Innovate to survive in the digital economy

Phil Marshall/ Tolaga Research
11 Aug 2011

Telecom operators worldwide are struggling with the disruptive forces of the burgeoning digital economy. This trend is creating an environment of heightened innovation that favors companies like Apple, Google and Facebook, whose solutions dis-intermediate and commoditize many of the traditional network services that are the basis of the telcos’ business models.

The dynamics of the digital economy are further complicated with disruption amongst new entrant players, such as Facebook’s rapid insurgence into Google’s territory with social networking and Google’s comeback with its own social network, and stiff competition between the Apple iOS and Google Android device platforms.

As the digital economy continues to take hold, telcos cannot sustain their product centric legacy, which has formed the mainstay of legacy services, but now languish as customer centric service innovation continues to accelerate.

To survive and thrive in a digital economy, telcos must transition from product-centric to converged consumer-centric offers. This transition is not trivial and requires the elimination of organizational, operational and technology silos that have been honed and refined over many decades to support product centric market offers. Given its complexities, consumer centricity cannot be achieved in a single iteration, but requires several evolutionary steps towards the ultimate goal. As telcos transition through these evolutionary steps, they must:

· Embrace and capitalize on technology standardization and network convergence, most notably web services, cloud computing, all-IP network architectures and application environments that benefit from large developer communities.

· Anticipate emerging business models that are displacing subscription based approaches, such as ad-supported business models which capitalize on large well understood audiences, and low cost telephony services that create communication centric communities. As these business models emerge, telcos cannot afford to go head –to-head with Internet heavy-weights like Google, but rather must focus on how they can add value to the services and applications that these companies create.

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