E-Business Transformation: Challenges and Opportunities for Telecom Operators
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E-Business Transformation: Challenges and Opportunities for Telecom Operators

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For traditional telecom companies, maintaining 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, ...

For traditional telecom companies, maintaining 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 an e-business transformation.

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E-Business Transformation: Challenges and Opportunities for Telecom Operators Document Transcript

  • 1. Perspective Carlos Severino José Antonio Tortosa Dr. Florian Gröne Christopher RischardE-BusinessTransformationChallenges andOpportunities forTelecom Operators
  • 2. Contact InformationBerlin Hong Kong MunichDr. Florian Gröne Dr. Edward C. Tse Gregor HarterSenior Associate Partner Partner+49-30-88705-844 +852-3650-6100 +49-89-54525-554florian.groene@booz.com edward.tse@booz.com gregor.harter@booz.comDubai London New YorkKarim Sabbagh Dr. Michael Peterson Christopher VollmerPartner Partner Partner+971-4-390-0260 +49-89-54525-640 +1-212-551-6794karim.sabbagh@booz.com michael.peterson@booz.com christopher.vollmer@booz.comDüsseldorf Madrid ParisStefan Eikelmann Carlos Severino Pierre PéladeauPartner Partner Partner+49-211-3890-110 +34-91-563-7308 +33-1-44-34-3074stefan.eikelmann@booz.com carlos.severino@booz.com pierre.peladeau@booz.comRoman Friedrich Jose Tortosa São PauloPartner Partner Ivan de Souza+49-211-3890-165 +34-91-563-7693 Senior Partnerroman.friedrich@booz.com jose.tortosa@booz.com +55-11-5501-6368 ivan.desouza@booz.comFrankfurt Christopher RischardOlaf Acker Senior Associate SydneyPartner +34-679-289-364 Vanessa Wallace+49-69-97167-453 christopher.rischard@booz.com Partnerolaf.acker@booz.com +61-2-9321-1906 vanessa.wallace@booz.comAndreas SpänePartner+49-69-97167-408andreas.spaene@booz.com Booz & Company
  • 3. EXECUTIVE Telecommunications today is increasingly a commodity business. For traditional telecom companies, maintainingSUMMARY 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
  • 4. 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 systemIMPERATIVE 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
  • 5. 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-changingSUCCESS 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. on their journey across sales and service channels—an automated • To increase efficiency and auto- support system that remembers mation, telecom operators must customers’ needs and preferences be able to scale up their online and is accessible from all internal customer offerings. That means and external touch points. predicting and tailoring products and services to individual subscrib- • To own and monetize the cus- ers quickly and seamlessly. It also tomer interface, companies must requires in-depth knowledge of establish a strong e-business customer preferences. This is a platform for the delivery of goods basic prerequisite for holding on to and new services. This platform your customer base. would deliver next-generation digital services. For example, a Achieving this level of transformation telecom operator’s smart app could is not easy. There are general princi- use customer profiling to suggest ples and methodologies to follow, but and deliver new offerings ranging the specific e-business approach for from music and video suggestions your company should be distinctive, to personal banking, health, and reflecting your goals and ambitions, security services. the constraints of your legacy systems, your market environment, and your investment capacity.Booz & Company 3
  • 6. BASIC E-BUSINESS interact with the company online, in a store, or through a call center, thus and business processes, not just Web and mobile portals. An operator thatARCHITECTURE enhancing the customer relationship uses a multichannel approach may be and delivering better service and able to present a seamless interface more opportunities for customer to the customer, but behind the retention and up-selling. scenes its back-office processes, such as billing and product delivery, are This approach is effective, but it does handled by separate platforms. Sales not go far enough to realize the full and customer service effectiveness are benefits of “e-enabling” business compromised, and costs mount. processes across the entire operation.Today most telecom operators are The key difference between this A fully integrated e-businesseither implementing or updating and the horizontal e-business approach builds online technologya multichannel sales and service cross-channel strategy is the degree and capabilities into all front- andapproach. One main objective of this and scope of the integration (see back-room business processes,strategy is to give customers the same Exhibit 1). The horizontal e-business eventually transforming thepersonalized experience whether they platform is applied across all channels operation into an “online company”Exhibit 1Multichannel Strategy Versus Integral Cross-Channel E-Business Strategy ILLUSTRATIVE MULTICHANNEL STRATEGY WITH INTEGRATED ONLINE CHANNEL CROSS-CHANNEL E-BUSINESS STRATEGY Legacy Online Retail Call Online Mobile Retail Call Online Mobile Shop Centers Channel Channel Shop Centers Channel Channel E-Business Platform Mobile Mobile Retail CMC Web Retail CMC Web Portal/ Portal/ OS OS Portal Portal Portal Portal Apps Apps Back End Back End Provisioning/fulfillment management Provisioning/fulfillment management Credit and billing management Credit and billing managementSource: Desktop Research; vendor interviews; Booz & Company analysis4 Booz & Company
  • 7. with Internet technology-based • Capturing new customers: Today’s satisfaction from cross-channelprocesses at its core. In the face of 18- to 34-year-olds buy online. If offerings of both new productsthe increasing costs for network telecom operators fail to capital- and better service translates intoexpansion, upgrade, and maintenance ize on this fact, they will miss key a reduced churn of 2 to 4 percent.and the falling margins, telecom market segments. In addition, the These extra offerings are oftenoperators can use this online platform high-value customer demographics called “loyalty options,” since theytransformation not only to integrate are increasingly using the flexibility give customers free add-on servicessales and service channels but also and comparability of online shop- that cost the company little orto lower overall cost structures. ping, even for expensive items. Our nothing but generate high levels ofE-business capabilities can shift benchmark analysis shows benefits loyalty.high-volume, high-cost transactions, of as much as €700 per postpaidsuch as customer profiling and setting customer and up to €600 per fixed- • Reduced cost-to-serve: Whenup accounts, to much lower-cost line customer. customers migrate to the onlineprocesses by encouraging customers world, they cost less to service. Thisto complete transactions online. • Enhanced average revenue per savings can represent 50 cents to €4This improves process efficiency and user (ARPU): Operators can per contact, depending on the chan-delivers better service to both internal expect an increase of 0.5 to 1 nel. Paper billing and mailing costsusers (account managers, billing percent in ARPU from e-business evaporate, and self-service productdepartments) and customers. optimization. For a customer base selection cuts down the need for of hundreds of thousands, this is expanded call centers. The trick isOur analysis of the short- and a significant bottom-line boost. to not only make the platform along-term effects of introducing First-time sales and up-selling are compelling service center but alsoan e-business platform, based on cheaper, easier, and more flexible use it as a sales platform to furtherthe experience of several European online. Products that stimulate maximize customer visits.telecom operators, demonstrates the greater data usage (games, socialbottom-line benefits. There are five networking) are available only Overall cost savings and additionale-business value creation levers: online. The creative use of Web income present a compelling case for pages provides opportunities for an e-business transformation. But• Reduced acquisition and retention both advertising and affiliated mar- the proof is in the implementation, cost: Telecom operators can save keting. Customers spend more, and and for this, companies must follow €50 (US$71) to €200 per customer per-sale costs are less. a well-defined step-by-step planning by migrating sales and top-ups process. online, which cuts out commissions • Extended customer lifetime: We and processing costs. estimate that enhanced customer Cost savings and additional income present a compelling case for an e-business transformation. But the proof is in the implementation.Booz & Company 5
  • 8. STEP-BY-STEP e-business means, in effect, making execution and sequence are critical.IMPLEMENTA- it a different type of business: an “online” company, with a strong Moving too quickly can lead to excessive organizational stress;TION specialization in telecommunications moving too slowly can sap support services. Unless the benefits of such a for change. Careful planning and top change are clearly understood, it will management buy-in can avoid these not win the support of those who are mistakes. key to its implementation. Moreover, there is no single “silver bullet” Management must first carefullyResistance to change is often broad approach. Every company’s starting determine both the scope of changeand deep, so strong leadership is position and goals differ and require and the timetable. The answers toa critical factor for a successful careful assessment. five key questions explicitly define theimplementation. For a seasoned objectives and help map the journeytelecommunications executive, In introducing fundamental change (see Exhibit 2):transforming a company into a true to a telecom business, the correct Guidelines: 11.0 million = aölkdfölka =Exhibit 2Sequence for E-Business Transformation 32.8% = 30.1% = E-BUSINESS TRANSFORMATION APPROACH: DESIGN FRAMEWORK INTENT & SCOPE Why? Design principles TABLE HEADINGS 1 1. Strategy-based Strategic 2. Market-back Business For Whom? A4 format: 3. Purpose-driven Priorities 2 - width for 3 columns Market - width for 2 columns Segment & What? Product 3 DELIVERY PLATFORM Process & Letter format: … sets objectives for … Boundaries How? Channel - width for 3 columns 4 Universe - width for 2 columns Operating Model … implies priorities to scope … 4a Process, 4b Platform People, Architecture Lines: 0,5 pt … defines scope Culture Vision Who? Lines for legend: 0,5 & priorities for … Transformation 5 Sourcing Model Note: Please always delete … clarifies needs & context for … otherwise InDesign w file. These colors can’t b Execution Approved Colors, TSource: Booz & Company6 Booz & Company
  • 9. • Why? The company must establish e-enable additional customer touch back-end evolution by ensuring that strategic business priorities. Is the points, such as call centers or the current enhancements are compat- transformation for growth, market retail footprint? ible with the future target design differentiation, cost leadership, or (choice of vendors, standards, a combination of the above? The • How? An e-business transforma- interfaces). goal will significantly determine the tion can be an incremental process, transformation road map. or it can take place all at once. • Big bang: The company may be Each company will have to decide confident and bold enough to• For whom? Is the transformation which implementation model is fea- decide that it doesn’t have time to necessary for all business units, sible and how it affects processes, introduce incremental transforma- or can it be applied to a particular people and culture, and technology tion but will instead opt for step- market? The company will have to platform architecture. change improvements by completely decide which parts of the busi- redesigning its business processes ness will be impacted: consumer • Who? Is there an in-house capa- around an online core. This could product lines, small and medium- bility to develop the necessary IT mean using one of several com- sized businesses, large corporate framework for all parts of the busi- mercial off-the-shelf platforms accounts, mobile customers, ness, or should this be bought or and enlisting external help. A “big fixed-line customers, or everything. licensed from off-the-shelf provid- bang” initiative should be driven by Scope determines complexity, cost, ers? How critical will bringing in a clear top-level mandate and man- and speed. external skills and talent be to the aged by an internal leader who is success of the transformation? authoritative and well connected.• What? The operator must decide which processes and which chan- E-business transformations follow one • A greenfield approach: This nels will be e-enabled and in what of three implementation models: company-within-a-company model sequence. For example, will the starts from scratch without the e-business transformation be lim- • Incremental development: The burden of legacy systems and builds ited to marketing and sales or will company decides to enhance an e-business platform for a specific it focus on retention and loyalty specific processes and e-channel market segment using new people management or customer care capabilities that are closely aligned and new methods. processes? And will it move beyond to the existing operating model. It the Web and mobile interface to then plans a system-wide front- andBooz & Company 7
  • 10. Conclusion E-business is the future of telecom- munications, just as it is for banking, but also to improve internal business operations. travel, retail, and other industries. Telecom operators that do not adapt An e-business transformation may not only will lose out on significant seem daunting, but it can be an growth opportunities but also may invigorating prospect for large com- find it hard to fend off core business panies. If it is done well, the payoff attrition. E-business is not just a new is substantial in terms of cost savings sales or service channel; rather, it and growth potential; more impor- involves a holistic end-to-end rethink- tant, it gives telecom operators a ing of all operations from back-room chance to reset their business model. IT architecture to front-end customer By taking this opportunity to adapt touch points. The ultimate goal is to to the online sales environment now, bring as many operations as feasible they can move quickly and confi- online in an integrated fashion, not dently into one of the 21st century’s only for better customer relationships strongest growth businesses. An e-business transformation may seem daunting, but it can be an invigorating prospect for large companies.8 Booz & Company
  • 11. References“Evolution or Revolution? Strategies for Telecom Billing “Multi-Channel Customer Management: Delighting Consumers,Transformation,” by Jens Niebuhr, Andreas Späne, Dr. Germar Driving Efficiency,” by Dr. Michael Peterson, Dr. Florian Gröne,Schröder, and Dr. Florian Gröne (Booz & Company, 2010). Dr. Karsten Kammer, and Julius Kirscheneder (Booz & Company,www.booz.com/media/uploads/Evolution_or_Revolution.pdf 2010). www.booz.com/media/uploads/Multi-Channel_Customer_ Management.pdf“Leaner & Keener Telecom Operators: Eliminating Waste Booststhe Bottom Line,” by Andreas Späne, Dr. Florian Gröne, OlafAcker, and Dr. Roman Friedrich (Booz & Company, 2010).www.booz.com/media/uploads/Leaner_and_Keener_Telecom_Operators.pdfAbout the AuthorsCarlos Severino is a partner Dr. Florian Gröne iswith Booz & Company based a senior associate within Madrid and a member of the Booz & Company based incommunications, media, and Berlin and leads the firm’stechnology practice. His areas CRM Center of Excellence inof expertise include strategy Europe. He supports tele-development, specifically communications companiesrelated to marketing, customer and ICT service providersservice, and sales channels. in developing their market positioning strategies, manag-José Antonio Tortosa is a ing large-scale front-officepartner with Booz & Company transformation efforts, andbased in Madrid and a mem- improving technology deliveryber of the communications, efficiency.media, and technology prac-tice. He focuses on business Christopher Rischard isstrategy, marketing, and sales a senior associate withfor fixed, mobile, and conver- Booz & Company based ingent operators across Europe Madrid, primarily workingand Latin America. with media, telecommunica- tions, and high-tech clients. His focus areas include capabilities-driven digital and e-business strategy and operating model design and transformation.Booz & Company 9
  • 12. The most recent Worldwide Officeslist of our officesand affiliates, with Asia Brisbane Istanbul Middle East Florham Parkaddresses and Beijing Canberra London Abu Dhabi Houstontelephone numbers, Delhi Jakarta Madrid Beirut Los Angelescan be found on Hong Kong Kuala Lumpur Milan Cairo Mexico Cityour website, Mumbai Melbourne Moscow Doha New York Citybooz.com. Seoul Sydney Munich Dubai Parsippany Shanghai Oslo Riyadh San Francisco Taipei Europe Paris Tokyo Amsterdam Rome North America South America Berlin Stockholm Atlanta Buenos Aires Australia, Copenhagen Stuttgart Chicago Rio de Janeiro New Zealand & Dublin Vienna Cleveland Santiago Southeast Asia Düsseldorf Warsaw Dallas São Paulo Auckland Frankfurt Zurich DC Bangkok Helsinki DetroitBooz & Company is a leading global managementconsulting firm, helping the world’s top businesses,governments, and organizations. Our founder,Edwin Booz, defined the profession when he estab-lished the first management consulting firm in 1914.Today, with more than 3,300 people in 60 officesaround the world, we bring foresight and knowledge,deep functional expertise, and a practical approachto building capabilities and delivering real impact.We work closely with our clients to create and deliveressential advantage. The independent White Spacereport ranked Booz & Company #1 among consultingfirms for “the best thought leadership” in 2011.For our management magazine strategy+business, visitstrategy-business.com.Visit booz.com to learn more aboutBooz & Company.©2011 Booz & Company Inc.