Thursday, February 20, 2020

Telco relevance and growth

I am often asked what I think are the necessary steps for network operators to return to growth. This is usually a detailed discussion, but at a high level, I think a key to operators' profitability is in creating network services that are differentiated.
I have seen so much value being created for consumers and enterprises at Telefonica when we started retaking control of the connectivity, that I think there are some universal lessons to be learned there.

Curating experiences

Creating differentiated network services doesn't necessarily mean looking at hyper futuristic scenarios that entail autonomous drones or remote surgery. While these are likely to occur in the next 10 to 20 years, there is plenty today that can be done to better user experiences.
For instance, uploading large files or editing graphics files in the cloud is still slow and clumsy. Also, broadband networks' advertised speed has become meaningless for most consumers. How can you have a 600mbps connection and still suffer from pixelated video stream or a lagging gaming session? There are hundreds of these unsatisfactory experiences that could benefit from better connectivity.

These nonoptimal experiences can be where operators can start creating value and differentiating themselves. Afterall, operators own their networks; since they do not rely on the open internet for transport, they should presumably be able to control the traffic and user experience at a granular level? A better connectivity experience is not always synonymous with more speed, in most case it means a control debit, latency and volume.

Accepting this, means that you have to recognize that the diktat of "one size fits all" is over for your network. You cannot create a connectivity product that is essentially the same for everyone, whether they are a teenage gamer, an avid video streaming fan, an architect office, a dentist or a bank branch. They all have different needs, capabilities, price elasticity and you can't really believe that your network will be able to meet all their needs simultaneously without more control. Growth is unlikely to come in the future for everyone paying the same price for the same service. There are pockets of hyper profitability to extract, but they need a granular control of the connectivity.

"Vanilla" connectivity for all will not grow in terms of revenue per user with more general speed.

Being able to create differentiated experience for each segment  means certainly being able to identify and measure them. That's the easy part.  Operators mostly have a good, granular grasp on their market segments. The hard part is finding out what these segments want / need and are willing to pay. The traditional approach is to proceed by creating a value proposition, based on a technology advance, test it in market studies, focus groups, limited trials and trials at scale before national launch.

While this might work well for services that are universal and apply to a large part of the population, identifying the micro segments that are willing to pay more for a differentiated connectivity experience requires a more granular approach. Creating experiences that delight the customers is usually not the result of a marketing genius that had it all planned in advance. In my experience, creating, identifying and nurturing this value comes from the contact with the client, letting them experience the service. There are usually many unintended consequences when one starts playing with connectivity. Many of successful telco services are the fruit of such unintended consequences (texting was initially a signalling protocol for instance).

Programmable networks

One way to create and curate such experiences is to increase your control on the connectivity. This means disaggregate, virtualize and software-define the elements of your access (virtualize the OLT and the RAN, built a programmable SDN layer).
You should accept that you can't a priori really understand what your customers will value without testing it. There will be a lot of unintended consequences (positive and negative). It is therefore necessary to create a series of hypothesis that you will systematically test with the customer to validate or discard them. These tests must happen "in the wild" with real customers, because there are invariably also many unintended consequences in deploying in live networks with real population compared to in a lab with "friends and family" users.
In average, you might need to test 50-60 variants to find 2 or 3 successful services. In telecom-years, that's about 100 years at today's development / testing cycles. But if you have a programmable networks, and know how to program, these variants can be created and tested at software speed.

Therefore, you need to test often and pivot fast and you need to be able to test with small, medium and large samples. The key for this is to build an end to end CI/CD lab that is able to coarsely reproduce your network setup from the core, the access and transport perspective. It needs to be software defined with open interfaces, so that you can permutate, swap and configure new elements on-demand.

Since current networks and elements are so complex and proprietary, you need to identify greenfields and islands of wilderness in your connectivity where you will be able to experiment in isolation without disrupting your core customer base. At Telefonica, these uncharted connectivity fields were rural networks and edge computing, in other networks, AI-augmented networks operation, network slicing or 5G could be perfect experimentation grounds.

Pluridisciplinary teams

Another learning is that not integrating user / customer feedback at every stage of the elaboration of the service is deadly. It is necessary that UX designers be part of the process from the inception and throughout. They might not be as heavily involved in some phases (development) than others (inception, beta, trial...) so they can be shared across projects.
Increasingly, data science, security and privacy good practices need to be considered also throughout the projects pivot points. In many cases, it is difficult, expensive or impossible to retrofit them if they were not part of the original design.
Products and services do not necessarily need large teams to take off the ground and create value, but they do need dedication and focus. Resist the temptation to have the core team work cross-project. What you gain by identifying possible synergies, you lose in velocity. Rather have small dedicated teams with core members and specialists that are lent from project to project for periods of time.
Foster internal competition. Evaluate often and be ready to pivot or kill projects.

Paradoxically, when you find a successful service, in many organization, the phase in which these projects are most likely to die is when transitioning to the products and business teams. The key is possibly for these not to transition. I have long advocated that it is easier for an operator to launch 5G as a separate company than as an evolution. But it is impractical for many operators to consider starting a parallel organization for network transformation.These innovations, if they are to transform the way the networks and services are managed must be accompanied by a continuous training process and a constant resource rotation between innovative and live projects. Therefore transformation and innovation is not the work of a dedicated team, but of the whole workforce and everyone has opportunity to participate in innovation projects, from inception to delivery.

Beyond the "how", the teams need a clear framework to guide them in their daily decision making. The "what" needs to be oriented by a vision, strategies, tactics and a doctrine that will explore in a subsequent post.

Please share your experience with transformation and innovation projects in the telco world. We all grow by sharing. "A rising tide lifts all boats".

Interested in how these principles were applied to the creation of the Open RAN market? contact me for a copy of the report "xRAN 2020".

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