The Dual Existential Crises of Telco

By Gareth Jude | Sep 8, 2019 | 0

For a long time, retailers thought they needed to become technology companies (some still do).  As all this was happening, I was head of retail operations for Australia’s largest telco and thought I had the opposite journey to make in trying to help a technology company become a retailer. When hanging out in retail circles, I may as well have been back in my high school days, feeling like I don’t fit in but being the nerd that is meant to have all the answers. However, it wasn’t long before we realised that we were all getting distracted.

Hindsight is a delightful and embarrassing friend. I and many others had thought about the problem the wrong way. We originally thought that the answer was obvious, technology is primary, and it will inevitably lead to us all becoming digital e-tailers and stores will close, it’s just super challenging to execute because no incumbent has done it well yet. The truth, however, is that we were accelerating without looking. This led to the industry taking a couple of wrong turns: Firstly, technology is one form of innovation, but not the whole answer and often not the answer at all. Secondly, we ruthlessly hunted down efficiency and automation, digitizing everything so that we could reduce our cost profiles and meet what we thought was our future (one where physical retail was dead). It wasn’t, nor is it now. The super smart co-founder of SHOWFIELDS in NYC, Tal Zvi Nathanel recently said “traditional retail is not dead, the traditional consumer is”. As I said, hindsight is delightful.

So, retail is going through this existential crisis, but what about Telco? That’s where it gets interesting. They are having their own, very different existential crisis at the exact same time, and it’s going to require some specific actions if carriers the world over want to keep growing and prepare for the inevitable increase in disruption.

The Core Telco Existential Crisis

Telco’s globally are at the core of some of the most emotive and important experiences of our lives. They let us share pictures with the family, video call them on important days, they help make our careers and let us work from anywhere and more productively than ever before. They are the reason we can watch that new TV series, the big game, the grand final. They facilitate the downloading of our favourite apps and music. Yet telco brands share in little to none of the goodwill that generates. Instead, all this goodwill goes to the manufacturers of the device, the builders of the apps, the accessories we connect to them.

Right now, from a customer’s point of view, a telco is exceeding expectations if they’re invisible. No outage, accurate bill, and no drop outs or data speed issues.  We can’t complain though, it’s a world we created for ourselves, and it is a symptom of the struggle we’ve had defining ourselves over the decades since the original incumbents separated from the post office. Are we a utility? A government organization? A retailer? Something different and unique? Some have gone down the path of being engineering and technology companies, others a marketing & sales business. Over time though, especially recently, we have realised the value of customer experience. However, that in-and-of-itself is being disrupted by a second existential crises that exists in retail. Essentially, telco’s have two crises to face down:

  1. The thing that has generated most value in the past (connectivity) for Telco’s is increasingly commoditized and the relationship has become one of ‘please be invisible’ and ‘the bill’
  2. The services offered in their retail channels, including stores are subject to retails own existential crisis (i.e., role of stores and service channels must adapt to modern consumer behaviours and preferences)

So how is it manifesting itself?

 The big incumbent or premium whole-of-service brands are banking on being more than connectivity. Two different examples coming out of the US are the branding shifts of AT&T and Verizon.  Verizon is tripling down on its investment as the network leader. They want to be known for their network flexibility and performance innovation, and its ability to be adapted to suit your life and work. Couple that with specific investments in customer experience moments that improve NPS performance and the brand is banking on being the best of the connectivity providers.

AT&T is far more interesting to me though (interesting doesn’t mean correct or better). Their focus is on the go-to-market strategy and how the brand is manifesting itself. Don’t get my wrong, Verizon is also having a go here, but not to the apparent extent of AT&T. The latter appears to be trying to get its fair share of the goodwill that the products they sell generate. An example of this is their Chicago GameNOW store. It has taken on many roles before, but recently it was completely revamped to focus on the Pokémon Go style Wizarding World of Harry Potter. The store was kitted with hands on experiences all about localized game culture. From old school arcade games and pinball machines, including local leaderboards, to state-of-the-art VR/AR immersive gaming experiences like Magic Leap.  The challenge though, is that the customer hasn’t followed yet. Telco’s are still a connectivity brand, a means to an end, and customers are continuing to come in for utility-style transactions in their droves.  It appears that the marketing and brand direction is right, based on consumer trend data, that customers want more emotive reasons for being with a brand than simply the best connection (especially in a world with increasing levels of network parity). This store is an amazing experience and visually impressive, as is their San Francisco flagship, or any of them for that matter. However, the jury is still out as to whether Telco’s can evolve to this space and be emotively connectable beyond their existence as a preferably invisible connection and the bill.

Does it really matter, though?

This isn’t just a battle for identity and reason for being, but one that defines how to differentiate and generate future growth. The two crises link together and, once solved for, will enable the brand to grow (or shrink costs if you choose the utility path, which I can’t imagine many will).  Many carriers are engaging similar strategies as they talk about how to grow their core and expand beyond it. In order to do that, there must be a reason that customers want to join you and give you their money and loyalty. This is where it gets complicated and the importance of the two existential crises.

Part one – Pushing your Brand beyond utility status – Telco’s need to stand for something, and the increasingly likely contender is to build their organization around the role they play in enhancing their customers digital lifestyle. Be the technology life stylists, the experts, the trusted advisors in everything connected. The core being the home and the business, building outwards from there. There are lots of options and different carriers in different markets will work through their own, but the result must be the same: A trusted, valuable advisor and expert, not a utility.

Part Two – Moving your channels beyond transactions – The challenge is, at the same time, telco’s need to respond to the retail crisis. Without an organization built around customer focused channel innovation that is responding to changes In the way humans want to interact with brands, then any change in their own identity is almost worthless.

Hence the double challenge: keep cutting costs and working on being that ‘invisible’ utility and maintain the ‘billing’ relationship with customers. Or, look for growth and invest to respond to the two crises by creating a brand people want to join and deliver services and a stunningly curated set of products and innovations through a reframed, modern channel environment.

Now, before I get the angry replies, yes, I know the core product is more complex, but so is the process of designing and making a phone, but Apple is a retailer as well. We look at Amazon as a retailer, but all they do is sell another people’s stuff through their ‘network’. Their ‘network’ just happens to be logistics and supply chain, rather than connectivity and 5G. We just need to reframe the way we think of our identity in the context of our customer’s lives and make sure we find the area that they would let you operate in, and then design and create a brand that fulfills that role. The clear one where telco’s have a right to play, is in ‘digital lifestyling’. That is, the curated set of connected devices, software, services etc. that enhances the life and work of customers.

So how does one do all this fancy stuff? With great difficulty! This is a summary of a story, that might have some points you agree with, some you don’t. No matter what, executing on this change is going to be seriously difficult. However, because I’m never shy of an opinion, here’s mine!

Andrew’s rant/ (probably subjective) opinion

Retailing, by definition, comes from the French re-tailler, “a piece cut-off”, simply to re-cut. It basically means to take a large produced thing, cut it down into consumable chunks and get it to a customer. I propose that telco companies worldwide need to reframe their definition and join the ranks of retailers. They do exactly that with their network anyway, so it’s not a stretch to suggest that they do it across a broader expanded range with a new personality and go to market philosophy.

Every brand will have its own priorities, but from my experience looking into the operations of several across the globe, here’s a starting list of actions needed to start the journey:

  1. Purpose!– We always start there because it is the core of our story, strategy, product and service. It’s everything about your brand and nothing else can be done without a strongly defined purpose. This is different to visions and missions, it’s a core ideal that helps motivate teams to do the right work for the right reasons. A great example, if not constantly used is Nike. “Our purpose is to unite the world through sport to create a healthy planet, active communities and an equal playing field for all”. Delightful, right? Helps people make decisions, understand the type of emotional connections to create with customers, and guides the type of products and innovations to pursue. We can’t all be Nike, but we can certainly learn from them in proving the case for the power of purpose.
  2. Reframe your definition of Customer Experience– This helps you solve existential crisis part one – pushing beyond utility status. Often in telco, customer experience has so many factors it is hard to define. Network experience, sales and service experience, bill experience, the list goes on. However, taking an outside in approach and thinking about you in their lives rather, their context, their behaviours to redefine the entire experience to be optimal is a good start.  Don’t be afraid to think outside the box here, and don’t be afraid to not think about it as a telco, but as a customer-obsessed retailer would.
  3. Design a curated product strategy –One that is beyond your core that links to your newly found purpose and brand image. This will need choices, unless you have the capability to do everything, but plot out options based on feasibility for you based on your capability and how it links to your new retail personality!
  4. Now it’s time to think about existential crisis part two – moving channels beyond transactions. Start by thinking about your retail store and digital channel capability – I have two bits of advice here: firstly, follow step one first. Secondly, not everything needs a restack and billions of dollars. Be smart about changing what needs to be changed. Get a CIO who knows that. Then it’s time to think about your stores!
  5. Get the marketing team to retell your story and purpose and invest in stores as the billboard.Stores are too-often either getting ignored or are not getting traction as they aren’t linked to a broader customer experience change. They are the physical manifestation of that new brand story and core to any pivot to becoming a trusted advisor, so use them well and design them to deliver on the key roles of:
  • Telling your brand story
  • Allowing customers to discover new parts of their digital lifestyle
  • Deep customer care – telco is complicated, give your customers a place to get help and they will be in your stores immersed in your brand and product set. The math works.
  1. Redirect your network strategy around delivering your curated product strategy – with 5G here and the movement towards fixed mobile conversion already in scope for a huge number of providers globally, it’s time to think about how yours is going to work. Remember, after overcoming this dual-existential crisis, network decisions are going to be important to help with evolution.

It is a lot, but we must run towards the fire.

Facing into a dual existential crisis sounds hard, and it is, but the advantage is you can redefine yourself just once! Silver linings are everywhere. If we use our hindsight and realise that delightful quote from earlier “traditional retail isn’t dead. The traditional consumer is” and reframe what it means to be a telco in this new world, then Telco’s can set themselves on a path towards growth that is not only aligned with the way the consumer is trending, but also is built around sustainable growth from the core business.  It’s just going to take a bunch of courage to redefine that many parts of the business in one go and shift a culture against the natural tendencies of an industry with such a complicated upbringing. But all good things require effort.

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