Capabilities for a New Game

Migration to Horizontal Business Models

Consumers and businesses are more demanding, expecting always-on service everywhere, forcing operators to boost network capacity and connectivity.

Industries are becoming increasingly digitized, demanding new services like mobile payment platforms and cloud computing.

Vertically integrated technologies, on which operators have long depended, are growing increasingly modular and open and the telecom ecosystem is becoming more competitive.

These challenges and opportunities are creating a fundamental shift among operators from the vertically integrated business models that dominated the industry for most of the past century. Now, four distinct, though by no means mutually exclusive, horizontal business models designed to take full advantage of the opportunities are emerging:

• Network Guarantors
• Business Enablers
• Experience Providers
• Global Multimarketers

Network Guarantors

Offering network infrastructure and related services to other players.

Capabilities:

• Cost efficiency in the operation of their infrastructure
• Scalability in replicating their technology platforms and operating models
• Reliability in terms of network and IT availability and quality
• Smoothly integrated IT platforms and applications

What next: Building these capabilities requires operators to make large investments in new fiber and LTE infrastructure, which may limit competitors to government-led networking companies and operators willing to share costs with other like-minded players.

Business Enablers

Monetize assets by opening up their infrastructures and extending their business strategy.

Capabilities:

• Ability to broker and manage relationships with different partners, offering tailored services to each
• Flexibility and willingness to cater to the needs of partners with different business models
• Capacity for aggregating platforms and services into attractive packages for its partners
• Willingness to partner with others to augment portfolio of offerings

What next: Incumbents that have embraced the concept and plan to open up their networks and assets to third parties should build on their partner management and wholesaling capabilities.

Experience Providers

Offer the best combination of targeted applications and content, and a high level of user experience.

Capabilities:

• Ability to develop innovative new applications and services
• Willingness to dedicate themselves to creating the best customer experience possible, including the ability to develop world-class user interfaces.
• Capacity for excellent customer management and service

What next: This model may be the most difficult for telecom operators to follow, given their lack of experience and questionable track record in creating truly innovative new businesses. Moreover, the competition is already fierce.

Global Multimarketers

The largest telecom operators that have a real opportunity to expand their businesses into multiple segments and markets, through a combination of the three models discussed above. The goal: to build value by creating synergies among different segments and markets, by managing their portfolios effectively, and by replicating the necessary capabilities from market to market.

Capabilities:

• Proficiency in going global—organizing, operating, and marketing across many different geographies, and thus thinking both globally and locally
• Capacity to develop different business models and accompanying capabilities that can be replicated in different markets without increasing overall complexity

What next: Competition among these players will likely be limited to those that already have significant scale, and the willingness to reorganize to push that scale even further.

Conclusion

Operators must begin making the strategic choices necessary to determine their future direction, deciding which of the four models—or combination of models—works for them. This decision should depend, in part, on whether they can effectively leverage the capabilities they already possess, and, in part, on careful consideration of their ability to build new ones.