For traditional telecom companies, maintaining customer loyalty and delivering growth in the face of fierce price competition and new market entrants requires a new way of operating. To achieve this, they must go through an e-business transformation.

1. Perspective Carlos Severino
José Antonio Tortosa
Dr. Florian Gröne
Christopher Rischard
E-Business
Transformation
Challenges and
Opportunities for
Telecom Operators

2. Contact Information
Berlin Hong Kong Munich
Dr. Florian Gröne Dr. Edward C. Tse Gregor Harter
Senior Associate Partner Partner
+49-30-88705-844 +852-3650-6100 +49-89-54525-554
florian.groene@booz.com edward.tse@booz.com gregor.harter@booz.com
Dubai London New York
Karim Sabbagh Dr. Michael Peterson Christopher Vollmer
Partner Partner Partner
+971-4-390-0260 +49-89-54525-640 +1-212-551-6794
karim.sabbagh@booz.com michael.peterson@booz.com christopher.vollmer@booz.com
Düsseldorf Madrid Paris
Stefan Eikelmann Carlos Severino Pierre Péladeau
Partner Partner Partner
+49-211-3890-110 +34-91-563-7308 +33-1-44-34-3074
stefan.eikelmann@booz.com carlos.severino@booz.com pierre.peladeau@booz.com
Roman Friedrich Jose Tortosa São Paulo
Partner Partner Ivan de Souza
+49-211-3890-165 +34-91-563-7693 Senior Partner
roman.friedrich@booz.com jose.tortosa@booz.com +55-11-5501-6368
ivan.desouza@booz.com
Frankfurt Christopher Rischard
Olaf Acker Senior Associate Sydney
Partner +34-679-289-364 Vanessa Wallace
+49-69-97167-453 christopher.rischard@booz.com Partner
olaf.acker@booz.com +61-2-9321-1906
vanessa.wallace@booz.com
Andreas Späne
Partner
+49-69-97167-408
andreas.spaene@booz.com
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3. EXECUTIVE Telecommunications today is increasingly a commodity
business. For traditional telecom companies, maintaining
SUMMARY
customer loyalty and delivering growth in the face of fierce
price competition and new market entrants requires a new
way of operating.
To achieve this, they must go through Adopting an e-business model
an e-business transformation. This involves a reevaluation of all busi-
entails developing online capabil- ness operations. How this is done,
ities—similar to those of the best and in what sequence, varies from
online retailers—across their entire company to company and requires
business operations, from back-room careful planning, but the benefits are
processes and logistics to customer the same: better customer service
service and sales. This is an essen- and greater customer retention, an
tial step for capturing and retaining increase in average revenue per user,
today’s savvy customers, who expect significant operational cost savings,
the same kinds of benefits from all and a platform foundation for digital
technologically oriented service pro- services and the world of apps.
viders. An e-business transformation
will also reduce costs in the long run, Some telecom operators—those with
and it is a prerequisite for effectively management structures that have
delivering digital goods and services developed and thrived in silos—
that bring new revenue growth. may resist the change. But if they do
not undertake this transformation,
But an e-business transformation is they will risk losing market share
not a simple step for telecom opera- and missing the opportunity to
tors to take. Complex legacy systems leverage their current clout for
and isolated business functions are long-term growth. Telecom operators
difficult and costly to migrate and have been slower than most to
integrate without disrupting opera- capitalize on the new e-business
tions. Simply improving websites and opportunities. The time to catch up
introducing multichannel marketing and move ahead is now.
are not enough.
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4. THE E-BUSINESS For most of the past decade, telecom
operators have faced 10 percent
and organization and turn it into a
seamlessly integrated business system
IMPERATIVE annual declines in the price of their built around an online core.
basic services. By now most of these
companies have reached the limits Few companies have yet made a full
of optimization and cost reduction commitment to an online platform.
with their current architectures and Most offerings so far focus on core
operating models. Customers are data and voice transmission services.
less interested in who provides the Some have leveraged Internet-
connections than in price, service, enabled technologies to offer online
and features. Couple this with the e-shopping and e-care channels.
global recession, fierce competition, There are also a few cases of online
and the emergence of powerful new channels integrating successfully
players that successfully leverage into a cohesive multichannel
or bypass telecom operators—such environment. But all of these efforts
as Apple and Google with their fail to capture the full potential and
smartphone and application power of a comprehensive e-business
ecosystems, or Amazon’s digital transformation.
goods and cloud service business—
and there is reason to question where The good news is that most telecom
significant future growth will come operators start with significant
from for the once dominant telecom advantages: deep experience in
monopolies. Internet technologies, large customer
bases, well-known brands, and
This transformation applies to substantial online and storefront
technology platforms, organizational operations.
structures, people, and business
processes. It is a redesign based The bad news is that time is running
on lean management principles out. The competition has already
that includes determining which embraced the e-business paradigm.
legacy processes and systems can be Mobile virtual network operators
transformed and how. But it can also have built their entire operations
mean a greenfield start, in which around e-business cores. IT, media,
new processes are designed and off- and the big e-tailers have e-business
the-shelf systems are built into the in their DNA and are already luring
e-business online platform. The goal the traditional telecom subscriber
is to take a typical siloed operation with communications products,
with its legacy systems, processes, add-ons, and services.
The goal is to take a typical
siloed operation and turn it into
a seamlessly integrated business
system built around an online core.
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5. STEPS TO Telecom operators must first
understand the four business ratio-
• To be the provider of choice, a
company must be agile and flex-
E-BUSINESS nales underpinning the e-business ible in the face of fast-changing
SUCCESS imperative: customer needs. That means it must
have the technical ability to add
• To keep and defend their customer new features quickly when custom-
base, companies must provide supe- ers demand them, such as providing
rior, consistent, personalized cus- log-ins across social networking
tomer experiences. This requires a sites and setting up e-commerce
consistent way to follow customers accounts tied to phone bills.
on their journey across sales and
service channels—an automated • To increase efficiency and auto-
support system that remembers mation, telecom operators must
customers’ needs and preferences be able to scale up their online
and is accessible from all internal customer offerings. That means
and external touch points. predicting and tailoring products
and services to individual subscrib-
• To own and monetize the cus- ers quickly and seamlessly. It also
tomer interface, companies must requires in-depth knowledge of
establish a strong e-business customer preferences. This is a
platform for the delivery of goods basic prerequisite for holding on to
and new services. This platform your customer base.
would deliver next-generation
digital services. For example, a Achieving this level of transformation
telecom operator’s smart app could is not easy. There are general princi-
use customer profiling to suggest ples and methodologies to follow, but
and deliver new offerings ranging the specific e-business approach for
from music and video suggestions your company should be distinctive,
to personal banking, health, and reflecting your goals and ambitions,
security services. the constraints of your legacy systems,
your market environment, and your
investment capacity.
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6. BASIC E-BUSINESS interact with the company online, in
a store, or through a call center, thus
and business processes, not just Web
and mobile portals. An operator that
ARCHITECTURE enhancing the customer relationship uses a multichannel approach may be
and delivering better service and able to present a seamless interface
more opportunities for customer to the customer, but behind the
retention and up-selling. scenes its back-office processes, such
as billing and product delivery, are
This approach is effective, but it does handled by separate platforms. Sales
not go far enough to realize the full and customer service effectiveness are
benefits of “e-enabling” business compromised, and costs mount.
processes across the entire operation.
Today most telecom operators are The key difference between this A fully integrated e-business
either implementing or updating and the horizontal e-business approach builds online technology
a multichannel sales and service cross-channel strategy is the degree and capabilities into all front- and
approach. One main objective of this and scope of the integration (see back-room business processes,
strategy is to give customers the same Exhibit 1). The horizontal e-business eventually transforming the
personalized experience whether they platform is applied across all channels operation into an “online company”
Exhibit 1
Multichannel Strategy Versus Integral Cross-Channel E-Business Strategy
ILLUSTRATIVE
MULTICHANNEL STRATEGY WITH
INTEGRATED ONLINE CHANNEL CROSS-CHANNEL E-BUSINESS STRATEGY
Legacy Online
Retail Call Online Mobile Retail Call Online Mobile
Shop Centers Channel Channel Shop Centers Channel Channel
E-Business
Platform
Mobile Mobile
Retail CMC Web Retail CMC Web
Portal/ Portal/
OS OS Portal Portal Portal Portal
Apps Apps
Back End Back End
Provisioning/fulfillment management Provisioning/fulfillment management
Credit and billing management Credit and billing management
Source: Desktop Research; vendor interviews; Booz & Company analysis
4 Booz & Company

7. with Internet technology-based • Capturing new customers: Today’s satisfaction from cross-channel
processes at its core. In the face of 18- to 34-year-olds buy online. If offerings of both new products
the increasing costs for network telecom operators fail to capital- and better service translates into
expansion, upgrade, and maintenance ize on this fact, they will miss key a reduced churn of 2 to 4 percent.
and the falling margins, telecom market segments. In addition, the These extra offerings are often
operators can use this online platform high-value customer demographics called “loyalty options,” since they
transformation not only to integrate are increasingly using the flexibility give customers free add-on services
sales and service channels but also and comparability of online shop- that cost the company little or
to lower overall cost structures. ping, even for expensive items. Our nothing but generate high levels of
E-business capabilities can shift benchmark analysis shows benefits loyalty.
high-volume, high-cost transactions, of as much as €700 per postpaid
such as customer profiling and setting customer and up to €600 per fixed- • Reduced cost-to-serve: When
up accounts, to much lower-cost line customer. customers migrate to the online
processes by encouraging customers world, they cost less to service. This
to complete transactions online. • Enhanced average revenue per savings can represent 50 cents to €4
This improves process efficiency and user (ARPU): Operators can per contact, depending on the chan-
delivers better service to both internal expect an increase of 0.5 to 1 nel. Paper billing and mailing costs
users (account managers, billing percent in ARPU from e-business evaporate, and self-service product
departments) and customers. optimization. For a customer base selection cuts down the need for
of hundreds of thousands, this is expanded call centers. The trick is
Our analysis of the short- and a significant bottom-line boost. to not only make the platform a
long-term effects of introducing First-time sales and up-selling are compelling service center but also
an e-business platform, based on cheaper, easier, and more flexible use it as a sales platform to further
the experience of several European online. Products that stimulate maximize customer visits.
telecom operators, demonstrates the greater data usage (games, social
bottom-line benefits. There are five networking) are available only Overall cost savings and additional
e-business value creation levers: online. The creative use of Web income present a compelling case for
pages provides opportunities for an e-business transformation. But
• Reduced acquisition and retention both advertising and affiliated mar- the proof is in the implementation,
cost: Telecom operators can save keting. Customers spend more, and and for this, companies must follow
€50 (US$71) to €200 per customer per-sale costs are less. a well-defined step-by-step planning
by migrating sales and top-ups process.
online, which cuts out commissions • Extended customer lifetime: We
and processing costs. estimate that enhanced customer
Cost savings and additional income
present a compelling case for an
e-business transformation. But the
proof is in the implementation.
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8. STEP-BY-STEP e-business means, in effect, making execution and sequence are critical.
IMPLEMENTA- it a different type of business: an
“online” company, with a strong
Moving too quickly can lead to
excessive organizational stress;
TION specialization in telecommunications moving too slowly can sap support
services. Unless the benefits of such a for change. Careful planning and top
change are clearly understood, it will management buy-in can avoid these
not win the support of those who are mistakes.
key to its implementation. Moreover,
there is no single “silver bullet” Management must first carefully
Resistance to change is often broad approach. Every company’s starting determine both the scope of change
and deep, so strong leadership is position and goals differ and require and the timetable. The answers to
a critical factor for a successful careful assessment. five key questions explicitly define the
implementation. For a seasoned objectives and help map the journey
telecommunications executive, In introducing fundamental change (see Exhibit 2):
transforming a company into a true to a telecom business, the correct
Guidelines:
11.0 million =
aölkdfölka =
Exhibit 2
Sequence for E-Business Transformation
32.8% =
30.1% =
E-BUSINESS TRANSFORMATION APPROACH: DESIGN FRAMEWORK
INTENT & SCOPE
Why? Design principles TABLE HEADINGS
1 1. Strategy-based
Strategic
2. Market-back
Business For Whom? A4 format:
3. Purpose-driven
Priorities 2 - width for 3 columns
Market - width for 2 columns
Segment & What?
Product 3 DELIVERY PLATFORM
Process & Letter format:
… sets objectives for … Boundaries How?
Channel - width for 3 columns
4
Universe - width for 2 columns
Operating Model
… implies priorities
to scope … 4a Process, 4b Platform
People, Architecture Lines: 0,5 pt
… defines scope Culture Vision Who? Lines for legend: 0,5
& priorities for … Transformation 5
Sourcing
Model Note:
Please always delete
… clarifies needs & context for … otherwise InDesign w
file.
These colors can’t b
Execution
Approved Colors, T
Source: Booz & Company
6 Booz & Company

9. • Why? The company must establish e-enable additional customer touch back-end evolution by ensuring that
strategic business priorities. Is the points, such as call centers or the current enhancements are compat-
transformation for growth, market retail footprint? ible with the future target design
differentiation, cost leadership, or (choice of vendors, standards,
a combination of the above? The • How? An e-business transforma- interfaces).
goal will significantly determine the tion can be an incremental process,
transformation road map. or it can take place all at once. • Big bang: The company may be
Each company will have to decide confident and bold enough to
• For whom? Is the transformation which implementation model is fea- decide that it doesn’t have time to
necessary for all business units, sible and how it affects processes, introduce incremental transforma-
or can it be applied to a particular people and culture, and technology tion but will instead opt for step-
market? The company will have to platform architecture. change improvements by completely
decide which parts of the busi- redesigning its business processes
ness will be impacted: consumer • Who? Is there an in-house capa- around an online core. This could
product lines, small and medium- bility to develop the necessary IT mean using one of several com-
sized businesses, large corporate framework for all parts of the busi- mercial off-the-shelf platforms
accounts, mobile customers, ness, or should this be bought or and enlisting external help. A “big
fixed-line customers, or everything. licensed from off-the-shelf provid- bang” initiative should be driven by
Scope determines complexity, cost, ers? How critical will bringing in a clear top-level mandate and man-
and speed. external skills and talent be to the aged by an internal leader who is
success of the transformation? authoritative and well connected.
• What? The operator must decide
which processes and which chan- E-business transformations follow one • A greenfield approach: This
nels will be e-enabled and in what of three implementation models: company-within-a-company model
sequence. For example, will the starts from scratch without the
e-business transformation be lim- • Incremental development: The burden of legacy systems and builds
ited to marketing and sales or will company decides to enhance an e-business platform for a specific
it focus on retention and loyalty specific processes and e-channel market segment using new people
management or customer care capabilities that are closely aligned and new methods.
processes? And will it move beyond to the existing operating model. It
the Web and mobile interface to then plans a system-wide front- and
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10. Conclusion E-business is the future of telecom-
munications, just as it is for banking,
but also to improve internal business
operations.
travel, retail, and other industries.
Telecom operators that do not adapt An e-business transformation may
not only will lose out on significant seem daunting, but it can be an
growth opportunities but also may invigorating prospect for large com-
find it hard to fend off core business panies. If it is done well, the payoff
attrition. E-business is not just a new is substantial in terms of cost savings
sales or service channel; rather, it and growth potential; more impor-
involves a holistic end-to-end rethink- tant, it gives telecom operators a
ing of all operations from back-room chance to reset their business model.
IT architecture to front-end customer By taking this opportunity to adapt
touch points. The ultimate goal is to to the online sales environment now,
bring as many operations as feasible they can move quickly and confi-
online in an integrated fashion, not dently into one of the 21st century’s
only for better customer relationships strongest growth businesses.
An e-business transformation may seem
daunting, but it can be an invigorating
prospect for large companies.
8 Booz & Company

11. References
“Evolution or Revolution? Strategies for Telecom Billing “Multi-Channel Customer Management: Delighting Consumers,
Transformation,” by Jens Niebuhr, Andreas Späne, Dr. Germar Driving Efficiency,” by Dr. Michael Peterson, Dr. Florian Gröne,
Schröder, and Dr. Florian Gröne (Booz & Company, 2010). Dr. Karsten Kammer, and Julius Kirscheneder (Booz & Company,
www.booz.com/media/uploads/Evolution_or_Revolution.pdf 2010). www.booz.com/media/uploads/Multi-Channel_Customer_
Management.pdf
“Leaner & Keener Telecom Operators: Eliminating Waste Boosts
the Bottom Line,” by Andreas Späne, Dr. Florian Gröne, Olaf
Acker, and Dr. Roman Friedrich (Booz & Company, 2010).
www.booz.com/media/uploads/Leaner_and_Keener_Telecom_
Operators.pdf
About the Authors
Carlos Severino is a partner Dr. Florian Gröne is
with Booz & Company based a senior associate with
in Madrid and a member of the Booz & Company based in
communications, media, and Berlin and leads the firm’s
technology practice. His areas CRM Center of Excellence in
of expertise include strategy Europe. He supports tele-
development, specifically communications companies
related to marketing, customer and ICT service providers
service, and sales channels. in developing their market
positioning strategies, manag-
José Antonio Tortosa is a ing large-scale front-office
partner with Booz & Company transformation efforts, and
based in Madrid and a mem- improving technology delivery
ber of the communications, efficiency.
media, and technology prac-
tice. He focuses on business Christopher Rischard is
strategy, marketing, and sales a senior associate with
for fixed, mobile, and conver- Booz & Company based in
gent operators across Europe Madrid, primarily working
and Latin America. with media, telecommunica-
tions, and high-tech clients.
His focus areas include
capabilities-driven digital
and e-business strategy and
operating model design and
transformation.
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