The competitive landscape for communications service providers (CSPs) is shifting, writes Peter Sinclair, MD: communications, media and technology business at Accenture in South Africa.
With barriers to entry collapsing, a new class of digital competitors is leveraging scale to spend far more than traditional providers can on engineering resources, product innovations and customer experiences.
For example, one of the leading over-the-top (OTT) provider of streaming video spends more than 20 times as much on customer recommendations as the average pay TV provider, and has roughly five times more resources who describe their roles as primarily dedicated to customer experience and user interface (UI). These digital disruptors have established a new standard of simplicity for the customer experience and a rate of new feature introduction that incumbents in both communications and media are struggling to match.
In seeking to fight back, CSPs have so far found it difficult to convert incumbency into an advantage. Their traditional approaches to revenue growth are no longer sufficient — the commoditised core of their business is not generating adequate returns and their legacy operating as well as technology models are highly siloed, proving to be unscalable. Meanwhile, a “me too” approach to digital initiatives has been insufficient to offset an ongoing, progressive reduction in customer stickiness and loyalty.
The good news for CSPs is that they now can take advantage of the emergence of a new, exciting world of living services, starting with services to the home, that is creating new ecosystem value chains and new potential for profitable revenue growth. “smart home” technology uptake has been slowly building over the last few years, with early-adopter consumers introducing elements such as connected security, smart thermostats and voice activation systems into their homes.
Now, however, such services are simply “aggregated,” rather than truly integrated. In other words, consumers are engaging with each home device and application separately, using one company for broadband/TV, another for connected security, and other providers for other services.
Accenture believes this tendency toward aggregation is unlikely to persist. Instead, consumer mass market uptake and ease of use for the smart home will be driven through integration: by bringing together everything consumers need — including traditionally operated delivered services, such as broadband and TV, as well as newer smart home services — via one platform, with fully integrated, highly personalised service.
The demand is certainly there: Accenture research found that 80% of consumers surveyed want a single provider for all their digital needs. Now, CSPs need to develop platform businesses and ecosystems that deliver everything their customers want together in one integrated offer. If CSPs can create the platform of choice for customers and third-party businesses alike, then the smart home opportunity will prove extremely fruitful.
CSPs’ knowledge of consumers offers significant advantages. The data available through the platform about consumer behaviour will enable CSPs to identify potential additional services, and to pass these vital insights onto service partners.
If they are to take advantage of the new hypergrowth markets that are available to them, CSPs who need to become platform-based digital service providers will need to:
* Build exclusive control points on three levels: the devices, data, and the API gateway that enables the partner ecosystem, making possible a full portfolio of digital services.
* Focus on building reach, versus Average Revenue Per User (ARPU), working across traditional boundaries and providing service subsidies, as needed. This means rethinking the traditional boundaries between “inside” and “outside” the home, and potentially departing from their legacy network footprint.
* Use this reach, along with evolved platform capabilities, to onboard third-party service providers on an open API platform.
* Trade reach for authentication to capitalise on their opportunities for monetising B2B data, insight and marketing capabilities.
In all of this, they will need to build their platform capabilities at web scale — global, efficient, and priced to compete — while at the same time, providing customer engagement that is truly differentiated.
The offering starts with getting the in-home connectivity experience right, and migrating to the next-generation hub that will enable the smart home to take off. The key to success is for every part of this journey to be built from the customer perspective.
