Five elements needed for telcos to secure future growth

Telco transformation hinges on an evolved operating model, McKinsey says.

Despite the challenges telecom operators have faced over the past decade, they still retain competitive advantages that can drive renewed growth, including global brand recognition, a large customer base, rich data sets, and extensive sales channels.

To fully capitalise on these strengths, telecom companies must transform from product- and volume-oriented legacy businesses to value-focused and customer-centric tech companies by making bigger shifts in the mindset, capabilities, and operating model of their organisations.

The mindset shift involves committing to the customer-centric goal, the new capabilities provide the tools necessary to achieve that goal, whilst the new operating model serves as a structure for effectively using those tools to get there.

According to a report from McKinsey & Company, the core of telco transformation lies in an evolved operating model, which results in a faster and more focused organisation that is capable of personalising customer interactions at the omnichannel level. 

Sharing its experience with telcos, McKinsey has identified the following five central elements that comprise a true operating-model evolution:

Clarify the roles of marketing versus channel teams

Consider the potential problems when a telco has numerous products or strategies being developed and implemented by various siloed parts of the organisation. If point of sale (POS) or web, for example, is building a separate approach to customer engagement, there’s the potential for a stratified operating model. That’s why it’s essential to consolidate the design of value propositions and customer engagement strategies within the single marketing function—and transform the channels into highly effective vectors. In this way, the roles and responsibilities of the two teams are differentiated. Marketing develops the plans; the channel teams execute them. The solution is to separate the strategy, which should be centralised, from the execution, which should be left to the channel teams.

Embrace product and channel agnosticism

Under this new approach, marketing operations focus on segments, personae, and use cases. This is a significant change from the current setup, where marketing teams are usually organised by product and separated into acquisition and management of the customer base. This product-based structure hampers strategic vision on the specific customer or customer segment. On the other hand, an optimised configuration would include two categories of teams, each of whose work is coordinated by a central orchestration hub of people responsible for guaranteeing a consistent customer engagement strategy.

Embed data scientists into business teams

To achieve the ideal of an entirely data-driven approach, telcos can work to eliminate the long-standing divide between business teams and data scientists. The most effective model would have a single agile, multiskilled team, with marketing and data scientists codesigning and working together, piloting, and testing. This is particularly important for context-based personalisation, which depends heavily on agility, to reduce the time to market as much as possible. Without the active participation of data scientists, business teams can have difficulty leveraging advanced tools and technology. 

Build cross-functional, agile factories

Strengthening the collaboration between technology and business teams can also prove advantageous. This is particularly true in those areas where the pace of change and speed of delivery are key to providing excellent customer experiences and generating value, such as channel platforms and product development. The ideal model would be cross-functional, multiskilled agile teams co-led by the relevant business function and IT. A shift to this setup can cause a four-to-six times increase in tech delivery velocity.

Develop an agile working mode

An agile working mode can mean many things. Still, our findings with telcos suggest the priority lies with defining clear accountability and impact KPIs for each team, with named product owners, clearly defined competence chapters, and cross-functional team members. With this established, the organisation should foster a test-and-learn, rapid-iteration approach. It should also set up regular ceremonies for progress monitoring and enable rapid reprioritisation.