The global telecom industry is at a crossroads. Our actions over the coming months will have a profound effect on its future, and whether we simply become providers of commoditized connectivity services, or key players in the worldwide digital economy, which is worth as much as $80 trillion.
In our latest edition of Perspectives, we explore some of the challenges and opportunities the industry faces as well as strategies for success and examples of companies leading the way.
The growth in telecom is forecast at less than 1 percent for the foreseeable future, yet at the same time new markets beckon that are potentially worth trillions. What’s more, telcos have many of the assets and capabilities they need to address those markets, including their collective scale and a long history of interoperability, but it is essential we think of this unparalleled opportunity in terms of business transformation, not just technology.
Network operators need to interconnect and manage digital ecosystems to gain the necessary scale for new services, and that’s complicated because we need to tease apart two different but essential trends as core revenues decline.
The first step is to become digital service providers ourselves; that is digitize the same kinds of services we offer today, but in a more customer-centric and real-time way, relying on widespread use of automation. Fundamentally, though, we’re looking at the same business models.
Digital table stakes
This is hard, but there is a general understanding of what is needed and that digitalization is table stakes to stay in business, whatever business you’re in. According to a recent report from the World Economic Forum, this element of transformation is worth about $400 billion to the telecoms industry over the next nine years. This is the predicted sub-1 percent growth comes in, bearing in mind that digitization means destroying value (for example cannibalizing or commoditizing old revenue streams and business models) as well as creating new value and business models.
Going for growth
The second trend of enabling digital services for partners relies heavily on that digitization, but takes us into far less familiar territory, where things become really complex. Enabling involves different kinds of business models, which might include creating our own platforms or operating within a federation with other service providers to create new services and enable them to serve their customers in a radically different way.
Whatever the exact route, it is all about tapping new sources of growth from new markets and business models, at unprecedented scale. According to the World Economic Forum, this is potentially worth at least $1 trillion to the communications industry over the same time period.
Others set the figure much higher: Platform-based businesses are already a $4 trillion market (including the world’s five biggest companies), but as yet no telco operates in this way, although they are well placed to do so.
Excitingly, as one of the world’s leading thinkers on platforms, Professor Geoffrey G.Parker observes in Perspectives, “The B2C market is largely done, now we need to look towards the internet of things, smart cities and medical technologies – the B2B side. That is an $80 trillion global economy that is rapidly digitizing and the B2C stuff is an itty-bitty side show by comparison. There is huge opportunity to be there first.”
We’re in it together
The combination of offering your own and enabling digital services for others is how to reach the destination of becoming a 2020 communications service provider (CSP) – a software-defined business with IT as its very heart and a radically different way of doing things.
TM Forum’s Open API program has a big role to play here, enabling companies to link their systems to share data and create new business value more quickly, easily and cheaply than through labor-intensive, expensive, slow manual integration. No wonder it’s supported by the world’s biggest network operators and equipment vendors, many of whom were involved in their development (you can read more about open APIs in two articles in Perspectives on How APIs can increase profit and How APIs bridge the gap between strategy and innovation).
Indeed, TM Forum exists to help our members make this transition successfully and as quickly as possible. For example, we are working on a Digital Maturity Model that touches on many aspects of transformation beyond technology, like strategy, people, culture and innovation.
How do we innovate? In a more open way to leverage our capabilities and generate growth, such as open APIs. Remember Apple benefits to the tune of more than $1 billion a year from its partners’ innovation in the App Store and those are the sort of numbers, if not greater, that we need to be thinking about. Right now, though, we’re still holding onto the idea of not wanting to ‘give things away’ and seeing things that will become obsolete as differentiators. We need to see those things we’ve built to run our own businesses as saleable assets, rather than fear competition and being displaced.
TM Forum has many tools and assets to foster and help implement innovation, developed by dedicated professionals from our member organizations – and an embodiment of the collective effort required to succeed in the digital economy.
Business not technology
I hope you enjoy this year’s Perspectives, which looks at many different facets of digital transformation. This ranges from looking at customers and new markets to the transformation itself, and then key emerging technologies. Perhaps there is no finer example than 5G to illustrate the point that digital transformation is about business transformation, not technology alone.
There are many wonderful use cases for 5G, but the only one we know how to do concerns providing better broadband. Hence to fulfill its tremendous potential, we need a 5G business to exploit 5G technology, and today’s telco is long way from being ready to do that. But we could – and that is why these crossroads are the most exciting place the industry has ever been. We look forward to helping you on your digital journey in every way we can, through the collective genius and efforts that are the collaborative heart of TM Forum.