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Breaking molds to continue on a digital growth path

(Image credit: Image source: Shutterstock/everything possible)

“If it ain’t broke, break it!” This is the mindset for companies who seeks to remain relevant in today’s digital world. Most service providers have broken out of the old mind set, and are now working hard to create visions that include new digital revenue streams in order to realize new digital approaches to customer engagement. It requires establishing an agile and automated operational environment, a partner mindset, and cultivating an innovative culture. 

In addition to constant investment in technology-driven efficiency improvements, the path to digital transformation requires that service providers move away from a focus on selling connectivity towards the selling of service-enabling digital platforms or experiences, both to consumer as well as B2B customers. These are also areas which are less exposed to regulatory restrictions.   

Telecom Italia is one company that recognized the shift this requires. Ovum quotes a company VP, who related, “I would like to be able to launch 500 services per year,” adding that they were working to adopt a “fail fast” culture, where of these 500 services, only 50 would most likely generate revenue. And while they were pursuing the ability to create and launch a service within five days, it was an accepted fact that not every service would be successful.

Competing over customers with speed and with convergence 

The digitization of services means that different types of connectivity and services will be sold in bundles, and while these bundles currently mostly focus on communications and media services, they can be and probably will be extended to other industries such as retail and energy.   

European mobile service providers who are in the final stages of their 4G deployments are seeing growth in the number of their 4G subscribers, which is leading to increased data usage, and upgrades into higher tiered priced data plans. These service providers will compete aggressively on 4G network coverage and over subscribers to continue growth. In order to keep their network advantage and the pricing advantage it brings, they will continue to invest in their networks upgrading to 4.5 and eventually 5G.  They will also continue network modernization in the combination and upgrade of fixed-mobile networks. 

Service providers with a fiber build out will continue to invest in their networks to answer demand for high speeds. If not, they may be challenged by alternative network companies. 

2017 will see European service providers continue to promote convergent strategies, as a retention tool. Telefonica saw its mobile contract churn rate fall from 1.8% (at Dec 2012) a month after its November 2012 launch of Fusion to 1.3% on the Fusion customer base as of September 2016. KPN reported in its September results that already more than half (53%) of all its branded postpaid customers were part of a fixed-mobile bundle versus 41% a year earlier. Cable operators are pushing into mobile, with the most recent announcement coming from Sky who unveiled Sky Mobile, turning it into a quad-play service provider.  It seems that convergence may also drive M&A activity, since regulators seem to support these types of mergers as shown for example by the BT-EE, and Vodafone-Ziggo mergers.   

It remains to be seen if 2017 will see service providers succeeding in capturing a competitive advantage by selling their 4G customers convergent offerings, or by combining them within a bundle.   

Digital is pushing the needle with the customer in focus 

Digital transformation means time to market is vital as once one service provider launches a services which is successful, others will follow.   

During 2017, service providers will consolidate their focus on digital services as a means towards growth, which according to Gartner, currently comprises an average of only 10%-15% of total revenue. Of this, enterprise will account for 75%-80% and consumer services for 20%-25%. 

One company whose transformation is bearing fruit is Telefónica, who seeks to become the “Onlife Telco”. Relating to how the company envisages achieving this goal, chief commercial officer, Eduardo Navarro said, “we’d need to shift focus from offerings like voice to connectivity to service the shift to consumption and generation of data … and in this new era, the agents of change are the Internet, cloud, big data, social networks and smartphones. Connectivity has become our new oxygen. “ Already, Telefónica’s digital services (video, cloud, e-health, security, and M2M) have grown to the extent that they contributed over 10% of the company’s total revenue in Q3 2016, with the expectation that it will continue to grow 20% year over year. 

Another promising transformer is Orange, whose Essentials2020 strategic plan sets the task of ensuring the company will be there to connect every individual to what is essential to them. To do this, they are committed to designing digital services that allow its customers to securely enjoy what is essential to them, and enable a unique daily customer experience. Ultimately, the company aims to achieve revenues of 1 billion EUR from digital. 

Enter Generation C… and artificial intelligence 

Customer behaviors and business models that were unthinkable a decade ago are now commonplace, even going as far as to change the way we relate to each other. Evan Spiegel, CEO of Snap Inc., whose company played a significant role in this shift, captured the phenomenon saying, “People wonder why their daughter is taking 10,000 photos a day. What they don’t realize is that she isn’t preserving images. She’s talking.” 

It is Generation C that is leading the way towards embracing all things digital, demanding empowerment through technology and craving fast and intuitive interactions. This generation, which is not defined by age, likes to create, curate, connect, and form communities. And they are taking connectivity (both with each other and with the content they consume) to new levels, using new devices that provide new uber-rich experiences. 

So it’s not surprising that the digital experience, together with the associated customer experience, has become a major focus area for service providers – a trend which will no doubt continue. For example: Orange expects 50% of all customer interactions across Europe to be via digital channels by 2018. Telefónica is aiming for 100% of customer interactions to be digital on its Tuenti brand. 

VimpelCom is building its digital strategy from the customer experience outwards, beginning with the customer first. They are redesigning their customer processes to become “easy in, easy out”, letting customers test services first, or turn them on and off without being tied to a contract.  New services and products are entered into via one of three approaches: partner, acquire or build, whichever seems to be the most appropriate and quick to open up new revenue streams.   

In another nod to Generation C, service providers are now beginning to experiment with emerging AI technologies in order to boost customer engagement. Already, customer engagement via digital channels is in high demand, especially via messaging. In addition, widespread use of virtual customer assistants in call centers and across social media is expected to grow. According to Gartner, consumer messaging is set to overtake social media as the point of origin for customer support, while the use of virtual customer assistants will jump ten-fold by 2020. These assistants will be deployed across multiple engagement channels and on multiple devices, in order to provide contextual and personalized interactions. They will also provide service providers with greater efficiencies via their ability to scale as well as reduced costs (virtual assistants can work 24/7 and do not get tired or sick). One pioneer in the area, is Kyivstar Ukraine, which launched a Facebook Messenger chatbot called “Zoryana” in July, which answers customer queries in Russian and Ukrainian, and has a knowledge base that grows based on its interactions. 

Service providers, now more than ever, have an opportunity to provide a simplified digital experience, and by making the most of their network assets, their customer base, data insights, as well as working with partners they can become even more central to their customer’s day-to-day lives. 

Uri Gurevitz, Director of Market Insight & Strategy at Amdocs 

Image Credit: Everything Possible / Shutterstock

Uri Gurevitz
Uri Gurevitz is Director of Market Insight & Strategy at Amdocs, a globally leading provider of customer experience solutions for the telecoms industry.