Wednesday, 21 November 2018

Telecoms: The next big strategic opportunity

Andrew Collinson @ STL Partners
Monday 22 October 18

Andrew Collinson, Partner at STL Partners discusses his vision for the future of the telecoms industry. Hear more from him and STL at the Total Telecom Congress next week.

The telecoms industry is always on the lookout for the ‘next big thing’: the next multi-billion dollar business opportunity. Well, we think we’ve spotted it. Come and hear about it from us in person at the Total Telecom Congress 2018 in London on 30/31 October. I'm chairing day 2 on 'Growth Strategies' and will present an overview, while my colleagues Phil Laidler, Amy Cameron and David Martin will present on the relevance of telco opportunities in Edge Compute, AI, and NFV/SDN respectively.   In the meantime, here’s a taster of our thinking.   Solutions seeking a problem?   Over the last twelve years, we’ve done a lot of research into subjects like how IP will change the industry, Internet players’ platform business models and how telecoms can use them, cloud, AI, IoT, 5G, transformation, etc. in practice.   It’s interesting to note that these are all to some extent solutions seeking a problem – whether a technology like 5G or AI, or a business model strategy like the platform model.   But to what end? Why should any person or company in the telecoms industry care beyond perhaps just surviving or having a job (which is fair enough…

The telecoms industry is always on the lookout for the ‘next big thing’: the next multi-billion dollar business opportunity. Well, we think we’ve spotted it.

Come and hear about it from us in person at the Total Telecom Congress 2018 in London on 30/31 October. I'm chairing day 2 on 'Growth Strategies' and will present an overview, while my colleagues Phil Laidler, Amy Cameron and David Martin will present on the relevance of telco opportunities in Edge Compute, AI, and NFV/SDN respectively.
 
In the meantime, here’s a taster of our thinking.
 
Solutions seeking a problem?
 
Over the last twelve years, we’ve done a lot of research into subjects like how IP will change the industry, Internet players’ platform business models and how telecoms can use them, cloud, AI, IoT, 5G, transformation, etc. in practice.
 
It’s interesting to note that these are all to some extent solutions seeking a problem – whether a technology like 5G or AI, or a business model strategy like the platform model.
 
But to what end? Why should any person or company in the telecoms industry care beyond perhaps just surviving or having a job (which is fair enough, of course)?
 
It is quite natural to seek opportunities to make money – it’s what businesses and industries do, or at least, it is one of their end-products. But in many ways, asking the perfectly reasonable question of ‘how can we make more money’ creates unintended problems for strategy.
 
It tends to result in conclusions and actions like changing prices, adding new features, cutting costs, or driving for more market share in existing markets. Within the limits of rationality and legality all of these are legitimate and generally sound practices. 
 
But they do not create new value in a market or industry that is close to reaching maturity – which the telecoms industry is, as the following chart illustrates.
 
 
Finding the big problem to solve
 
The ‘lightbulb moment’ in our latest thinking came from asking two questions:
 
1.      ‘What is the telecoms industry for, now and in the future?’
 
2.      ‘What are the big problems the world needs to solve, now and in the future?’

What is the telecoms industry for, now?
 
I joined the telecoms industry as a graduate in 1986 to work on developing fibre-optic transmission networks. I remember thinking what an amazing future faced the industry then. Mobile was in its infancy, and fibre was the new kid on the long-distance transmission block, very much second to copper. Telecoms was about expensive, long-distance conversations. The Internet did not exist – at the time, it was in its ARPANET guise.
 
But even then, it was clear that one day, fibre would reach the home, and mobile would be a mass market product. But what will all those people do with all this, the execs would ask in disbelief and bewilderment?
 
The following chart shows a few stats I picked from 1988 vs 2018 to give a (relatively tidy) comparison. It shows mobile and internet penetration, and AT&T’s revenues and growth for comparison.
 
I used AT&T as a shorthand comparator because I could readily find its 1988 revenues. The chart shows that AT&T has grown massively but also that recent growth has slowed.
 
Back in the late 1980s as a twenty-something year old, I did not have the responsibility of making multi-million £/$ investments, but it was clear to me that high bandwidth connectivity would come. There were so many disconnected, bored, lonely people I reasoned – imagine how much better it would be if they could all connect with each other and all sorts of other stuff like music, films and information?
 
Of course I didn’t know everything that would happen between 1988 and 2018. But it seemed to me like a form of economic gravity: the direction that the world would take was obvious and unavoidable.
 
And it was great to be involved in something that I thought mattered. It wasn’t just about money; that was a very welcome by-product. I had always known that I could make more money in The City, but that seemed uninspiring - money for money’s sake.
 
Thirty years later, I can see that type of thinking in a much more holistic and generally useful form in the following chart that shows why the purpose of what you do matters for your business’s performance. It’s from a report we just published on ‘How to create a healthy culture’.
 
The point is that by having a clear and motivating purpose, you can help to enhance your company’s current performance, engage its employees, and find and nurture new areas of growth.
 
What are the big problems the world needs to solve, now and in the future?
 
Again, going back to basics, we asked ourselves what are the big problems the world needs to solve?
 
It didn’t take long to come up with some obvious candidates, e.g.:
 
·        Climate change
 
·        Mounting waste
 
·        Conflicts over resources
 
·        Resource availability: water, fuel, power, food, healthcare, etc…
 
·        Migration and increasing nationalism
 
·        Concerns over employment
 
·        Business efficiency and productivity
 
·        Wealth distribution and poverty
 
Moreover, time is also a resource for people and business. Both want to make best use of their time – whether it is getting things done more effectively or enjoyably.
 
At first, it’s hard to see what telecoms has to do with all this.
 
Our insight is that all of these are to some extent the manifestation of the same problem: the need to make the most efficient possible use of your/the world’s resources.
 
One way of summing all this up is that we now live in a world of 7 billion people that already uses 1.7x its sustainable resources, and if we keep on at this rate we will face major environmental and societal pains and problems.
 
We may not even have 30 years to avoid the worst problems, but the challenge is certainly on the scale of that of connecting the world during the last 30 years, and it reaches across all economies and not just telecoms, but we believe telecoms has a significant role to play.
 
This is not a PR opportunity but a serious and significant problem for humanity.
 
So, what should telcos do?
The telecoms industry cannot alone solve these problems, nor can the industry be motivated by a call to ‘greater good’ per se.
 
Nonetheless, all companies and individuals within it stand to gain by recognising that this is the new economic, social and political ‘gravity’, and that the great business opportunity is to travel with that gravity – to serve the purpose of making better use of resources or ‘making the world run better’.
 
So we believe that telcos and the telecoms industry now have two possible jobs. The first is well known – connecting everyone. The second is to help make the world run better. Players in the telecoms industry don't have to do this second job, but the opportunity is there.
 
We will be outlining how we think telcos and the industry in general can and should evolve to do both of these jobs in our forward research agenda.
 
We will be sharing…
 
·        How and why telcos are in a unique position to help enable the efficient use of resources at a transformational level
 
·        The business benefits, including renewed motivation and relevance for telecoms with youth, consumers, businesses and governments
 
·        The key actions
 
…and also presenting in the following sessions…
 
·        Telco Edge Compute: The opportunity and why telcos should to pursue it – Phil Laidler, Consulting Director
 
·        The Telco AI Roadmap: The key areas and priorities for telcos to utilise Artificial Intelligence – Amy Cameron, Senior Analyst and AI research lead
 
·        NFV/SDN: What are telcos really doing? Senior Analyst David Martin will present the latest findings of STL Partners’ SDN/NFV telco implementation tracker.
 
… at the Total Telecom Congress 2018 on Oct 30/31 in London.
 
You can read the original version of this article here.
 

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