#2 – Operators take operational efficiency to the next level: transformational change is here
Operational excellence has been high on the operator agenda for some time, but the magnitude of change will reach new proportions, as all quick wins and easy initiatives have already been exploited. We see a clear trend of transformational initiatives coming up, addressing the difficult areas of operator operations – such as BSS – in a more comprehensive way.
In many markets top line growth is slow at best. The growth in the number of mobile subscriptions is slowing down and certain markets have even peaked. At the same time, there is no significant ARPU growth and revenues from M2M, although growing, has limited top line impact.
What is growing is the customer’s appetite for data and their demands and expectations of digital services. Operators have to invest substantially in keeping up with each other. Coverage is extended, networks are densified, new spectrum is acquired, old spectrum is re-farmed and new technologies like VoLTE and VoWiFi are being implemented. Further, many legacy platforms have historically been upgraded as patch works and can’t keep-up as operators are trying to meet constantly evolving market requirements driven by digitalization of business models (e.g. omnichannel and self-service), TTM-requirements and the need for simplification.
To sustain margins and meet return on capital requirements, operators will have to look even further to implement initiatives that increase operational efficiency. More than ever before, this means transformational change in operating models, organisations and streamlining of processes and system support to allow for responsive adaptions to changing market conditions and customer requirements. Transformation of BSS legacy is critical, but very challenging, and must be driven from a sales and marketing perspective with simplification and streamlining of the customer offerings as a starting point. Other initiatives include various forms of network sharing. Many will build capabilities to maximize benefits from outsourcing of selected tasks, based on strategic intentions and value creation potential. Others will explore divestments of non-core assets. We will also see operators go even further to benefit from synergies between fixed and mobile, both on a sales and marketing context and in an operational context.
We have recently seen a lot of transformation initiatives amongst operators that have been unfulfilled. In our mind, this has mainly been due to unnecessary disconnects between the top-down management commitment/approach and the bottom-up detailed analysis of what it would take for successful execution. Another reason is that the scope for the transformation has been too wide and complex to effectively manage. To achieve significant and sustainable transformation effects, it will be more important than ever to ensure “bottom-up” understanding, involvement and buy-in from the organisation in the implementation stage. At the same time, the transformation must be driven and monitored top-down and backed by full CxO commitment and mandate to avoid scope creep and dilution of effects. In 2016 and going forward, Northstream believes that operators will realize the importance of this approach to achieve transformational change and we will see fewer bound-to-fail big bang type of programs.