve around a 20% engagement. Sheer response apart, the success is also an indicator of the Digitalization of the customer base as to redeem a reward, a customer has to be on a digital channel.

Another benefit is that telco now measures churn impact by type of gift, so they know which gifts actually work. Net Promoter Score, a key KPI, has also significantly improved since the program was initiated. The Telco has moved from 3rd to 1st place in both prepaid and postpaid and believes it now has a sustainable leading position and expects its NPS score to continue improving.

Current Trends in Digital Transformation

 To cherry pick what seem to be both the most nascent and the most important trends among many, we would suggest that the keys to pay attention to include:

  • ARTIFICIAL INTELLIGENCE AND MACHINE LEARNING: Telcos are increasingly shifting towards AI capabilities to expedite and personalize customer service, reduce human bias, and increase productivity. In so doing, they are finding that the value of AI and machine learning tools are dependent upon the data they are fed. Research suggests a 95% growth in the adoption of AI in the coming years, and that 25% of customer service operations will be using machine learning algorithms by the end of 2020. 
  • MULTI-CLOUD COMPUTING: While the shift to multi-cloud environments is established, managing multiple clouds is complicated, specifically when it comes to moving application workloads between them. API-led application development and containerization are emerging as the favoured solutions to this problem.  APIs help unlock data and the functionalities of applications residing in multiple cloud environments. Containers package up code and its dependencies, so an application runs quickly and reliably from one computing environment to another. It’s estimated that containers will experience 165% growth in the next 18 months.
  • IT BECOMES CENTRAL TO BUSINESS: To maximize the full potential of Digital Transformation, telcos are positioning IT as a core enabler of the business. This means IT has to deliver more, in less time. All digital companies, telcos included, must operate as technology companies that can leverage both new and emerging technologies to improve the customer experience. Achieving an agile, fast, and innovative environment is critical. 
  • CO-CREATING VALUE WITH EXTERNAL STAKEHOLDERS; Telco success depends on creating a network effect by building collaborative ecosystems of partners, customers, and external stakeholders. When effectively realised, telco can seamlessly incorporate new products and services into their customer experiences. This is table-stakes for success in the digital commercial landscape.
5 Aug 2020