Strategy & Best Practices

Three Ways Telcos Can Learn to Stop Worrying and Love Digital Transformation

By Ideas @ AppDirect / February 27, 2018

If “digital transformation” is the phrase of the moment in your organization, you’re not alone. Analyst firm IDC recently released some new numbers on the state of digital transformation, and they are eye-opening. By the end of 2019, the firm expects spending on digital transformation to reach $1.7 trillion worldwide, a 42 percent increase from 2017. And we’re not just talking about small projects; by 2020, 60 percent of all enterprises are expected to have an organization-wide digital platform strategy.

For telcos, ISPs, and other communications service providers (CSPs), the digital transformation question is especially urgent. Over a five year period ending in 2016, the telecom industry has faced slow but steady decline as consumer preferences have begun shifting to digital. Revenue growth in the telecom sector is down from 4.5 percent to 4 percent, margins are down from 25 percent to 17 percent, and cash-flow margins are down from 15.6 percent to 8 percent, according to McKinsey.

Forty-nine percent of executives express a “fear of change” when digital transformation initiatives are proposed.

Despite the clear need to embrace new digital strategies, almost half of organizations openly admit that they fear digital transformation. In a recent survey of more than 1,000 business leaders, 49 percent expressed a “fear of change” when digital transformation initiatives are proposed. Even so the fact remains: CSPs that don’t digitally transform will be left behind. How can you learn to stop worrying and love digital transformation and the changes it brings? Here are three ways.

1. Agree on What Digital Transformation Means for Your Company

Platforms? IoT? AI? Does your digital transformation strategy include any of these, or maybe all of the above? It’s okay if you don’t know at the moment, but you need to find out. If you don’t know where to begin, a good place to start is gathering together the internal stakeholders—and sometimes outside experts—that you’ll need to help identify and shape your organization’s digital transformation strategy.

Many organizations are fast-tracking digital projects by hiring a dedicated digital transformation team. According to IDC, at least 40 percent of organizations will have a digital leadership team by the end of 2018. If you don’t yet have the buy-in to hire or form a new a team, then the process will likely move more slowly, but it is far from impossible. To move forward, you will need to find executive sponsors, align internally on a definition for digital transformation, and communicate cross functionally to get the buy-in you need.

2. Create a Culture that Welcomes Partnering—and Change

A key aspect of your digital strategy needs to be partnership. A platform ecosystem consisting of multiple partners will provide more value to your innovation-seeking customers than a single company ever could.

In a report on digital transformation initiatives in the telecom industry, the World Economic Forum notes that legacy CSPs and digital-focused newcomers “operate with distinctly different ‘received wisdoms.’” Often, CSP leadership can be stuck in old ways of operating—be them behaviors, processes, or a focus on short-term metrics—that can stymie innovation. An unfortunate side effect of these attitudes can be a culture that fears failure rather than embracing new ideas.

Legacy CSPs and digital-focused newcomers “operate with distinctly different ‘received wisdoms.’”

If this sounds like your organization, it’s time to change, but it won’t happen overnight. It can take small steps to lay the foundation for sweeping transformation. For example, when you form a new partnership, remember to highlight the benefits of the relationship—both to your customers and to internal stakeholders. Seeing the positive impact of being more open will help create an organization that is more welcoming to change over all.

3. Use the Customer As Your Guide

Digital transformation is complex. It can (and should) touch every part of a CSP, from inside corporate headquarters—IT, finance, and sales teams—to employees at brick-and-mortar locations. Given its complexity, many CSPs fear trying to do too much, or doing too little—and failing to create a strategy that will deliver value either way.

One of the easiest ways to determine if an element of your strategy is necessary is to ask a simple question: “Does it enhance the customer experience?” If the answer is yes, then move forward. If the answer is no, then you can safely ignore it. If you don’t know what your customers want, particularly when it comes to digital, then now is a great time to find out. Invest the time and resources in surveys, focus groups, and other data-gathering methods to understand what your customers want.

Embracing Digital Transformation

Digital is the way of the future, especially for CSPs who are already facing pressure from startups and rapidly changing customer preferences. The payoff for companies that get digital transformation right can be huge, which makes it well worth it to face your fears and embrace change. For those CSPs that learn to love digital transformation, success is on the horizon.

Ideas @ AppDirect is a leading source for trends, statistics, best practices, and other information related to the digital economy.