Believe it or not, there are plenty of similarities between coffee and telecoms services (voice, data). Both are largely commoditised product. Then it shouldn’t come as a surprise that telecoms service providers and Starbucks have so much in common. For a start: discrimination. Price discrimination.
Price discrimination in telecoms (and in coffee shops)
There is plenty of price discrimination around us. People don’t pay the same for essentially the same goods or services. If that sounds unfair, then think of ‘discrimination’ as ‘differentiation’ instead. Economically speaking, price discrimination is often socially optimal as:
Our recent article on NSN (The future of NSN: a happy-end at last?) has been a blockbuster of sort. It has attracted more than 3,500 readers since publication at the end of April 2012, from Germany, Finland, Portugal, India as well as many other countries. We have been very surprised by the interest that the article has generated. There was nothing new in the article that was not in the public domain already, and the financial numbers were taken straight from the Nokia web site.
We have reasons to believe that many readers must have been NSN employees trying to decide what to do now, in the view of the various outplacement and redundancy programs set up by the company. Also a former NSN employee indicated that “the NSN management would never point out the series of multi-hundred-million annual loss so clearly”! If this means that the NSN management has lacked transparency towards its own employees in the past, then this is rather worrying.
Telecom service providers are very capital intense businesses. Everybody knows that. But in addition, they are mostly fixed-cost businesses. Everybody seems to have forgotten that.
Fifteen years ago, when GSM really kicked off, there were still a lot of PAMR (Public Access Mobile Radio) service providers on the market. For those who don’t know or were too young to know: PAMR were deployed in the late 80s to provide services to corporate customers. Do you remember Dolphin in Europe? Now these operators have all gone, cannibalised as they were by GSM operators. But with PAMR, you did not have to pay per minute. You would pay per user, per month.
Truth be told, you don’t need a Ph.D. in data mining or statistical analysis to reduce churn. Which is good news.
Truth be also told: investing tons of money in data mining tools does not guarantee success – more often than not, it guarantees failure.
Churn reduction is a complex process. There are many reasons why it can go wrong, and from our discussions with telecom service providers, it seems to go wrong most of the time. Why is that?
Recently, we have noticed something interesting. Go to the web sites of the top telecom suppliers and check in which order the words “products”, “solutions” and “services” appear there.
We have done the check:
- Nokia Siemens Networks (NSN): products, solutions, services
- Huawei: solutions, products, services
- Alcatel-Lucent (ALU): solutions, products, services
- IBM: solutions, services, products
- Cisco: products & services
- Ciena: products & services
Interestingly, IBM is the only company that puts ‘products’ last. And NSN, ALU and Huawei seem to put a strong focus on ‘solutions’. But are they really ‘solutions’ companies? Well, not in the IBM sense. Finally, Cisco and Ciena don’t even talk about solutions, at least at the top level.
There is no question that churn is the plague of the telecom industry. In the mobile business, annual churn rate of 20%-30% are standard. In developing countries, churn can be as high as 60% per annum. Do you know any other industry where companies lose 20%-60% of their customers between the 1st of January and the 31st of December?
High levels of churn are the results of both the supply-side and demand-side peculiarities of telecom service providers. On the supply side, operators engage in intense marketing activities, launching new tariffs, handsets and promotions on a continuous basis to lure end-users to their own service offering. On the demand side, barriers to switch are very low: SIM cards are mostly free, prepaid customers usually do not have to provide much information, and in countries where Mobile Number Portability has been implemented, customers can take their phone number with them to their new service provider.
But if churn is the plague, you don’t have to be fatalistic. Tomorrow’s winners will be service providers that better understand what customers want and better anticipate how customers will behave. This applies to churn as well and raises questions such as: can we forecast which customers are likely to churn in the near future? Can we explain churn? Can we retain customers who are about to churn?
Yes, we can. Churn can be reduced, and should.
Impact of Churn prediction and Micro-campaigning (Source: Investaura, Lumata)
For telecom service providers, outsourcing has always been a tough decision. In the past, the most common processes that have been outsourced fall into three broad categories:
- Call centre / contact centre / CRM
- IT services, whether relating to the enterprise internal needs (e.g. desktop services, Data Centre Services, ERP) or to end-user applications (VAS, application hosting)
- Network operations: plan, build, operate, maintain
Other areas of service providers business have long been outsourced, including fulfilment logistics and in most countries distribution and sales – retailers Points of Sales to complement the service provider’s own direct sales force and PoS.
But let us step back. From a big-picture perspective, the key issue is: when does it make sense to outsource a particular activity?
More often than not, MVNOs have not been particularly successful. We have seen many MVNOs on the market, but most have failed commercially and have sold their customer base to the host-MNO.
So what does it take to be a winner in the MVNO space? Well, let us start by taking some perspective on where MVNOs come from.
What are MVNOs all about?
MVNO are mobile service providers that do not own a GSM or UMTS spectrum licence but partner with an existing mobile network operator, also called host-MNO, and buy capacity on their radio access network. Since their initial appearance in the late 1990s in the Nordic countries and the UK, MVNOs have became widespread in Europe, America and some countries in Asia. They are now emerging in developing countries in the Middle East and Latin America.
MVNOs exist in various forms depending on the depth of their role in the value chain:
- Full-blown MVNOs own the same network assets as an MNO except a radio network. They also have their own Mobile Network Code and own interconnection agreements. This type of MVNO is the exception rather than the rule because MNOs usually consider them to be ‘too big a threat’.
- MVNO-light own basic service platforms (SMSC, VMSC) as well as Billing and CRM systems. Other network assets are provided by the host-MNO (MSC, HLR, Mobile Network Code, Interconnection).
- Branded Resellers resells the products and services of a host-MNO under their own brand and are essentially a marketing and sales channel. They are the most common form of MVNO on the market because they are easy to set-up and regarded as the lowest threat by MNOs.
Translated from an original article written by Thomas Bez, TEDESCA Consulting, www.tedesca.com
The TeleManagement Forum (TMF) Framework
Unlike the ITU-T, the TMF is not a traditional standardisation organization but an independent industry consortium of telecom network operators, manufacturers and service providers. This is probably one of its greatest advantages, as it can overcome the traditional slowness of other telecom standardization bodies.
This brief article is not meant to be an introduction to eTOM, as the TMF provides an excellent primer for this purpose. We are proud to be a member of the TMF, and advise our clients on the content and application of the various TMF ‘standards’.
The TMF has launched a series of complementary frameworks and initiated a number of marketing activities, with focus on the management of telecommunications networks. These frameworks are as follows:
- NGOSS (Next Generation Operations Support and Software) has set itself the task to provide telecom operators with interoperable solutions for managing their services and networks
- eTOM (enhanced Telecommunications Operations Map) is the process model behind all activities of the TMF, and obviously takes a very telecom-specific view of the business processes of an operator
- TAM (Telecom Applications Map), a non-binding blue print of applications or application functions of OSS that are necessary for the implementation of the eTOM processes
- SID (Shared Information / Data Model), a range of object-oriented information models that describe the interfaces between OSS or applications (as defined in TAM)
- A number of other activities, such as technology and showcase programs that are designed to demonstrate the interoperability of OSS solutions, and certification of OSS solutions for compliance to the TMF standards
Louis V. Gerstner Jr. was CEO of IBM from 1993 to 2002. He managed the turn-around of the company from a product business to a service and solution business. He is regarded by many as “the man who saved IBM”.
“It is extremely difficult to develop a unique strategy for a company; and if the strategy is truly different from what others in the industry are doing, it is probably highly risky.
…. at the end of the day, more often than not, every competitor basically fights with the same weapons.
…. in most industries five or six success factors that drive performance can be identified.
…. it is difficult, if not impossible, to redefine what it takes to be successful in that industry.
…. so execution is really the critical part of a successful strategy. Getting it done, getting in done right, getting it done better than the next person is far more important than dreaming up new visions of the future.”
Translated from an original article written by Thomas Bez, TEDESCA Consulting, www.tedesca.com
A service management project – whether it be the restructuring of a service unit, the development of SLA and the set-up of a Service Level Management, or a service outsourcing – rarely follows a textbook format. However, the usage of a methodology or reference model (also called framework or blueprint) is absolutely essential. Reference models are usually developed in a particular industry, and, if they are successful at all, further mature over time with the addition of new releases. Many of you might still remember the now extinct “FCAPS” reference model from the telecommunications industry, a fairly simple process model from the ITU-T M.3400 standard with its five functional areas: Fault, Configuration, Accounting, Performance and Security Management.
It is not unusual for these reference models to become more widely used during the course of their development, or at least to give the appearance that their concepts are applicable beyond their industry of origin. We are particularly familiar with two of these frameworks:
- ITIL (IT Infrastructure Library), a collection of “best practices” or, as recently more modestly described, “good practices” in IT service management – today indispensable in the IT service area.
- eTOM (enhanced Telecommunications Operations Map) from the TeleManagement Forum (TMF), which is more and more becoming the de facto standard for the design of business processes in the telecommunications industry.
In this article, we want to show how ITIL is becoming universally applicable for service management purposes beyond the IT industry, and in particular in the telecom sector where it can be used in parallel with the standards of the TeleManagement Forum.
There is a semantic problem with the word ‘strategy’ – it is one of the most overused but unfortunately rather vaguely defined words. It is rare to find any two people who use it in the same way. The consequences are disastrous.
95% of the typical workforce does not understand the strategy – Fortune Magazine
70% of CEO failures come not as a result of poor strategy, but of poor execution – Fortune Magazine
Only 1 in 10 companies successfully implement their strategy – Paul Niven
So what is strategy? I remember one company claiming: „Our strategy is to become number 1 in the market“. That’s is not a strategy! This is a goal – nothing more, nothing less.