In 2018, with the commoditization of voice and data services firmly in the cards, the digital market appears to be the market of choice for communication service providers (CSPs) hoping to boost stagnating revenues. The problem is, in the digital market, the competition no longer looks or acts like a traditional CSP. Instead, a substantial piece of the digital pie is being eaten up by internet-native superpowers like Google, Facebook, and WeChat, who can roll out new and exciting services for customers at the drop of a hat, using their powerful digital business platform models.
To compete against these digital superpowers, win new customers and, ultimately, grow top-line revenues, CSPs are all too aware that they need to innovate — and quickly. As such, digital transformation has rapidly become the clarion call for CSPs around the world. Frustratingly, this journey too often focuses on using technology to shore-up short-term financial performance by delivering greater efficiency, rather than building and implementing the new business models needed to support a digital business.
The reality is, few innovations (improvements and new services alike) are created solely in-house. This becomes increasingly true as use cases for 5G and IoT come into fruition — they are more complex and far more ecosystem-based, meaning that successful partnering will be model, to earning a return on investment. Therefore, if CSPs wish to achieve the ‘S-curve’ growth enjoyed by others in this market, establishing the right partner ecosystem — centered on a multi-party digital business platform — is paramount.
Partnership ecosystems — the silver bullet?
A partner ecosystem is an open, multi-sided collaboration between different parties including internal units of a CSP, external product and channel partners and customers. While collaborating with partners is nothing new, with digital services it is now both easier to execute and can be used to greater effect because of digital platforms and the new multi-sided business models they enable. A partner ecosystem helps CSPs generate new ideas, drive innovation, expand offerings, increase reach and grow revenues.
Fortunately, many CSPs around the world are acutely aware of this — or so found our recent research study “Partnership ecosystems: the silver bullet for telco woes?” conducted by Coleman Parks. According to the survey findings, 60 percent of CSPs expect partner ecosystems to drive cost-effective innovation, 59 percent to help them remain competitive, 51 percent to improve customer experience, and 48 percent to create direct relationships with customers.
What’s more, when asked about the percentage revenue uplift they anticipate to see in the next two years from a successfully developed ecosystem, a startling 50 percent of CSPs expect their revenues to grow by more than 16 percent. Of that, 12 percent anticipate growth of more than 25 percent.
In the wake of declining revenues, it seems that expectations are running high when it comes to the promises of partner ecosystems — the ‘silver bullet’ for a great many of the business challenges that CSPs face today.
High expectations, but limited progress — the reality
But here’s the kicker: despite high expectations, CSPs are straggling behind other sectors when it comes to their progress with developing new digital offerings and business model innovation – many of which are underpinned by partner ecosystems.
According to the research, the telecoms industry ranked lowest for being fully engaged in the execution of new digital business models and offerings, against IT & technology, automotive, transport, banking and insurance sectors (26 percent vs. an average across industries of 34 percent). The reason? Ironically, technology.
Of the 19 potential challenges outlined in the survey, four of them were technology-oriented, and three of these made the top four challenges facing CSPs in managing and enhancing their partner ecosystem. In fact, having the right technology in place to manage monetization across the ecosystem is the number one challenge facing CSPs in managing and enhancing their partner ecosystem (55 percent).
This is perhaps because, despite much industry chatter on the subject of partner ecosystems, there is no dominant model yet in play for CSPs. At its core, executing on the potential of partner ecosystems comes down to CSPs to defining and delivering a digital platform-based business model. And for that, they need a digital platform technology solution.
Digital service provider — a happy ending?
The results of our survey paint a picture of CSPs with high expectations but much catching up to do. The impact of successful partnership ecosystems on their businesses will be vast. However, there is an enormous amount of work to do and challenges to overcome before the benefits can be realized. The good news is: all is not lost.
CSPs are in a strong position to play ‘catch-up’: 27 percent are already embarking on planned development of new business models and digital offerings, 31 percent of CSPs are analyzing options, and 14 percent are looking at whether they need to re-structure. In fact, only 2 percent of those CSPs surveyed had not considered the issue.
Also, there are a number of digital platform-based business models available to CSPs dependent on company, growth strategy, current needs and existing relationships. If established and executed successfully — combining the right partners, with the right digital platform-based business model — CSPs will be able to continuously build a competitive advantage through a powerful network effect. With the right digital platform in place, the transformation to a digital service provider can be staged to protect the core business while building adjacent revenue streams.
It’s true that CSPs are perhaps a little behind other sectors in executing their ecosystem strategies. But, for those that establish a concrete digital strategy that utilizes a partnership ecosystem and that is supported by the right digital platform-based business model, there is indeed the potential to gain ground on others sectors.
