E-Business Transformation - Opportunities and Challenges for Telecom Operators

Perspective Carlos Severino José Antonio Tortosa Dr. Florian Gröne Christopher Rischard E-Business Transformation Challenges and Opportunities for Telecom Operators Contact Information Berlin Hong Kong Munich Dr. Florian Gröne Dr. Edward C. Tse Gregor Harter Senior Associate Partner Partner +49-30-88705-844 +852-3650-6100 +49-89-54525-554 florian.groene@booz.com edward.tse@booz.com gregor.harter@booz.com Dubai London New York Karim Sabbagh Dr. Michael Peterson Christopher Vollmer Partner Partner Partner +971-4-390-0260 +49-89-54525-640 +1-212-551-6794 karim.sabbagh@booz.com michael.peterson@booz.com christopher.vollmer@booz.com Düsseldorf Madrid Paris Stefan Eikelmann Carlos Severino Pierre Péladeau Partner Partner Partner +49-211-3890-110 +34-91-563-7308 +33-1-44-34-3074 stefan.eikelmann@booz.com carlos.severino@booz.com pierre.peladeau@booz.com Roman Friedrich Jose Tortosa São Paulo Partner Partner Ivan de Souza +49-211-3890-165 +34-91-563-7693 Senior Partner roman.friedrich@booz.com jose.tortosa@booz.com +55-11-5501-6368 ivan.desouza@booz.com Frankfurt Christopher Rischard Olaf Acker Senior Associate Sydney Partner +34-679-289-364 Vanessa Wallace +49-69-97167-453 christopher.rischard@booz.com Partner olaf.acker@booz.com +61-2-9321-1906 vanessa.wallace@booz.com Andreas Späne Partner +49-69-97167-408 andreas.spaene@booz.com Booz & Company EXECUTIVE Telecommunications today is increasingly a commodity business. For traditional telecom companies, maintaining SUMMARY customer loyalty and delivering growth in the face of fierce price competition and new market entrants requires a new way of operating. To achieve this, they must go through Adopting an e-business model an e-business transformation. This involves a reevaluation of all busi- entails developing online capabil- ness operations. How this is done, ities—similar to those of the best and in what sequence, varies from online retailers—across their entire company to company and requires business operations, from back-room careful planning, but the benefits are processes and logistics to customer the same: better customer service service and sales. This is an essen- and greater customer retention, an tial step for capturing and retaining increase in average revenue per user, today’s savvy customers, who expect significant operational cost savings, the same kinds of benefits from all and a platform foundation for digital technologically oriented service pro- services and the world of apps. viders. An e-business transformation will also reduce costs in the long run, Some telecom operators—those with and it is a prerequisite for effectively management structures that have delivering digital goods and services developed and thrived in silos— that bring new revenue growth. may resist the change. But if they do not undertake this transformation, But an e-business transformation is they will risk losing market share not a simple step for telecom opera- and missing the opportunity to tors to take. Complex legacy systems leverage their current clout for and isolated business functions are long-term growth. Telecom operators difficult and costly to migrate and have been slower than most to integrate without disrupting opera- capitalize on the new e-business tions. Simply improving websites and opportunities. The time to catch up introducing multichannel marketing and move ahead is now. are not enough. Booz & Company 1 THE E-BUSINESS For most of the past decade, telecom operators have faced 10 percent and organization and turn it into a seamlessly integrated business system IMPERATIVE annual declines in the price of their built around an online core. basic services. By now most of these companies have reached the limits Few companies have yet made a full of optimization and cost reduction commitment to an online platform. with their current architectures and Most offerings so far focus on core operating models. Customers are data and voice transmission services. less interested in who provides the Some have leveraged Internet- connections than in price, service, enabled technologies to offer online and features. Couple this with the e-shopping and e-care channels. global recession, fierce competition, There are also a few cases of online and the emergence of powerful new channels integrating successfully players that successfully leverage into a cohesive multichannel or bypass telecom operators—such environment. But all of these efforts as Apple and Google with their fail to capture the full potential and smartphone and application power of a comprehensive e-business ecosystems, or Amazon’s digital transformation. goods and cloud service business— and there is reason to question where The good news is that most telecom significant future growth will come operators start with significant from for the once dominant telecom advantages: deep experience in monopolies. Internet technologies, large customer bases, well-known brands, and This transformation applies to substantial online and storefront technology platforms, organizational operations. structures, people, and business processes. It is a redesign based The bad news is that time is running on lean management principles out. The competition has already that includes determining which embraced the e-business paradigm. legacy processes and systems can be Mobile virtual network operators transformed and how. But it can also have built their entire operations mean a greenfield start, in which around e-business cores. IT, media, new processes are designed and off- and the big e-tailers have e-business the-shelf systems are built into the in their DNA and are already luring e-business online platform. The goal the traditional telecom subscriber is to take a typical siloed operation with communications products, with its legacy systems, processes, add-ons, and services. The goal is to take a typical siloed operation and turn it into a seamlessly integrated business system built around an online core. 2 Booz & Company STEPS TO Telecom operators must first understand the four business ratio- • To be the provider of choice, a company must be agile and flex- E-BUSINESS nales underpinning the e-business ible in the face of fast-changing SUCCESS imperative: customer needs. That means it must have the technical ability to add • To keep and defend their customer new features quickly when custom- base, companies must provide supe- ers demand them, such as providing rior, consistent, personalized cus- log-ins across social networking tomer experiences. This requires a sites and setting up e-commerce consistent way to follow customers accounts tied to phone bills.