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.