2020 will forever be remembered as a year of unprecedented change, when the world locked down and the telecoms industry donned the hero’s cape to keep us all connected remotely. Despite this, however, the share prices of telecoms companies dropped on average by 20% over the year. Clearly, there’s more to the story, and 2021 looks like the year when the industry finally has to face the music when it comes to 5G. Financial markets are forcing them to live by the mantra, “enough talking, time for action.”
Most Communications Service Providers (CSP) see no option but to invest heavily in 5G, but it’s not just consumers who aren’t always on board, enterprise customers, who are key to the economics of 5G, are going elsewhere (40%) when it comes to buying compelling 5G solutions. Some are even doing it themselves (31%) rather than with a CSP (20%). The agenda for many CSPs is dominated by the vast technology choices needed to build their new 5G networks, but 5G won’t sell by itself. Unlike with 4G, CSPs can’t rely on the “traditional formula” of monetizing 5G by selling smartphones and contracts to millions of retail customers. Build it and they will come no longer works with 5G. In 2021, CSPs must execute a much broader set of changes if 5G is to stand any chance of being an economic success for them. CSPs have been uncomfortable with the level of change needed and it will take time, but time is not on their side!
Any business model change, such as the one needed to sell 5G services, requires a much deeper cultural and organizational shift to reset what a CSP values, how it operates, its core skills and what gets measured. With the 20% drop in share prices in 2020, change must be swift and led from the top, but there are three challenges (triple debt) that CSPs are faced with, and none are easy to solve:
Could North America-based CSPs be the real trail blazers when it comes to the 5G B2B revolution? Research shows that they appear to be clearer in their understanding than their Asian and European counterparts when it comes to knowing what customers want from 5G. There’s a lot less clarity though in the US when it comes to the role the CSP wants to play in providing solutions, as only one in five US-based CSPs expects to orchestrate an ecosystem of partners to help customers realize 5G use cases. Likewise, Verizon’s recent $6.9 billion acquisition of Tracfone sees renewed investment in the “traditional formula” which will see it acquire millions of relatively low-value prepaid B2C customers to protect connectivity rather than drive beyond connectivity – it doesn’t look good. Given that the US was one of the first regions to see the real potential of cloud, CSPs may be best placed to seize the huge B2B 5G opportunity that we will see unfold in 2021. After all, they wouldn’t want a repeat of the ‘missed’ 3G and 4G opportunity they experienced first-hand as the real money was made by companies selling over the top (OTT) of their mobile connectivity like gaming, eCommerce, streaming and social media.
In 2021, those looking to move onto new business models will need to change how they operate. They've historically been focused on standard connectivity products and centralized decision-making away from the customer. Decisions have been driven by short term internal organizational and financial considerations rather than customer insight and needs. The more CSPs go into this and see 5G from their customer’s perspective, the more they will understand the importance of being bold in accommodating an ecosystem within a new operating and organizational model with a culture that enables a more experimental and agile approach to co-creating 5G-enabled solutions with partners and customers. The competitive threat now comes on many fronts from organizations borne digital and with a laser focus on the customer.
Standing still is no longer an option, it’s all about change. Vodafone in its press release on TechCo (above) talks about needing to break through its “respective legacy cultural and technical doctrines”. BT with its digital unit speaks of a major shift in its technology operations focus, delivering digital platforms that harness new technologies such as AI and machine learning to create products, platforms and services, in areas such as healthcare and data.
Firstly, it’s important to try to understand the changes necessary for success and to simply learn by doing. It’s too slow to transform the whole organization, so the secret is to start small by creating a FutureCo or a pathfinder “TechCo” division. This is then given full freedom on bringing in the right talent, ways of working, partnership and technologies to create the 5G-enabled solutions that customers want to buy. It calls for a very different approach to IT and IT architecture, sitting much closer to the business and the need to drive new revenue. This “step out” division needs to be fully empowered and allowed to try out new things including new business and operating models that break down silos, but most important of all, start with what the customer wants.