This continues a series of columns from practitioners I respect. The category "Real Deal" describes them well.
This time it is Martin Geddes, profiled in my book in the chapter on telcos. He is a thought leader on business models in the telecommunications industry. He provides consulting services to Boards, CEOs and CTOs seeking a thinking partner and critical friend. Martin was formerly Strategy Director at BT Innovate & Design, and Chief Analyst at Telco 2.0.
“Voice and messaging services are the core business of telcos, comprising over 70% of global telecoms revenues. Voice is also the quintessentially human communication channel, as well as a natural interface between human and machine. Telephony will thus remain central to telecommunications for the foreseeable future.
However, minute-based revenues for both fixed and mobile services face decline as a result of competition, substitution, regulation, arbitrage and technology abundance, which forces telcos to seek new business models. The presumed alternatives – broadband and media services – do not offer comparable margins or profit. It is clear that telcos also lack competence and competitive advantage in application service development. Furthermore, companies such as Google – with the ‘Cult of Free’ – threaten the very essence of telco business models by offering free application and media services funded by ‘upstream’ advertising revenue. In future we can expect to see not only free services but also free distribution of those services (e.g. Google Voice) posing a direct attack on telco ‘quad play’ revenues.
Meanwhile, every enterprise engages not only in industry-specific processes but also in ‘horizontal’ business processes, from marketing to customer support. These commonly require customer contact via channels such as telephony, voicemail, SMS, or email. The capabilities and social customs of these channels are largely accidents of history, frequently deriving from analogue-era technologies. We collectively fail to transcend these old patterns when designing new systems that are intended to support B2C communication.
This has often resulted in the unhelpful positioning of the boundary between people and machines. Humans are often reduced to doing rote tasks that are better suited to computers, while computers are designated tasks they cannot perform satisfactorily. Thus opportunities for effective and value-adding automation are missed, with resultant inefficiency, ineffectiveness and insecurity for enterprises along with increased operational and working capital costs. Problematically for B2C communication, the effect is a poor customer experience. All too frequently, everyday business processes are bottlenecked by the capabilities of the communications channels between the enterprise and the customer.
The challenge for telcos is how to re-think their voice and messaging business model to address the loss of consumer revenue and compete against ‘free’, whilst protecting today’s telephony and SMS cash cows. For enterprises, the question is how to engage communications service-providers to eliminate the friction in their contact with customers, and then to go beyond this: creating new value by enabling new modes of interaction and personalisation.
Today telcos make money from ‘minutes, messages and megabytes’ as enterprises communicate with their customers. In future, they will need to address the ‘moments’ when these business processes are serviced through features of the communications media that carry them. This demand that telcos address three core enterprise communications needs:
1. The ability to connect with their customers.
2. Rich interaction with their customers.
3. Transactional services that integrate commerce and communications.
Rising to this challenge will require a rethink of how communications products are built and sold. This industry paradigm change will only be to the advantage of telcos if they act to embrace it. What enterprises demand is standardisation, global reach, and relevant functionality. The realisation of the Cloud Communications opportunity will necessitate a collaborative process among the key ecosystem players – enterprises, telcos, aggregators, systems integrators, network vendors. Achieving this will in turn will call for external strategists’ catalytic contribution.”
For a free white paper on how cloud communications forces a paradigm shift on the business model of telcos, contact Martin Geddes at email@example.com, or for more information see www.martingeddes.com