Digital Transformation - Substitute Products Displacing the Industry

If you apply Michael Porters five forces model to the telco industry, you would rightly arrive at the tipping point - which today the industry calls - the Digital Transformation. Digital transformation is applicable across different industries; however this paper focuses fundamentally from a communication service providers (CSP) perspective.

Just to give you a context, Google's entry into the telco industry with the introduction of Android operating system has paved way for smart phones to enter the market with ease. With the kind of user experience and customer delight that today's smartphones offer, the market has witnessed falls of some of the veterans in the industry. For instance, Nokia - who primarily ran its in-house Symbian OS was unsuccessful in catching up with the user experience and customer delight offered by smartphones that ran iOS and Android OS. In addition, with apps like WhatsApp, Snapchat, Viber, etc. now eating the revenue share of CSPs, telcos are forced to create new sources of revenue to sustain and boost growth. This essentially translates that telcos will now have to re-look at their value chain which could mean:

Partnering with niche players to be able to co-create, co-innovate and offer a differentiated value proposition to the new generation consumers, and,
Migrate from legacy stack to a newer stack which will support digital enablement

In order to make this transformation real, telcos will also need to carefully watch and meet the following:

Changing demand of the consumers
Changing technology
Changing competition

By applying Michael Porters five force model to the telco Industry, we may find a something similar to the one shown below. Figure 1.1

The substitute products in the market like WhatsApp, Viber etc. are eating into the revenue share by offering free calls over the internet. While, this puts tremendous profitability pressures on telcos, the only option left out for them would be to monetize the unused data which will remain in their logs. This will open up new stream of revenue for them.

Digital Transformation - Substitute Products Displacing the Industry

As the trend shows that if telcos do not cope up and innovate, substitute products will transition into the industry sidelining the mainstream telco players. For instance, Google has already started investing in their own telco infrastructure. If Google enters the telco sector from a voice and data perspective; then it could really mean good news for the consumers as they would be able to enjoy cheaper service as compared to the current market conditions. And if this trend continues, Porters five force will then transform into a new diagram (Figure 1.2)

As you can clearly see;the new entrants are stay away;but for google an exception.The substitutes are slowing enterlng or eating info the industry space and consumers shifting towards better service for lower cost.The suppliers continue to work with industry.

To keep up with competition, telcos have also been looking at acquiring key players from communication, media and technology space. To quote a few examples, ATTs acquisition of DirecTV; Bell Canada’s acquisition of Astral Media etc. are clear indicators on the transformation that’s taking place. In the era of digital transformation, it is essential to create a customer community as well as a value chain ecosystem which needs to remain loyal to the brand and thereby making it profitable. The underlying message clearly is to stay up to the trends. Losing to understand and coping with the trend could turn fatal for the current players in the Industry.

About The Author

Ajeesh Venugopalan has rich experience in customer engagements, Services and Digital Marketing. He is a trained campaign management specialist from the US and a transition expert having transitioned marketing teams from US to India on multiple occasions to bring in optimized marketing solutions for the organization.

More recently with Wipro, Ajeesh was responsible for campus marketing during which he transformed Campus Arena to a powerful and the only Talent Community for Wipro. He is a technology enthusiast and a specialist in building online communities. He has been the brain; behind programmes like Intrapreneur, Guardians Podium, and Leap etc. which is today a well-known brand in engineering colleges across India. He has been recently awarded the Best Branding Lead by the business operations team for his contributions towards branding Wipro in colleges across the nation. Currently, he heads marketing for the Telecoms business of Wipro Limited, where he spear heads, Events like Mobile World Congress, Analyst relations, thought leadership and digital.

An MBA in Marketing, Ajeesh comes with more than 12 years of experience in sales and Marketing. He is an avid reader and vibrant speaker in many forums across the country. He has also got a self-published collection of poetry to his credit under the name of “Obscurity of Life”. He loves mentoring fresher’s while at work and teaches students during his free time.

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