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Innovate or die–the challenge of 5G (Reality Check)

February 23, 2018 - Aleks

For mobile operators, the phrase ‘innovate or die’ is perhaps more apt than it is across other industries.  After all, any incumbent operator that elects not to bid for a 5G license and roll-out the innovative new network technology is more than likely signaling the end of its business.  It is most certainly signaling the end of its ambition.

But a new technology, such as 5G, with the myriad of opportunities that it can create, represents so much more than simply a technical challenge – it’s also a challenge around service innovation.  Even while the White House floats the idea of a single, Government-owned 5G network – which is certainly a challenge to the existing business approaches to mobile networks in play all over the world – the two big US mobile carriers are involved in a race to launch the country’s first 5G network and services.

But here’s the thing: This is a race where being first isn’t necessarily going to make you the winner.  The new 5G networks offer such a range of different capabilities and service potential, that any operator, anywhere in the world, that doesn’t first re-evaluate its business model and processes for the world it is serving today, could very easily be left behind right now – even if it gets there first, so to speak, from a technology perspective.

In many ways, the current and next generation mobile networks represent the most significant overhaul ever of a traditional telco business model.  And that is really saying something because we only have to cast our minds back a few years in the overall history of the business to remember the days when voice was king of telco services and operator revenues.  

Bigger than 5G – the need for speed (and agility)  

Today, operators give voice away and look to maximize data revenue, but surely not for much longer. The digital natives that will comprise the bulk of future customers expect data to be free as well and those operators that don’t recognize this pattern and re-invent their business models once again will face dwindling revenues.

So, the operator that doesn’t innovate its business models today will just as surely die as the operator that doesn’t evolve to 5G technology.  To be blunt, the operator that tries to continue to function using the business models that were suitable for its legacy networks, is writing its own death sentence.

To maximize the opportunity, operators need to look beyond the technology. 5G may be different, but for the customers it is not about G’s, it’s about the digital services they want to access using the network.  So, while I understand the tendency to marvel at the things the new technology can do – and the operators are certainly guilty of talking up the potential of 5G, Industrial IoT, connected cars, and a myriad other new use cases – the concerning issue in the background is that current operator business systems are neither fast nor agile enough to cope with launching and monetizing the potential new digital services they could be delivering today with their 3G and 4G networks.

While the operators stay wielded to the cumbersome systems underpinning their existing legacy businesses, they will remain locked-in to a business approach that cannot respond quickly to change. They will stay dependent on business software systems with upgrade projects that can take years to implement.  And they will be hindered by their own back-office technology even as they try to launch new services today and be ready for the next wave of technological change.

How can an operator hope to monetize new use cases, if it cannot launch new digital services quickly today? To take advantage of the digital innovation available now, both operators – and their business support system vendors – need to adopt today’s new technologies and embrace commercial model change. There is no alternative if they are to stand a chance of delivering new revenues, maximising cost savings and achieving rapid speed to market for new digital services. Instead of long-running service contracts, operators should look for agile business partnerships using internet-style pricing models and service provisioning.

Fixing the broken operator/vendor model

The hard truth is, until now, business software vendors have neglected to meet the business needs of operators. They have been reluctant to change their traditional business models because they have successfully delivered locked-in operator revenues tied to service contracts and upgrade programs hindered by old technology and even older thinking. While operators have been desperately trying to digitally transform, most have found themselves “stuck” – sold upgrade projects that take years to implement, cost the earth, and are hindered by old technology and thinking.

But this cannot be allowed to continue, and maybe the disturbing reality for those traditional telecoms vendors is that in an increasingly competitive market, where the operator’s customers are no longer prepared to pay simply for connectivity, the traditional approach to service provision and business support systems is no longer sustainable.

The operators who evolve the quickest and are most able to adapt to change will be the ones who win in the new digital economy.  Not by necessarily being first with the new network technology, but by being first to change and embrace fully automated digital sales channels.  As operators move away from selling standard voice and data services, they need to be able to quickly bring to market and sell pretty much any service that can be delivered over a digital channel – from entertainment to energy. They will need to engage with their customers over those digital channels for all their activities and touch points – marketing, sales, order processing, and customer care for example.

Because the real winners in this race will be those operators that capture the largest percentage of their target customers’ digital spend – and not those who maintain focus on an ever-decreasing telecoms spend and remain restricted by outdated business models.  It’s not going to be an easy, overnight transformation – but it doesn’t have to be difficult either.  And when the alternative is likely extinction, then the motivation for innovation is strong.

 

Read more on RCR Wireless.

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