The DNA of the telco industry must embrace continuous transformation

As an industry we tend to be fascinated with the next shiny new thing. In 2018 every conversation in the telco industry was about digital transformation and every industry move was interpreted in the context of digital transformation. 2019 was the year when the focus shifted to 5G. Over the space of a short few months, 5G went from being a mobile technology that was still in the distant future, to the current generation of mobile that everyone was talking about. Every new service and business model found itself being rapidly remodelled with a 5G 'angle' inserted somewhere in the service description. Following this pattern, 2020 became the year of Infrastructure Virtualization, Open RAN & Edge. Again, it was surprising how quickly the virtualization & edge conversations moved from being a specialist/technical discussion, to being front and center in the business model considerations - let alone geopolitical considerations - of the industry. Now a few months into 2021 I suggest that 2021 is shaping up to be the year of 5G2B Services!

As each of the above fascinating topics crests beyond the hype-cycle peak, there is a temptation to think that we don't need to worry about it anymore. We treat the topics as if it is now 'mainstream' and we move our focus on to the next hot topic. For example, this has been happening with digital transformation (and to a certain extent 5G). I am often amazed at some of the comments I hear within the industry about how digital transformation is ‘finished’ or is ‘old news'. Those opinions could not be further from reality. I recently shared my views on how well digital transformation is progressing , and the key take-away is that while digital transformation has progressed a lot over the past 3 years, there is still a long, long way to go! More to the point, all of the above high profile topics are essentially different parts of the digital transformation of the telco.

(Aside: I know many people hate the 'digital' word being tagged onto transformation as, quite frankly, it is a meaningless adjective in the context of transformation (or services), but it has made its way into the lexicon of the industry so I will bear with it)

A single great conversation about the transformation of an industry!

The great works of western literature stretching from Homer's Iliad, written around 1,000BC, up to the fabulous of poetry of Seamus Heaney, written at the end of the 20th century, are often referred to as a single great 3,000 year conversation between the western civilizations. I have adopted this concept to reflect the way I think about all of these high profile changes underway across the telco industry. I see them all as part of a single change that is happening, essentially a great conversation about the transformation of an industry.

Those of you who have read some of my previous writings will be well aware that the central concept of my last book “transforming the telco” is the belief that there are 10 distinct but inter-related transformation journey’s that the telco must undertake. In this book, I cast the net of digital transformation very wide indeed to embrace everything from the fundamental technology challenges, to the business challenges & opportunities, to the cultural, operational and organizational challenges which digital transformation presents.

So when we talk about 5G, 5G2B Digital Services, RAN Virtualization and Edge cloud, we are not talking about topics that are divorced or distinct from digital transformation. Many of these are simply discussions about one or more of the transformation journeys that the telco is undertaking. A better way to view digital transformation is as the umbrella term for the changes that must take place if the telco is to survive in this rapidly evolving digital economy. 

5G is obviously a technology and infrastructure upgrade, but it also opens-up the possibility for the telco to begin addressing new markets and offer new business models. In many respects, if left to its own devices, the telco industry would probably have just treated 5G as a slightly faster, lower latency version of 4G. But there are two factors stopping this happening. Firstly, the 5G business case is pretty difficult to make work. My analysis (and the analysis of others) indicates that the connectivity revenue available from 5G will simply not be sufficient to meet the ROI expectations of the telco shareholders, and that the telco will need to find revenue ‘beyond connectivity’ to make the books balance. Secondly, the rest of the global economy has a different agenda surrounding 5G. In the eyes of the vertical industry players, 5G (just like AI and Edge Cloud) is destined to become a key component in how they transform their own industries. Their ambitions to change their own industries - along with the growing interests of the hyperscalers and OTT players in 5G2B - is a big element of what is driving the 5G2B trajectory of the telco in 2021. A recent survey I ran on this topic seems to reinforce this view, with around 60% of the respondents believing that the leadership in 5G2B will come from some combination of the vertical industry leaders themselves, the digital service specialists (e.g. in areas like digital twin, predictive maintenance, etc..) and the hyperscalers - rather the traditional telco industry leaders.

Similarly, while the rapid shift towards virtualized infrastructure and cloud edge obviously relates to journey 1 of my 10 transformation journeys, the widespread adoption of virtualization will require a lot more for this to be successful. For example in another recent survey I carried out, I tried to better understand the factors that may delay the widespread adoption and commercialization of virtualization. Some of these factors will be resolved by the supply side, but a number of these (such as ability to manage a complex ecosystem, or a new approach to security, or a transformation of the skills profile of the telco) will require substantial transformation journeys within the telco.

Where to prioritise scarce transformation focus!

I have spoken with many telcos over recent years on where to focus their transformation efforts, and there has been a remarkable consistency in where they are prioritising transformation.

The journeys surrounding: infrastructure & autonomy; data-centricity; digital services; business models; and organization & culture always tend to come out on top in terms of telco focus on digital transformation. As I mentioned earlier, while there has been good progress in each of these areas, there is a long way yet to go! The only journey i am pessimistic about is journey 8 (Culture, Skills & Organisation). This is a difficult and intractable challenge for any established business to face, and much of the rest of the future of the telco will depend on the ability to crack this nut!

Each telco should take a few minutes to look with fresh eyes at their digital transformation program. It is possibly not as high profile as it was a couple of years back, perhaps a little disappointing or disjointed. But if anything, it is now more important than ever. The ambitions of the telco of 2025 that will offer 5G2B services into multiple vertical industries, across a highly efficient and virtualized 5G network, with seamlessly integrated edge cloud capabilities, will simply not be achievable without extensive and continuous transformation!