Telcos must embrace platform economics to go truly digital: IBM

01 Jun 2016

As the telecoms sector is disrupted by the onset of the digital economy, telcos need to think beyond simply transforming themselves into digital service providers (DSPs) - they must also become platform-based digital service enablers (DSEs) to truly thrive beyond 2020.

That was the message from a presentation by Rob van den Dam, Global Telecommunications Industry Leader at IBM, during the Enterprise Digital Transformation track of the CommunicAsia2016 Summit on Tuesday.

“Companies like Apple, Facebook and Amazon have fundamentally changed the way people interact, and this has set a new and higher bar for CSPs,” van den Dam said.

According to a global IBM survey, CSPs believe customer experience is going to be the main differentiator going forward. But they’re not doing well - telcos typically score poorly on customer experience indexes, and worse on Net Promoter Scores.

All of this is necessitating the need for digital transformation, van den Dam said. “It will be a difficult journey, but it has to be done.”

That transformation will involve a combination of cost reduction, investment in technologies to become agile and automated, a digital-savvy workforce, customer-defined purchasing and cognitive analytics to understand what the customers truly need.

But becoming a DSP won’t be enough - telcos must also become a DSE, which ultimately means shifting from a product or infrastructure-based business model to a platform-based model.

“These ‘born-on-the-internet’ companies like Xiaomi, Tencent, Airbnb and Uber are disrupting business categories by reinventing business processes,” van den Dam said. “They are transforming the traditional value chain into a business ecosystem. And it’s working because platform economics are superior to product or infrastructure economics.”

Once telcos transform themselves into DSPs and DSEs by around 2020 or so, they can combine those capabilities to become disruptors in their own right, serving both consumers and an extended ecosystem of partners, including OTTs and start-ups, van den Dam concluded. “This is the future for telcos.”

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