Trash the Rulebook

TRASH THE
RULEBOOKThe new rules of engagement are being written by
Communications Service Providers’ customers.
Releasing trapped value to make investments in
future B2C and B2B growth is urgent in order to
survive.
#NewAppliedNow
1Copyright © 2019 Accenture. All rights reserved.

THE INDUSTRY IS BEING
SQUEEZED FROM ALL SIDES
TOP-LINE GROWTH IS STALLING
REVENUES HAVE LEVELED OFF
CUSTOMERS ARE FINDING
NEW WAYS TO ENGAGE,
DIGITALLY
AND DIGITAL DISRUPTORS
ARE UNDERMINING THE
TRADITIONAL BASE OF SERVICES
THE RULES
HAVE
CHANGED

The commoditized core business isn’t
profitable and there’s ongoing substitution
with low cost, digital alternatives.
Shareholders are being kept with dividend
yields and share buybacks.
SHIFT &
DISRUPTION
OF VALUE

Barriers to entry & market boundaries are
collapsing and traditional approaches to growth
are no longer sufficient. Existing asset values
and historic positions of strength are eroding.
CHANGING
RULES OF
THE GAME

Ongoing reduction of customer
stickiness and loyalty. Incumbency is no
longer an advantage – CSPs are not an
essential part of the users’ daily
digital routine.
THE LIQUID
CUSTOMER
IS HERE

Infrastructure-bound, with vertical integration
and siloed operating models. CSPs have un-
scalable legacy operating and technology
models and legacy, engineering-based
workforces.
THE TELCO
RULEBOOK
IS OUTDATED

WHILE CSPS HAVE MAINTAINED INVESTMENT LEVELS,
THEY ARE FACED WITH DECLINING PROFITABILITY
Copyright © 2019 Accenture. All rights reserved.. 7
CSPs have experienced lower return on invested capital and profitability
CAPEX SPEND VS. ROIC
Percent
EBITDA
Percent
32.4%
29.7%
31.4%
29.0%
29.5%
30.0%
30.5%
31.0%
31.5%
32.0%
32.5%
33.0%
33.5%
34.0%
34.5%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
TTM
15.7%
16.4%
15.5%
12.5%
10.8%
5%
8%
11%
14%
17%
20%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
TTM
Capex / Revenue ROIC
Notes: 2018 data covers LTM numbers from Capital IQ. All exchange rates have been converted at constant currency rates of 2018.
Source: Capital IQ data for 70 companies; Accenture analysis; ROIC from Value Insights Platform

DISRUPTERS ARE BORN DIGITAL, BENEFITTING FROM
NEW BUSINESS AND OPERATING MODELS
While historic protections disincentivised CSPs to innovate, disrupters upended the market
by capitalising on core business model advantages to capture market share
TIME TO GET TO A $1BN DOLLAR VALUATION
20.0
8.1
6.2 5.9
5.1
4.4 4.3
3.4
2.8 2.3 1.7
Avg
Unicorns
DISRUPTIVE BUSINESS CHARACTERISTICS
YEARS
Disruptive businesses have
demolished the time to become a
$1Bn dollar business
S&P 500 /
DAX
Create an
ecosystem
of partners,
customers &
developers
Own the full digital
experience and
engagement
(cloud, network and
devices)
Operate as 2-sided
platforms vs focusing
on products
Embed data
driven feedback
loops to optimise
decision making
Adopt a different
business model:
the more you use
the more you grow
Foster a different
tech culture (fail
fast and learn)
Benefit from lack of legacy and
no need to maintain asset baseSource: comScore, Traction metrics, The Economist; oneweb.world; Accenture
*$110-120 in cities without Google vs $70 in cities where Google offers its fiber patch.
**Google estimate of $5 per served customer up to 120M served customers. ***Comcast Capex FY15, only Cable Business

TELECOM COMPANIES ARE LAGGING IN READINESS FOR
DATA-DRIVEN TECH CULTURE
Copyright © 2018 Accenture. All rights reserved. 9
Platform companies have invested in the skills required to become data-driven business,
while telcos are hampered by legacy and have fallen behind.
Source: LinkedIn; Accenture analysis
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
Time Warner
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[…
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
0%
5%
10%
15%
20%
25%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
% OF WORKFORCE IN ENGINEERING
%OFWORKFORCEINANALAYTICS

DISRUPTERS DRIVE EXPERIENCE USING DIGITAL
ENGAGEMENT, NOT PHYSICAL PRESENCE
Source: Goldman Sachs; Accenture analysis
AT&T
APPLE
VS.
31
KPN
Telecom Italia
Verizon
BT
38
41
64
69
1,181
Retailing
Online/Digital Services
Technology
Hospitality
Financial Services
Insurance
Telecom
50
46
37
28
24
23
11
…BUT STILL TYPICALLY SCORE POORLY
IN TERMS OF NET PROMOTER SCORES
Net Promoter Score by IndustryUnique subscribers (000s) per store – Domestic operations – 5
large Telcos Vs. Apple
TELCOS HAVE A LARGER RETAIL
PRESENCE PER CUSTOMER VS. DIGITAL
DISRUPTORS…

DISRUPTERS HAVE SEIZED OPPORTUNITIES IN B2B
WHILE CSPS HAVE FAILED TO INVEST
 Only few CSPs with a
successful B2B play
 Digital natives such as
Amazon (with AWS) and
Google are clearly the
B2B revenue growth
leaders recording growth
rates of 30-50%
 They started to transfer the
magic loop of ever
increasing customer
relevance from B2C to B2B
Notes: B2B Penetration implies B2B revenues as a % of total revenues
Source: Company reports; Accenture analysis
The new and continuously evolving ecosystem landscape required a radical change for
telcos: learn from cloud companies, or partner for growth.

BUT WHAT IF THIS
COULD BE FLIPPED TO
ARACE TO THE TOP?
Cost savings are
now re-invested
to fuel future
growth
WITHOUT INVESTING
INAFUTURE GROWTH
MODEL IT’SARACE TO
THE BOTTOM FOR CSPS
CSPs are currently
just surviving by
optimizing their core
business to save
costs and pay
dividends

1. TRANSFORM THE CORE BUSINESS
…by building more competitive cost structures to improve flexibility,
increase profits, and drive up investment capacity.
2. GROW THE CORE BUSINESS
…by redirecting some of that investment capacity
to drive incremental growth in the core business.
3. SCALE NEW BUSINESS
…while identifying new sustainable business models which
leverage and monetize key control points and scale them
(at the risk of core business cannibalization).
4. PIVOT WISELY
…by keeping an eye on pace and balance. The “core” and “new”
businesses usually need to co-exist for a substantial period of
time.
13
SCALING NEW GROWTH IS A DELIBERATE AND
PERPETUAL CHANGE JOURNEY, NOT A SINGLE EVENT
Copyright © 2019 Accenture. All rights reserved.

Leverage the valuable heritage of telecoms experience –
customers, billing relationships, networks, security, and
trust - to embrace new competitive advantage and find new
growth.
PLAY TO
YOUR
STRENGTHS

NETWORK ROLE NETWORK INVESTMENT STRATEGY
 Drive the most cost competitive in-
country connectivity (all digital,
portfolio simplification)
 Open to shared or outsourced networks
 Software defined and agile control
points to build customer intimacy
 Foundation capability to provide
connectivity services
 Provides critical control points: SIM
cards, CPEs
 Differentiating capabilities ahead of
competition (low latency, own IPs, MEC,
topology of services)
 Provides critical control points:
connected objects and ubiquitous
policy management
 Focus on best quality, features and
coverage
 Walled garden for distinctive network
capabilities and control points
 Articulated organization and tech platform
for service creation and exposure
Multi-sided
platform model
Connected Industry
Orchestrator
SUCCESS DEMANDS ADEPARTURE FROM TODAY’S MODELS
AND COMPETENCIES –AND PLAYING TO ONE OF THE CSP’S
CORE STRENGTHS – THE NETWORK
Pervasive
Network
As an
Enabler
for New
Growth

INTELLIGENT OPERATIONS
Transform the operating model towards
customer-centricity and agility while leveraging
automation (RPA, AI) into the core culture.
PROGRAMMABLE PLATFORMS
Transform the cost base and the customer
experience by creating software defined,
programmable and reusable solutions, driven by
insightful data and end to end orchestration.
DYNAMIC NETWORK SERVICES
Rapid launch of software driven services to keep pace
with client desires and expectations (B2B, B2C, 5G)
supporting a Multi-sided platform model as well as a
Connected Industry Orchestrator model.
GROW + TRANSFORM THE CORE
MIGRATIONS/DEPLOYMENT
Ultra lean management of legacy network, in
parallel to accelerated migration towards new
stack and deep densification of Fiber & 5G. Needs
a two speed approach to migrate and sustain while
building the new
THE PERVASIVE
NETWORK
OUTSIDE IN INSIDE OUT
THE PERVASIVE NETWORK IS DRIVEN BY INSIDE OUT,AND
OUTSIDE IN, TRANSFORMATION

WITH SUCH DISRUPTIVE TRENDS, TELCOS MUST ACT
FAST TO LEAD OR LOSE IN THE FUTURE VALUE CHAIN
SUMMARY IMPLICATIONS
 Global industry growth is anaemic: globally, traditional CSPs revenues have stalled
 Value shifts to digital players: tripling in comms industry value driven by platform growth
 Strength in North America: NA CSPs have seen some success via diversification strategies
while European CSPs have focused on consolidation and have fallen behind
• Examine new growth areas carefully, and look for
opportunities to make shift along the value chain
to occupy other profit pools, or find new ways to
monetise existing offerings
 Regulatory protections are fading: traditional telco strongholds are being eroded
 Digital business models drive platform growth: disrupters leverage new business models
built on speed, reach, and scale
 Customer lifetime value is key: platforms export customer loyalty across an ecosystem of
products & services to optimise customer lifetime value
• Launch a digital transformation program to revisit
competitive position, business models,
investments, and services in B2C and B2B
markets
• Enforce rotation to a relevant platform play
 Customer expectations continue to shift: disrupters raise the bar on customer experience
 Capitalising on emerging trends is key for B2C: relevance, brilliant basics, security & trust,
and ease of experience are front of mind for B2C
 Disrupters have seized opportunity in B2B: telcos have been held back by current business
models, but can target specific pools of value
• Adopt user-centric, digital first, and data-driven
experience design
• Learn lessons from leading B2B services
providers to target SMB customers with a
relevant and balanced service portfolio
 Growth of the physical internet: the internet moves from connecting people to people to
connecting things to things with autonomous data exchange becoming the norm
 Edge enables new applications: security, privacy, and convenience is moving to the edges,
giving devices and proximity a new relevance
 Future value lies in orchestration of this ecosystem: landscape is already crowded
• Enable software defined, reliable, secure data
highways with smart connectivity (incl. 5G)
• Move early to occupy the orchestrator role,
creating multisided cloud based platforms and
capitalising on proximity and trust advantage
Source: Accenture analysis

RIDING ON THE DISRUPTIVE
TRENDS, THE CSP CAN
REINVENT ITSELF

Look for new growth
opportunities in B2C
and B2B
Become embedded in the
digital routine of consumers,
and provide platforms and
vertical services for
enterprises.

Launch a digital
transformation program
Revisit competitive
positioning, business models
and services in B2C and B2B
markets. Enforce the rotation
to a relevant platform play.

Move to hyper-
personalization for
customers
Adopt user-centric, community
oriented,
data-driven experience design.
Leverage the credibility of telcos
around trust, security,
privacy and proximity.

Update technology and operating models
Build software-defined, highly reliable, secure data highways,
specialized network clouds and smart connectivity, including 5G.
Anchor multi-sided, cloud-based platforms increasingly on
edge devices for reliability and security, allowing telcos
presence, proximity and trust advantage.

Success demands a departure from today’s
models and competencies if CSPs are to scale
new growth models.
PICK
YOUR
PLAY

TO ROTATE TO THE NEW SUCCESSFULLY, CSPS
NEED TO MODIFY THEIR DNA
CORE CAPABILITIES
• The future of work evolves from “jobs” to
“roles” in a liquid model
• Workforce development, training and
capability building become
central tasks
• Operating model transformation will
blur traditional foundational models and
establish agile collaboration
• Empowerment is at
the center of future
performance management
OPERATING
MODEL
• Hyper-individualization and
contextualization of services
• Future service models manage the
tradeoff between Revenue Per Customer
and Reach
• Investment and capital allocation ruled by
platform economics and (for product
development and innovation-related
processes) - flexibility over efficiency
BUSINESS
MODEL
• Customers expect that services
understand them and not the other way
around
• CSPs need to adopt
a more customer-centric, data driven,
experience designed approach
• Channel specificities
and audiences will be managed
consistently through a system
of engagement
• Co-creation and continuous learning to
improve the experience
CUSTOMER
ENGAGEMENT

CORE CAPABILITIES
• CSPs will operate software defined and
virtualized pervasive network stacks
• Key capabilities are centered around
providing digital highways, specialized
network clouds and smart connectivity
• Network transformation follows a smart
combination
of customer centric and efficiency
driven approaches
NETWORK
• CSPs need to operate
a digital multi-speed IT and network
stacks to get on with the digital portfolio as
soon
as possible
• Federation of decoupled platforms across
IT and Network
• IT and networks will be a central part of
day-to-day value creation, and the
engineering teams will have to become true
business partners
TECH
STACK
NEW GROWTH MODELS NEEDANEWAPPROACH TO
ITAND NETWORK INVESTMENT

Unleashing trapped value through
cost optimization is just the first step.
We help you reinvest smartly and
scale new growth in a future business
model that stays true to your core.
TUNE UP

Trash the Rulebook

More Related Content

What's hot

Similar to Trash the Rulebook

More from accenture

Recently uploaded

Trash the Rulebook