Building a Business Model for a Better Connected World

According to the visionaries attending this year’s Mobile World Congress, everything is become digital. Whether wearables, kitchen appliances, factory equipment, education, hospitals or cars, nothing will escape the next industrial revolution of digitalization. Over the first three days of the show, how this should be addressed by the operators’ networks has been covered in intricate detail, with 5G, SDN, NFV and cloud technologies just a few innovations showcased by those exhibiting. 

 

It is important to remember, though, that this is just one part of operators’ concerns. The evolution of communications from voice and SMS to multimedia formats like video has already cost them dearly, with more and more of their customers moving towards OTT services. For the next disruption, then, operators need to learn new ways of doing business to ensure their profits don’t suffer further. 

 

As perhaps the biggest disruption to hit the telecoms industry in recent years, OTT players and services have to be the first factor to be taken into account when considering what the new digital business ecosystem for operators should look like. 

 

The emergence and subsequent popularity of OTT services has forced operators to lower voice and SMS prices to stay in the game. This has not been enough to eliminate the OTT threat, which manifests in two areas, revenue and customer relevance, with the latter often being viewed as more fundamental. When OTT first came to the fore, the ambition of these service providers seemed clear – take the carrier’s place in the customer’s mind and relegate operators to a wholesale role. And OTT players with wide service portfolios have certainly eroded customer loyalty to operators’ brands, and displaced SMS. But, with OTT content providers depending on carriers to upgrade networks to ensure that their services continue to run quickly and reliably, there is also opportunity for carriers, as OTT providers drive traffic and generate the potential for mutually beneficial partnerships.

 

The question for carriers, therefore, is whether they should compete with OTTs or collaborate. During a presentation titled “Roads for SMAC’, Anthony Mark Johnson, Global VP ICT Services, Strategy and Marketing, of Huawei, sug gested that the latter approach is not only desirable, but necessary. 

 

“In this new world of SMAC, the world of B2B is not just going to be about the supplier and the customer,” he said, “It’s about partnerships, it’s about living together, sharing the consequences and driving everything forward together. This is a whole new world of communications and it is changing all the time which means carriers don’t just need to deal with this innovation, they also need to be prepared to deal with the next one, and partnerships can be an effective way of achieving this.”

 

Partnerships between operators and existing OTTs, then, can enable both to reap the benefits of OTT content being made available to consumers but, of course, this is not the only factor that will come into play in the new digital ecosystem. 

 

The quality and experience a service delivers are equally important, as highlighted by Johnson: “Huawei’s new concept, based on architecture designs to enable ROADS (Real-time, On-demand, All-online, DIY and Social) looks at the customer experience before anything else,” he said. “Even with all the new technologies in the world, without customer experience you have no insurance. Customer experience is going to drive business strategy and operators need a business model that supports this.”

 

Pedro Lopes, Senior Advisor Consulting System and Integration, of Huawei, agreed. Urging operators to ‘Seize the Chance of Massive Traffic’, Lopes said that in order to become a leading brand, superior network quality was a must. 

 

“Operators now benchmark themselves against others as marketing tool,” he continued. “Service quality drives revenue, for example, if Amazon experiences an access delay increase of one second, the average loss will be $1.6 billion a year.”

 

According to Lopes, in order to develop a business model based on customer experience, operators must first ensure quality is guaranteed through better network performance. 

 

“To materialise this vision, we have developed four key elements,” he explained. “Brand ranking improvement, massive traffic forecast and accurate planning, service quality improvement and key event assurance. The business value of deploying solutions which focus on these four elements includes high ROI, superior quality and gaining that all important status of becoming a leading brand by highlighting benchmarks.” 

 

While partnerships with OTTs and focusing on customer experience will help operators, this telecoms-focused transformation is not enough. To really transform their businesses for the digital business ecosystem, carriers will have to look further than this to other industries. This need results from the common belief that eventually everything will be connected over the network, as Dong Sun, Chief Architect of Digital Transformation Solutions, explained.  

 

“All industries are evolving fast due to innovation of technologies,” he said at presentation titled “Enabling Transformation to Digital Operator’. “The telecom industry is facing unprecedented opportunities, with the digital transformation market worth $15 trillion. ROADS requires new operation models; digitalization and the internet are not just for operators but also for other industries.”

 

The question, then, is what does a business model involving partnerships with companies from other industries look like? In other worlds, how can operators transform into connectivity enablers?

 

Huawei was among exhibiters at Mobile World Congress to put forward proposals. 

 

Senior Business Consultant Mac Taylor presented the idea of a global platform at a talk titled, ‘Innovative ICT, Building a Better Business Model’.

 

“The Huawei platform allows specialist service providers to be integrated onto one host space,” he said. “Once these services are loaded onto the platform, the operators have multiple services that they can deliver to customers. This replaces the more traditional supplier customer model and looks at revenue sharing instead.”

 

As with networks, then, building a new digital ecosystem is likely to take some time to achieve and involve some trial and error. As Taylor put it, the key takeaway for operators is: Be willing to fail fast in order to succeed.