Telecommunications

Telecoms leaders: Are you ready to disrupt?

Chris West Chris West

Established telecoms players are navigating a tricky landscape. While the number of people using mobile services is going up, revenues have flattened thanks to the declining cost of connectivity. Added to this, the sector has been heavily disrupted by over-the-top (OTT) services from giants like Google and Amazon.

In the early 2000s it wasn’t obvious how the tech firms were going to impact the telcos, other than driving up demand for connectivity: it’s now all too clear.

In March, we held our annual dinner for telecoms business leaders in London. Discussion focused on how to grow revenues through diversification, how to compete with OTT suppliers like Amazon, as well as how and where to make the best tech investments. From the discussion emerged three key themes:

Accelerate growth by fostering innovation

One of the biggest threats to traditional players in the telco space comes from OTT services provided by the big five such as Facebook’s WhatsApp, Google Hangouts and Apple FaceTime. Not only do these firms seem to have a never-ending carousel of new innovations but every new service helps them grow to an invincible size; this has never been more apparent than in March this year, when Facebook had $80 billion wiped off it’s stock value1 and it’s future didn’t seem to come into question. This has made the challenge of competing with these businesses seem even more impossible for longer-established firms. 

To compete, many in the TMT sector are launching startup accelerators and incubators as a way of fostering innovation under their own roof. In April 2017, innovation foundation Nesta reported that there were 368 incubators and accelerators in the UK alone2, with many of these backed by corporates – proving that it’s a tried and trusted way of accelerating innovation. Telefonica has boosted its innovation credentials successfully with Wayra, now recognised as the accelerator of choice for the UK’s tech startups.

It’s all about agility

The only way to compete with the tech giants and nimble startups disrupting the telecoms market is to become more agile. With an investment decision cycle of five years, telecoms is significantly slower at taking new innovations to market than other sectors like media and tech, making it vulnerable to disruption.

One thing that many of the biggest global tech companies like Amazon, Facebook and Google all have in common is that they’re still led by their founders. Regardless of how large their businesses grow, with the founder at the forefront they can be significantly quicker in any acquiring or innovating decisions.

While being founder-led is not always an option for the majority of the UK’s telecoms firms, there are still ways in which they can go about being more agile. All attendees agreed that having a flexible strategy and being ready to adapt this to fast-paced market changes is key to staying competitive. They also pointed to the need to have a short-term business strategy alongside a longer-term one, with room to make tactical moves and acquisitions

Multi-sector revenue streams

Businesses like Netflix and Amazon have proven that the key to longevity in modern business is establishing multiple revenue streams. Amazon Prime and Apple Music are two examples of how big tech companies are diversifying into new sectors whilst retaining their core business proposition.

One attendee endorsed this strategy as a viable approach for telecoms firms looking to grow their revenue streams. He operates his company with a multi-sector strategy, with lines of business under four key areas: AI, big data, connectivity and cyber security. All attendees agreed that AI presented the biggest growth area for all businesses and represents a big untapped opportunity for telecoms.

There is no simple answer to the question of how to stay competitive in the ever-changing telecoms market. What’s clear is that businesses in this sector need to be thinking laterally, avoiding narrow viewpoints, when anticipating threats and spotting opportunities which don’t necessarily sit within their usual domain. However, only those which are brave enough to take action quickly will stand a chance of competing with behemoths like Amazon. It’s fast becoming disrupt or be disrupted for modern telecoms businesses.

To discuss the key themes from the annual telecoms event in more detail, please contact Chris West.

References

  1. Facebook has lost $80 billion in market value since its data scandal, CNN Money, 27 March 2018
  2. Incubators and accelerators: An updated directory for the UK, Nesta, 12 April 2017