What are Canadian telcos’ greatest risks?
1. Ineffective growth and diversification strategies are commoditizing connectivity.
New business models and services matter. At EY, we found 71% of industry leaders pegged that newness as their most important strategic priority, ahead of improving customer experience. But progress has been spotty, innovation incremental, and early forays into adjacent markets – like financial services – have met mixed results. Meanwhile, potential-rich developments like IoT are promising, but have yet to scale.
How are industry leaders navigating the risk? Taking down siloes before they block progress is a good start. Think holistically about the transformation agenda. Tackling connected business objectives like digital operations, customer experience and operational efficiency in a united way can strengthen any plan. True, too, for exploring strategic partnerships or inorganic growth opportunities that bring the capabilities or intellectual property you need to offer customers’ a fully integrated, end-to-end experience. Putting the customer at the heart of your strategy now can best enable you to ultimately own your fair share of their wallet later.
2. Underestimating the changes to privacy and security imperatives is seriously eroding organizational trust.
Everyone knows digital trust is a white-hot issue. With 77% of Canadian consumers saying they’re concerned about the personal data they share online, it’s also one telcos can’t ignore. The growing challenge of keeping customer’s data and experience safe and secure is huge, especially as mobile increasingly becomes a channel for authenticating other devices and services (like digital banking). Any breach, bad headline, or new concern – especially for an emerging area like IoT- can chip away at the trust you’re trying to build.
How are industry leaders navigating the risk? Consumer security and privacy concerns can wreak havoc on organizational trust. But your commitment to mitigating those risks can have the equal and opposite effect of setting you apart. Making “security by design” central to your operations is bigger than a compliance exercise. It must mean baking the ways you’ll protect end-users into the forefront of strategic plans and product development. Telcos that do can transform this risk into a competitive advantage.
3. Old IT systems and skillsets are becoming expensive barriers to transformation.
Telcos looking to evolve their customers’ experience are laser focused on multi-year digital transformation. It’s also part and parcel of becoming a more efficient and agile organization. The problem is, legacy systems and outdated skillsets are getting in the way. EY research shows 65% of telcos surveyed cited legacy IT platforms and architecture as the biggest obstacle to digital transformation. Another 51% zeroed in on a lack of skills and expertise in digital domains. When you weave in the push-pull of competing priorities, and the often-fragmented nature of data that might already be poor in quality, Canadian telcos are facing a perfect storm. Even as AI and RPA take top spot as the most prominent technology on 57% of boardroom agendas, the drive to capitalize on them is hampered by the pull of the past.
How are industry leaders navigating the risk? Identifying your greatest IT capability gaps – and tapping into the gig workforce to quickly activate transformational turnkey solutions – can make a significant difference. Creating a strategic data roadmap helps telcos concentrate on the right initiatives and keep momentum going around new digital opportunities at the same time.
4. Skills gaps and the struggle to attract talent are exacerbating inadequate organizational agility.
As technology cycles speed up, reskilling becomes more critical. But productivity takes a real hit when you don’t think broadly enough around workforce design. EY research shows more than half of telcos consider a lack of digital skills their top barrier to transformation. But they don’t necessarily view it as a top strategic priority. They’re focusing more on systems and processes instead. Balancing external hiring with internal reskilling is increasingly important. Otherwise, you run the risk of building new siloes that could hurt your ability to jump on newer tech cycles, like SDN and 5G.
How are industry leaders navigating the risk? Bringing people and technology together in your organizational model doesn’t just erase boundaries. It creates an ecosystem built for the digital area. Prioritizing reskilling might require leadership and cultural adjustments – and that’s okay. Doing so sets the tone for retaining and re-deploying the people you already have, as well as attracting new talent in an ever-tightening labour market.
5. The capex burden is growing, making it harder to generate ROI from infrastructure.
Capital needs are getting more intense for telcos. Rolling out 5G will spur an uptick in global mobile capex, with capital intensity set to rise from 18 to 21% between 2017 and 2023. Policy focus on issues like full-fiber connectivity will stimulate a new wave of investments and more than ever, the typical portfolio of network assets is diversifying well beyond traditional domains. Low-power, wide-area rollouts to support IoT have trended up, while spending on SDN is designed to procure long-term capex and opex savings. Switching off legacy networks – and the related regulatory demands – will impact the bottom line. All told, ROI is a source of anxiety and that’s not about to change.
How are industry leaders navigating the risk? Telcos can’t afford to take their foot off the gas on cost reduction and optimization. That means carrying out cost-benefit analysis of running legacy network technologies, exploring migration programs, and looking at opportunities to reduce operational costs. All while ensuring ongoing and tangible benefits. This is about embedding a strategy that’s focused on deriving maximum ROI on every investment you make, and having predictive risk analytics in place at every step of the journey. The bigger and broader your long-term vision, the nimbler you can be.
For Canadian telcos, long-term success will be about striking the right balance between evolving to better serve customers, and mitigating the risks that come with evolution. It’s not enough to put customers at the heart of your strategy. You’ve got to keep one eye on the risk landscape, and plan now for what you’ll face tomorrow.