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Christina Winquist

Welcome to the EY Tech Connect podcast, where we have candid conversation about the most pressing priorities facing tech, media and entertainment and telecommunication companies and provide strategic insights on the key issues that matter to them. As industry ecosystems evolve in new directions, we use these discussions to reflect on how companies can not only take advantage of new opportunities, but also tackle emerging challenges.

Adrian Baschnonga

Welcome to EY Tech Connect. My name’s Adrian Baschnonga. I’m Lead Analyst for Telecommunications at EY and I’ll be moderating today’s discussion alongside ...

Winquist

And I’m Christina Winquist, Global Leader for Brand Marketing and Communications for TMT at EY and we are welcoming two guests today.

Ioannis Melas

Hello, everybody. My name is Ioannis Melas. I am a partner at EY, and I head up our Customer and Growth Consulting for the Tech, Media and Telecommunications sector in the UK.

Pippa Dussuyer

And I’m Pippa Dussuyer, also now in Tech, Media and Telco’s sector and specifically focused on digital and customer-centric transformations. Great to be with you all today.

Winquist

Fantastic.

Baschnonga      

Great, so today we’re going to talk about COVID-19 and its impact on customer experiences. The pandemic and resulting lockdown saw all of us stay at home, but what did this actually mean for how we used connectivity and content, and crucially, how did it alter the way we interacted with service providers? Decoding the digital home consumer survey has helped us uncover some of these changing household attitudes and we’ll be drawing on some of the outputs of this research as part of today’s conversation.

Winquist

So, to get us started, Pippa and Ioannis, what are the main trends you’ve observed coming out of COVID-19?

Melas

So, it’s been a very interesting time to be in this sector. Obviously, we all rightly celebrated the contribution that our health and care workers and critical supply chain practitioners obviously played during the pandemic, but I would argue that our tech, media and telco providers have been the unsung heroes in this whole experience and that is because they have been offering the backbone of connectivity and content that has kept the economy going. Now, there’s a few estimates put forward on what the GDP loss would be if this pandemic happened 20 years ago when we didn’t have that infrastructure.  I don't know that it’s even worth to speculate that much about it, but what we do know is the world kept running because of TMT providers to a very large extent and that is also something that obviously the consumers themselves experienced, whether knowingly, or perhaps implicitly.  As Adrian mentioned earlier, in their current studies that we run to get the pulse of consumers, customers, users, a few things were very interesting.  We are seeing peak demand and statements of need when it comes to connectivity.  43% of all households have responded that their internet connectivity needs are higher as a result of the pandemic and on top of that, 37% are saying they’re more engaged than before with the connectivity and the content they buy. This comes with lower cost control than ever before.  So, it’s the first time we’re seeing that 24% of respondents expect to increase broadband spending, and that’s after consecutive years of people looking to spend less and less on connectivity.  Many said that they have been more engaged than ever in terms of the connectivity and content they buy.  Now, traditionally, this is a set of services that we may treat as utilities, not understanding what we get, what it really means in terms of lived experience, et cetera, but this is something that definitely changed during the pandemic.  And crucially, our appetite to spend in these services changed as well. So traditionally we have been seeing increase in cost sensitivity, how much money are consumers really willing to pay for good connectivity and higher speeds?  And this is the first time ever in the time that we’ve run this survey where we saw an increase in the proportion of people who say, “I’m happy to spend more to make sure I have reliable connectivity,” as I said, this the first in the 10 years that we’re running the survey.

Dussuyer

I find this so fascinating. As you say, I mean, there’s just been this unsung, huge amounts of work going on on behalf of tech, media and telco providers just to keep things going in the background. We hear some amusing anecdotes around what spurred on your digital transformation. Was it your CEO, COO or C19 and definitely COVID-19 has spurred on so much digital demand across consumers and enterprises. What’s great to see is through a year of what must have been just huge heroic efforts. What the sector now faces is increased amount, higher engagement, and an increased willingness to spend and that’s a super-exciting place for the sector to be in because it all points to a significant growth opportunity for TMT companies and one that they can really capitalize on if they can deliver to the customer expectation. So, I think what could have been and what was a very distressing time for consumers and companies alike, is now turning into a fantastic growth opportunity. 

Baschnonga

So, that’s really reassuring to hear that TMT companies have this exciting, new opportunity for growth, but let’s get down into some details. What kind of packages are people looking for and how is the nature of the bundle offer changing? Pippa, it would be great to have your take on how the offer to customers is evolving.

Dussuyer

I think it’s interesting because I think the typical quad-play telco bundle, if you like, was being challenged even pre-COVID-19 and this is likely due to just technological evolution, but fixed voice was already a questionable part of what was the desired bundle. You’ve also got the launch of numerous streaming devices from multiple competitors, which is challenging the media portion of the bundle as being provided by traditional players, so there’s definitely evolution required in terms of what TMT companies are offering and a need to stay close to the changing customer needs. But I think — and I can talk for hours (laughter) just on the need for simplicity, and bundles and propositions — I think TMT companies do need to be cautious that in responding to this and in introducing any new bundles, that they’re also retiring old because the proliferation of a growing back book drives massive complexity into downstream processes and can create customer experience challenges in billing journeys, for example. So, I think there is a changing evolution required in terms of what is offered, but I would say that companies need to be cautious of responding to that without managing for the simplification of what they offer in retiring things that are no longer relevant. Bundles are definitely here to stay, and we see that coming through in surveys, as Ioannis and yourself have mentioned, but what’s interesting is that it’s why are bundles being demanded? And it’s not so much about the supremacy of one product over another, it’s more about the simplicity of one single provider and the fact the consumers are seeking one single provider, particularly around customer service. What consumers are looking for is a much lower effort in terms of how they manage all of their communications providers and there’s definitely a rationale for taking a bundle from one provider. It’s about the simplicity of the customer experience. Another interesting thing that we’re seeing, which is a new demand coming through, I guess, in terms of bundles is the addition of security. COVID-19 definitely reinforced this due to an increase in phishing scams, others taking advantage of the situation in this increase in digital anxiety, if you like, which means that there is definitely further demand for privacy, security features, in addition to the broadband bundle. COVID-19 has amplified the need for some new services, such as security, that it’s also bringing up the need for simplification and a shake-up of the bundles to get rid of some of the elements that are no longer relevant.

Melas

This is putting a bigger strain on a lot of our TMT clients, this idea that if you are to provide a more unified service to me, that is a reason for me to buy security and privacy, smart home, other things that are coming into this bundle because a lot of our clients in TMT have already been challenged in weaving together customer experiences as they straddle sales, marketing and service. And the more they go outside the core to innovation and services that perhaps are treated as adjacent to the business or indeed don't already have unified customer care infrastructure or all of the tools in place, I guess, that allows them to have that united front as they’re interacting with the customer, it is something they have to figure out quite quickly and obviously in the context of a lot of these customer organizations already are going through some transformation to cope with the COVID-19 impact themselves, mixed environments in terms of home agents and contact center agents or how much digital self-serve can you present as the prime option before you hand it off to a person. All of these things are still playing out and, as I said, are pushing the customer service agenda to a new space because then they have to do that and account for products that are not traditionally the core bundle. It’s a very exciting space and it’s not short of challenges.

Winquist

(Laughter) Absolutely. And this notion of the various service parts of the business being joined up sounds extremely important and as customers go ever more digital with the pandemic playing an important role here, what’s the future of brick-and-mortar businesses in the retail store experience?

Melas

That also has been one of the more eye-opening parts of our survey when we take a longitudinal approach, as is in over time. Clearly, retail had a very tough time coming through the pandemic, not least because a lot of it was shut for long periods of time and with uncertainty of when things would reopen and how much. So, it was quite interesting for us to see that perhaps the death of the high street, as it’s known in the UK, or indeed the relevance of or lack thereof of the retail channel was very prematurely called. What we’re seeing in our research is that there’s almost a smile trend in the curve of preference towards retail as you follow it along different age groups. That means that the youngest and the oldest still would be most predisposed to retail experiences, obviously for products that have physical forms themselves, obviously the mobile phone itself being a key aspect of that. When you get to the time-poor 45s to 55s, that is at its lowest, but again, a lot of people around, the younger and the older, still want to have their choice of a retail environment and they will choose it more often than not.

Dussuyer

This is a really interesting one. It’s quite surprising in terms of as the world gets more digital, this continued reliance, particularly on the part of the young, that physical need to interact with products. I suppose it’s surprising and not in other ways, given, as you look to sort of the future of the high street and how to invigorate. I think there’s something for companies here around how do you capitalize on the role of those physical spaces, the purpose is beyond just the acquisition journey. How can you start to expand the role of those in terms of maybe customer-collaborative innovation or service purposes alongside acquisition. It’s something that Apple has done very well. What the survey shows is just the continued need for that channel. And therefore, I guess the call to action is how do you optimize that channel to be something even more compelling?

Baschnonga

Yes, really interesting to ponder over some of the results from our survey, particularly around attitudes to retail experiences. But we’ve talked a lot about consumers and how their world has changed. But TMT providers to the enterprise have grappled with many of the same customer issues. So, how are B2B providers reacting to these trends and what are the leaders in this space doing well? Pippa, it would be great to have your perspective on this.

Dussuyer

It’s been amazing to see how rapidly enterprise businesses have had to change their behaviors and particularly their consumption behaviors just due to the pandemic. What we see that had already begun, but this acceleration of the transition to consumption-as-a-service model, rather than, I guess, your traditional products acquisitions, but these digital products that then become platform as a service, consumption as a service. And what we’re seeing is that 94% of TMT providers are on that journey to evolving their product suite into these cloud-based models, but only 15% of them are feeling confident about their success in that journey. And confidence in this case means two things: it’s about the pace of the digital transformation agenda and, I think, also just how holistic that agenda needs to be, the ability to connect what legacy organizational silos, particularly across the front office, so your sales, your marketing, your customer service, and how you connect all of those functions to deliver something that needs to be much more seamless when you’re talking about a cloud-based consumption model, which is a digital product in its nature. What we’re seeing is it’s a significant opportunity, but we are seeing quite a lot of hesitation and nervousness amongst the TMT providers when it comes to the enterprise space. The distinctions between those who are leading and capitalizing on the growth vs. the rest of the pack boils down to a couple of things. The first to call out is, I think, around to what extent they are offering digital first, or digitally assisted capabilities, to their customers. So, a greater capability for digitally assisted purchase experiences across all products. How much of that acquisition journey can organizations, so enterprise customers, start and complete online? This is more prevalent in the SME space than it is potentially in large corporate, complex acquisitions, but absolutely that’s where the distinction is for those who are leading. The other is around the role of digital in selling, how you actually equip yourselves to become strategic advisors and that digitally assisted sales process is very, very important and with that comes all of the data, I guess, the proactivity with it and the importance of data and understanding your customers. Understanding those segments becomes really important, as well. I think the final one to call out is just their ability to qualify the leads for those sales. So, again, it’s how reliable is the data that you’re giving to your sales teams to ensure that you are going after the right growth opportunities, converting those growth opportunities and then giving your customers a seamless digital acquisition that allows you to, I guess, shift your base into those cloud-based-as-a-service models. 

Melas

Yes, I’ll build on this. This is as much, in the B2B space, a mindset shift as it is a change in business models. I think all of these things have been underway for a while, but a lot of our B2B clients have been resistant to fully embrace them and there were a lot of sacred cows that were slain in that process. I think that the first and foremost is what Pippa mentioned around what does sales mean in a world where you cannot be physically next to a customer? Even before COVID-19, about north of 90% of client interactions within a B2B sales cycle were remote, were over the phone. But even so, people didn’t realize that they still had a lot of resistance to let go of that dependency of large-field sales organizations. COVID-19 definitely changed the mindset around the fact that you can have a meaningful, a strategic advisor relationship with your clients, even if you’re not in the same room with them, as long as you have the right infrastructure, digital-selling capability, whether that is human or technology. So, that’s one thing. The second one is all of this came with an elevation of marketing overall. There’s a lot of businesses that are still in the B2B space that don't have marketing as an equal on the table when it comes to a long, elaborate B2B sales cycle. But that’s not an option if you want to be engaging with a customer remotely, digitally, etc., because that’s the place where a lot of the sales cycle plays out, if you start at the right time of evaluation, discovery, trial, all of these things that inform a B2B purchase. So, marketing is a lot more of an equal at the table now. The last piece, I guess, just picking up on Pippa’s point on data and insight, this is really the lifeblood of how this new engagement model works. I know it’s been very well documented. The TMT providers that are moving towards consumption-based models, which, by the way, (laughter) is 95%, almost all of them.  But we were finding the businesses that have achieved growth rates of 15%-plus over a sustained period of three years and more, the data that these businesses were looking at were very deep into product use, into adoption of specific services, into value perception. They were very granular about how customers and users actually engage with the service and the product. And the businesses that were not, i.e., the slow-growth businesses, were still in the world of firmographics, of using company turnover as the proxy for addressable wallet, like all of these things that frankly by now don't give enough insight on the customer to be useful guides on how you structure your customer-facing channels and your engagement model.

Baschnonga

Well, that’s great. You know, really interesting to learn what separates the leaders from the laggards, and I like this idea of the changing relationship dynamic, whether that’s externally with your customers or internally between different parts of the business. With all of this in mind, what do TMT providers needs to get right as they adapt to this rapidly changing new normal? What’s the call to action for them?

Dussuyer

Both across consumer and enterprise TMT companies, it’s really deliver to changing customer expectations. Companies need to understand their organizations through the eyes of their customers, and I think that’s the first thing, is to really understand what is the end-to-end customer experience look and feel like? Because customers don't see all or care for the siloed functional arrangement of marketing their sales or service. And, therefore, companies need this holistic understanding of the end-to-end customer journey and how to orient operating models to be in service of this interconnected set of experiences. Just as Ioannis was talking there about the increasing prominence of marketing within an enterprise context and that’s absolutely valid, but you need to sort of really understand that in terms of marketing in service of what? It’s in service of articulating simplified propositions that give customers the confidence to purchase in a digital way. And I think that is really what companies need to be very careful about, is as you kind of evolve, it’s really trying to drive simplification through every element of the business. If you’re evolving product bundles, do it with careful consideration and involvement of the service teams to make sure you aren’t inadvertently adding complexity in these downstream processes. This is really key. There’s so much to go after in terms of growth and opportunity. I think there’s a cautionary tale about each function trying to go after elements of that in a siloed fashion vs. the opportunity to go after true customer growth in a really joined-up fashion, taking an end-to-end view of the customer journey and avoiding the temptation to do marketing optimization vs. sales optimization vs. service optimization. That’s the really key thing: it’s about how do you go after that growth, how do you measure success? How do you ensure that there is a balanced scorecard that therefore allows those business functions to align on common customer goals and to tackle this opportunity for growth in a holistic way?

Melas

That is spot on, Pippa. I think the second thing is obviously in this context of business outcome and customer outcome being the main guide, a lot of providers understand, in theory, agile as a good way to do things, but either go down a path of treating agile as a way for not having scope and not having a defined outcome and to just stay introducing ambiguity into the transformation process. Or indeed not doing the hard work of thinking how an agile transformation effort truly mirrors itself in the operating model of the business at large, i.e., having people double-hatting, having people partly committed to the transformation effort — all of these things that present an illusion of agile whilst not necessarily yielding the benefits of it. This is not something that a lot of businesses have cracked entirely, nor should we pretend that it’s easy. But it certainly makes for an exciting way forward in terms of thinking how do you get all of these things right — or enough of these things right enough of the time to be obviously having a greater impact on the customer and the business.

Dussuyer

Completely. It is so exciting. We do talk about it often and it really makes us sound like super-interesting people, doesn’t it, Ioannis? It’s such a kind of art and science to getting this right and I really liked what you said about agile because the creative principles around agile enable, and the design thinking, the service design elements, that just unlocks such a huge uplift in terms of what you can achieve around autonomy and what you can achieve around the business outcomes. But it must be done in a disciplined way, and it must be done in a measured way. It’s not a license for chaotic transformation, and I think this is where there is an element of experimentation that I think works well, this huge legacy, this huge complexity. So, to pivot the operating model to be more aligned to end-to-end customer journey I think takes some experimentation. It takes kind of incubating some of these agile ways of working, tackling end-to-end customer journeys in vertical slices of the business and then using that as a way to test and learn what the new operating model might look like. I think that’s going to be a really fascinating thing to see, how some of the more legacy telco and media providers start to evolve over the next few years.

Winquist

That’s right. It’s all very exciting and the opportunities are endless.

(Music)

So, thank you guys so much for joining us on EY Tech Connect. I think we can all identify with your insights as we’re all consumers, we’re B2B buyers, sellers, so thank you again for your time.

Dussuyer

Thanks, everyone. Bye! 

Melas

Goodbye. Thanks for having us.

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