A battle plan for telcos’ digital-attacker brands

06/03/2021 17:34

Many operators need to transform themselves to cope with new market conditions but have had difficulty making an organization-wide overhaul. A smart digital-attacker strategy may be the solution.

Global telecom giants currently find themselves at a critical crossroads. Although coverage is improving and speed is increasing with investment in 5G networks, revenue growth from voice and data is slowing in many markets. At the same time, the industry continues to have difficulty with meeting rapidly changing customer expectations, which are shaped by simple, personalized interactions that are made available by digital giants such as Airbnb, Amazon, Apple, Netflix, and Uber. Telecom operators’ average net promoter score (NPS), a key customer-satisfaction metric, has typically been in the 20s, versus more than 50 for many digital powerhouses

There is nothing simple about most telcos’ product portfolios, and that complexity is part of their problem. What started as a broad range of plans for a diverse customer base has evolved into a dizzying array of options that are difficult to under­stand and navigate, damaging the customer experience, especially in comparison with that offered by ascendant digital-native alternatives.

To better satisfy and hold onto their customers, some operators have started to build their own separate digital-native-attacker units. This approach has turned out to be less expensive and disruptive—and in some cases, more successful—than a holistic digital transformation of the core business. The nimble, new brands are also proving to be strong growth vehicles for their parent companies. Within four quarters from launch, the typical digital attacker has contributed close to 25 percent of overall gross additional subscribers (gross adds) to the incumbent operator, while showing total profitability that is more than five percentage points higher

Choosing to embark on a digital-attacker strategy in the first place is not a simple decision for a parent operator to make. In our experience, the organization’s leaders need to address several key questions before taking the plunge:

1. - Would the digital attacker help accelerate customer acquisition with a differentiated brand and value proposition that will serve an underserved or underindexed segment?
2. - What would be the cannibalization impact? Even if it is potentially significant, is there merit in a preemptive self-cannibalization strategy to protect “share in digital” (that is, cannibalize yourself before others cannibalize you)?
3. - Do the company’s existing technology and processes provide the means to test and learn quickly?
4. - Do the existing operating model, brand perception, customer expectations, technology stack, and business processes pose any challenges to launching a new proposition that is fundamentally lean and nimble?
5. - Is there an opportunity within the existing operating model to experiment with a more open ecosystem and telco adjacencies?
6. - Is there a cost advantage to explore by moving to an end-to-end or hybrid digital proposition?
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8. All of these players have shown that the key to a digital attacker’s success is having an agile, lean operating model that gives it the flexibility and nimbleness to make rapid changes, shift its business strategy, and go to market quickly. The five steps that we have identified are critical to achieving that goal.
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10. 1. Create a radically simplified and differentiated product. Telecom operators’ product portfolios have grown exceedingly complex over time. Taking various options into account, operators might offer more than 20 separate mobile plans, each with many pages of fine print and often featuring late fees and other charges that surprise customers at the end of the month.
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12. 2. Adopt customer-tested design and create an ultra-easy user experience. Even if a digital-attacker brand does a great job streamlining its service offering, it won’t reap the full benefits without an equally simplified user experience. That means having a seamless, intuitive interface and simple wording and communication. Design professionals must work closely with customers to create and test the user interfaces (UI) and user experiences (UX) every step of the way (for example, making sure customers navigate as few screens as possible to accomplish a task and easy switches to turn options on and off).
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14. 3. Build flexible technology that helps fuel innovation. Digital-attacker brands need to launch and experiment with new features and customer experiences rapidly. That requires a new IT stack that is flexible, modular, and operates independently of the incumbent telco’s IT systems.
15. These new IT stacks should leverage cloud-native deployments whenever possible to simplify IT operations and reduce operational overhead. Cloud adoption is gaining momentum with the advent of 5G because 5G standards are pushing for cloud-native architectures for telco infrastructure. Vendors of business and operations support systems are pushing cloud-based offerings to the market.
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17. 4. Use digital marketing and advanced analytics to drive digital sales. To fuel revenue growth, telcos also need a much faster time to market for new promotions and campaigns. Being successful in digital sales requires continuous reinvention (for example, adopting new channels, formats, creatives) to tap new pools of subscribers.
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19. Accordingly, digital attackers operate their new promotions and campaigns on a very short idea-to-execution cycle: a few days versus several weeks at most incumbents. For example, yallo by Sunrise Communications implemented weekly marketing sprints. Each Wednesday, teams decide what they will launch the following Monday. The entire marketing system is configured to move at pace, including all external partners.
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21. Advanced analytics can turbocharge the learning process and help digital attackers to personalize offers based on a customer’s current plan and circumstance; for example, knowing when a cus­tomer is landing in a new country and needs international data roaming or recognizing when a customer is seeking specific help and linking them to relevant tutorials.
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23. 5. Recruit digital talent and adopt an agile working model. The digital model requires more specific, technology-savvy skill sets than exist within most incumbent telcos today (that is, designers, product owners, tech leads, developers, data engineers, and data scientists), along with new agile ways of working. In an agile setup, small squads with a combination of these skills operate with a fair amount of autonomy and continuously perform customer testing and gather customer feedback in two-week sprints, delivering updates frequently.
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25. Summary: many telecom operators are in dire need of transforming themselves to cope with new market conditions but have had difficulty making an organization-wide overhaul. We believe launching separate digital-attacker brands is an alternative route to digital transformation and a way to address customers’ changing demands rapidly. Once at scale, the digital attacker can become the main growth driver for the parent operator.

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