Crossing the Digital Divide

Where Does This Leave Telco? In summary, leading digital businesses have exploited new technology to make themselves fast, efficient, market-responsive and profitable. Their explosive business growth over recent years suggests that customers like this approach too, or at least regard any shortcomings that accompany it as an acceptable trade-off for lower prices and greater convenience. It leaves Telcos on the wrong side of a digital divide, which might be defined as follows: • An Absence of Real-Time Interactivity: Digital technology means that the ordering process and the configuration of the customer package can be much more interactive. In addition, customers that are involved with the construction of their package, that choose its various elements and how it will be delivered, are likely to be much more loyal than customers who are limited to a few generic choices. A digital Telco will move steadily away from deferred and linear processes (such as order management and billing) to real-time interaction through apps, chat and social media. • Business Sluggishness: Perhaps tied to a reliance on aging software platforms and traditional development cycles, and to the need to work with physical infrastructure and deployments. But virtualized network functionality is making change increasingly easy to effect, while it is becoming evident that legacy business IT can be gradually (perhaps not so gradually) sunsetted, either through transition to lighter, more agile digital platforms or by outsourcing to third-party providers. • A Relatively Closed Business Mindset: Many digital businesses make the customer part of the business, not just its target. Others share their platform, making customers of businesses that might otherwise have been competitors. Relatively few Telcos have yet exploited their customer’s natural willingness to participate in affinity groups, seem to work only reluctantly with partners and are prone to relying on an unchanging set of vendors, many of whose offerings and attitudes also date from an earlier commercial era. Bridging the Gap Identifying the gap is one thing, but the approach that is taken to bridging it will represent the Telco’s digital strategy and will be perhaps its most important business decision in a generation. MATRIXX sees Telcos tending towards one of two strategic directions: • A Complete Transformation of the Telco IT Stack: The counsel of perfection but one that carries the risk of being lengthy and costly, and in the end leaving Telcos still lagging the market. While Telcos certainly need their IT stack to be carrier class, they also need quick wins and early payback in areas where they are currently suffering competition from more agile, digital insurgents. • A Selective Transformation: Where a fully digital approach is introduced to support a subset of customers or services, often creating a new digital business within the organization. Transformation is typically quicker, impact on the overall business is less and risk is lower. If the approach proves unsuccessful, the cost will be minimized, as will the effort needed to roll back or adapt the initiative. If it proves successful, on the other hand, it will be relatively easy to introduce the approach across the rest of the business, making incremental improvements and updates at each stage. Crossing the Digital Divide page 3 / 4 Characteristics of Legacy and Digital Operating Models Business Issue Legacy Operating Model Digital Operating Model Business Agility Low High IT Complexity High cost, slow DevOps, agile Personalization Static, segment of many Dynamic, segment of one Customer Engagement Limited Active Monetization Missed Timely Digital Channels Low < 80% call center and retail High > 80% mobile-first Cost to Serve Dollars/interaction Cents/interaction Source: 451 Research In practice, and at least for a significant transition period, a combined, or hybrid approach is likely to offer the best return for many Telcos. For example, a light, digital stack is developed to support the more dynamic, growing side of the business (new cloud-based lifestyle services), enterprise IoT propositions or a new digital brand targeting the rising generation of consumers. This is while the legacy stack continues to support traditional services and longstanding customers. Such an approach will minimize both investment and business risk, while allowing a strategy for a fully consolidated agile IT environment, or perhaps for the outsourcing of the stable legacy environment to a managed services partner to evolve over time. Towards a Blue Horizon Many Telcos are looking across a significant divide between them and the digital high ground occupied by today’s digital leaders. The good news is that the gap is far from unbridgeable, and that a pragmatic and tactical approach may provide quicker, better and more cost-effective returns than a lengthy and high-risk strategic overhaul. For more ideas on digital strategy, see MATRIXX and 451 Research’s paper Fast Tracking Telcos to Digital Transformation (September 2018). And for more on how leading digital service providers such as Telstra, Vodafone, and Yoodo are using MATRIXX solutions to underpin their digital transformation, visit http://www.matrixx.com/customers/. Crossing the Digital Divide page 4 / 4

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