In most telcos, being a CIO can be a frustrating experience. That’s because almost three quarters of the resources at their disposal generally need to be devoted to simply running the day-to-day business[1] – keeping the lights on. That figure reflects the complexity of a typical telco’s legacy IT environment. As a result, the development of innovations that will take the business forward is often under-resourced and heavily constrained.
Over the past half-decade, telcos and their partners have been trying to flip this ratio, so that one quarter of IT resources are employed to keep the lights on and three quarters are used to drive really meaningful innovation. To date, most of the attempts to achieve this ambitious shift have revolved around buzzwords, such as becoming asset light, reducing time-to-market or failing fast.
Although all of these concepts have their merits, none of them is a silver bullet. Instead of pursuing the latest management trend, CIOs should take a step back and build a holistic view of the telco’s business and the context in which it is operating.
To do that, they need to use an up-to-date tool. Rather than conducting a traditional SWOT (strengths, weaknesses, opportunities and threats) analysis, they need to implement the aptly named PEST analysis, which involves looking at the political, economic, social and technological challenges faced by the business.
On the outside looking in
Although there are clearly major differences in the culture and dynamics of each national market, telcos across the world are facing similar high-level issues. As the digital economy expands and grows, telcos often find themselves caught on the outside looking in. Operators are providing the connectivity and infrastructure that could deliver US$10 trillion in value over the next decade, but most, if not all, of this windfall will go to other industries. By our reckoning, telcos’ share of industry profits is in steady decline, falling from 58 per cent in 2010 to about 45 per cent in 2018. Operators have also seen anywhere from a 13 to 36 per cent drop in average revenue per user since 2012.
Given these troubling trends, the key political challenge for most telcos is to remain relevant - they need to provide more value and they can't always do that at the customer's expense. From an economic standpoint, the challenge is often to make telco solutions consumable and increase the business value for the end consumer. The social challenges revolve around the tools, features, tactics and triggers the business can use to engage with other stakeholders.
A PEST analysis will help the telco to get to grips with these market dynamics – it will yield a better understanding of what value is being created and who's receiving that value. Once the telco knows exactly who its customers are and where they engage, it can then be proactive in addressing their challenges and creating a continuous buying cycle.
Armed with this information, CIOs will be better placed to overhaul and simplify their IT environment by harnessing best practices, reusable assets and cloud infrastructure in place of their legacy systems. The end result is that telco should be finally able to flip that IT resource ratio, so the CIO can finally focus on creating new value, rather than simply keeping the lights on.
[1]Source: Gartner
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