The Future of Customer Ownership
Where does the future of customer ownership lie? A ‘Matrixx Software’ survey showed that over 64% of the 3,077 respondents would swap their mobile operator for a mobile service from their favourite Apps – Amazon, Netflix, Paypal, eBay. The respondents, who are from the UK and USA, cited main reasons as: transparency in pricing, ease of use, greater personalisation, and instant access to services.
Tech companies with their online systems have spoiled customers. The expectation now is one of simplicity and transparency. This is hard to achieve for Telcos as their legacy systems hinder their ability to innovate at the pace required. It makes them sluggish at making changes to current product experience, and new product development is equally slow. In addition, product design does not necessarily cater for what the customers demand, more what they can deliver.
Short vs. Long term View
I note two other challenges facing Telcos in addition to their legacy systems. Firstly, Telcos are myopic as they largely focus on current year operations targets. Secondly, they need to place considerable weight on the annual returns sought by shareholders. These two factors force short term thinking, making it tough to justify multi-year investments with longer payback periods.
I can only imagine the 180 degrees of difference between boardroom discussions in a Telco vs. an Amazon or Google! Whilst business leaders in Telcos focus on short term KPIs, their Tech counterparts, who largely depend on Telco infrastructure to deliver service, are planning years ahead. The latter peer through the eyes of customers to chart their course to a sustainable future. And by so doing, they maintain customers interests and are rewarded through improved customer lifetime value and profit growth.
Do Digital Natives Own the Future?
So, who is better placed to succeed in the future? Telcos with their huge, regulated, infrastructure investments or Tech companies who like cats have many lives as they learn through failure? I would argue that the Tech companies own the future! And why do I say this? Customers are at the heart of all that they do. Whether it is learning customers preferences or delivering simple and transparent propositions, they follow a customer centric approach.
eSIM and Google Project Fi
Take the example of Google Project Fi which has already launched services to paying customers in the USA via eSIM. Their value proposition includes the ability to select service from 3 of the major Telcos in the US, and roaming in over 135 countries. Project Fi also pitches a clear and simple pricing scheme that is bound to draw attention from multiple segments of the market, not just the value-seekers. So, it’s all about customer choice, simplicity, and transparency. Three very tangible ingredients in a proposition which are typically void in Telco provider offerings. This is just one example where advances in technology such as the eSIM is putting Tech companies in control.
Other OEMs have followed suit by designing their devices (like Samsung Gear 2 and Apple watch 3) on the eSIM concept. Further development of this trend will increasingly empower digital natives as it simplifies the switching of service providers. This is great for customers but it might spell the beginning of hard times for Telcos. The relationship with the customer is moving away from the Telco (where they were often held captive against their will) to the Tech companies. This will accelerate Telcos slipping to the bottom of the value chain and will see roles reverse with the Tech companies having to pay Telcos for infrastructure access.
Customers Are Jumping Ship When an Alternative Comes Along
Looking ahead, Telcos will likely cede customer ownership to Tech companies who offer a mobile service proposition. Project Fi is already receiving accolades from its customers. So where does this leave Telcos? I suppose they will remain landlords of infrastructure with waning ability to command a premium as they no longer manage the customer relationship. This does not bode well for Telcos and their ability to invest in 5G and beyond. It remains to be seen how Telcos will navigate the changing landscape of customer ownership which is being reshaped by Tech companies dancing to the tune of digital natives.