Scenario planning, is a strategic planning method to devise flexible long-term plans. It is in large part an adaptation of classic methods used by military intelligence : WAR GAMES. At Royal Dutch/Shell it was viewed as changing mindsets about the exogenous part of the world, prior to formulating specific strategies. Scenarios provide a mature insightful way to lay out alternative futures to challenge cherished but perhaps irrelevant assumptions on the future of the high capex volatile industries like Oil and Telcos.
The aim of scenario planning is not to identify one specific future, but to explore possible futures and to identify the mechanisms that drive the future in a particular direction. Scenario-based strategic planning achieves its cognitive effects through a structured, tool-based approach .Which brings us to envisioning some simple yet plausible scenarios for the Telco Industry !!
Scenario 1: The technology future
In this scenario Telcos obtain a competitive advantage by developing / delivering new proprietary technologies. At the same time customers’ buying decisions are mainly influenced by the technological characteristics of the innovations. And consumers have become technology savvy and technology addicts. Under these circumstances, the most relevant strategy for telcos is to invent new technologies and push them to the market.
In the long run this scenario may mean the disappearance of fixed networks as the leading technology for transporting voice and data. Even if physical networks remain, in this scenario they will play a minor role. They are what roads are to transport: they need to be there, they need to be maintained, but apart from that nobody really cares. The customer is interested more in cars ( Smartphones ), than in the type of asphalt ( LTE 4G ) he drives on.
For example Google is highly innovative, only distributes services online and has completely disrupted existing business models, putting pressure on such diverse industries as traditional software, newspapers and publishers. In the technology world, telecom companies that are disruptive innovators will do to the current telecom industry what Google has done to software. They will redefine existing industry boundaries completely, based on technology.
Scenario 2: The commodity future
In this scenario there are no distinctive technologies that give telcos a competitive edge. Instead, there are a number of standard technologies offered by vendors. Consumers recognize that technological change is incremental : they are all very much aware of the standards that exist and have a pretty good idea about what they want. They do not need to go to a store to check the hardware, but just order it online. Telcos will have to offer the technologies and the connected services in a convenient and efficient way.
Gaining economies of scale to serve mass markets cheaply is the key to company survival here. The role of the Telco is best described as a standard direct packager: it takes standard technology and services from other companies, then packages them and offers them on the web with little thinking about product differentiation.
For example Dell does not innovate its technology, but buys components from vendors. Next it ties those components together and ships the resulting product fast and cheaply to the consumer. It is a completely online business model. As most people now have an understanding of what they want from a pc or laptop, or they have a smart cousin who can help them articulate their wishes, there is no need for a store with staff explaining what the basic choices are.
Scenario 3: The customised future
In this world each segment has its own demands in terms of products and services and how these are to be delivered. R&D focuses on serving this diversity of market segments. Telcos will follow a demand pull strategy in developing innovations. They will listen to the market, identify the needs of different consumer groups and innovate around this need. This may lead to different versions of products and services being offered in the market or to entirely different technologies being developed for different segments.
The role of the Telco is that of a market driven innovator which may lead in two directions. The first one is reactive: creating innovations based on a profound understanding of consumer needs. The other road is more proactive: creating innovations that create new market segments that other telecom companies have not yet thought of.
For example Apple innovates based on superior understanding of what consumers like. In doing so they deliver superior technology to existing markets (the iPod that replaced other MP3 players), but they also create new market segments by supporting online communities. Their approach is decidedly multichannel with much online business, but also investments in Apple stores and resellers.
Scenario 4: The segmented world
In the segmented world, telcos source innovation from vendors and package those standard technologies for specific market segments. In many ways this scenario is closest to the current strategies of most traditional telecom incumbents. They have decreased their investment in innovation and have embarked on a multichannel strategy. In the segmented world technology and content sourced from vendors need to be integrated and they need to be matched with the diverse market segments that exist.
The company that is best able to connect the trinity of technology, content and segment will be able to reap superior profits. However, a critique on this strategy is that it tries to be everything for everyone. There is little focus on either specific technologies or segments. The risk that niche players enter into the most profitable segments may be high. Have Telcos ever considered the nightmare scenario when Apple and Amazon offer handsets plus e‑SIMs. Contracts and billing could be handled via iTunes or Amazon accounts. The telco would thus become anonymous, a mere wholesaler of network capacity with no end-customer relationship of its own.
Scenario 5 : The Digital world
Digital Telcos reconfigure themselves to deliver high quality, integrated product offerings across a number of more established digital service areas, including Machine-to-Machine, Cloud Computing, eHealth, Financial Services, Advertising and Information Security. It also brings together all capabilities in media services ranging from IPTV and satellite TV to over-the-top video, ensuring that the Digital Telco is a leading video broadcasting company as well.
Going Digital means retooling the network for Virtualisation , Cloud , CXM, reconfiguring the Organisation structure , revamping the IT Core with analytics capability , creating a new business model based on thorough understanding of the digital consumer….YES EVERYTHING AND MORE. In the final analysis Digital Telcos aim to provide the digital products and services which will help to improve the lives of our customers by leveraging the power of technology.
Traditional strategy tools are designed for stable market environments, but fail predictably when applied to innovation under conditions of uncertainty and rapid change, which characterizes today’s telecom market. Telcos can no longer afford the luxury of sluggishness, strategic inertia or blind spots.The good news is that various scenarios show an abundance of opportunities for Telcos.
The mobile industry is undergoing a dramatic rethinking of business foundations and supporting technologies. In many ways, technologies such as cloud, software-defined networking and 5G result in a “software is eating the network” end game. This in turn will promote opportunities that are much larger than just selling voice and data access meaning digital commerce, advertising, energy services, smart home , e-health ,M2M , Connected Car , Big Data , IoT etc .
It is for the Telcos to adapt , improvise , transform to profit from the known and many unknown opportunities ….that only scenario planning can help identify. Knee jerk reactions years after an event has occurred ( like underestimating the cannibalising impact of OTT or realising that high international data roaming charges are the real reason why free Wifi grew so fast….etc etc ) are proof that Telco CVxO have still not figured out how to use tools like Scenario planning !!
….lest Telco CxO’s forget what the 6 th century Sage said.. ” Plants are born tender and pliant; dead, they are brittle and dry ….and the same for men “ Lao Tzu
Sadiq Malik ( Telco Strategist )