Dynamic telecoms industry

IRRESPECTIVE of the success and financial fortunes of the individual players therein, the overall demand situation for products and solutions in the telecoms sector still points to viable opportunities and investment sense.

Report by Chris Tenga

It is believed the growth trajectory of the telecoms industry is both long-term and highly sustainable. Noteworthy is the fact that this industry’s survival is premised on innovation and agility in the context of a highly competitive and dynamic telecoms environment.

Leading telecoms players have fully embraced the Blue Ocean model (Chan Kim & Mauborgne; 2005) after realising that success is secured by the ability to avoid direct competitive confrontation in current or existing products and markets.

Value is being created in new, unconventional markets that seem to require new telecoms products/ solutions or existing ones reconfigured and packaged radically different. What can the banking sector, the sector that used to be the hallmark of innovation, learn from the telecoms industry?

The telecoms industry is truly a “PhD in Strategy” research case.
The industry is dynamic, highly competitive and fast-paced. It is churning out products and solutions at a pace that is faster than any industry has ever done in history. The scramble for the market and the passion to the coverage agenda is addictive to players in this industry.

From a talent front, the industry is characterised by intense competition for the best and brightest.

And true to the relentless innovation, the telecoms industry is impacting human life in more and better ways than any other, including the banking sector.

It is by far more innovative, churning out new products and service standards, and evolving existing products, better and faster than the banking sector.

For some inexplicable reason, the telecommunications and IT industries seem to be successfully creating (not identifying) blue oceans.

Yes, that various players in this exciting industry are to some extent engaged in red oceans, where competition is on gaining market share in established products or solutions within existing and well-defined industry boundaries, utilising known competitive rules of the game.

But telecoms industry players seem to be realising one thing; that the market space for traditional (red ocean) products and services is getting crowded faster, and prospects for profits and growth are reduced as products quickly become commodities, and cut-throat competition is turning these red oceans bloody.

Serious contenders in the telecoms industry locally, regionally and globally are now seeking and vigorously pursuing untapped market space (blue oceans) by actively creating demand, and by expanding existing industry boundaries.

In the mobile business, for example, we have moved from traditional voice and data products into a plethora of Value Added Services (VAS) and Fixed Mobile Convergence (FMC) in a very short time span.

Products have evolved from pre-paid and post-paid into various hybrid forms, within a very short time-span. The industry is creating not only solutions, but user/ customer capabilities that minimise operator costs, maximise market reach for these solutions, and extend the range of functionalities around them.

While the telecommunications and IT industry is on the ascendency, the Zimbabwean banking sector is in a miserable decline. I have often pierced through business advertisements to extract the value proposition.

Unlike telecommunications business adverts which propose tangible benefits to customers, benefits such as tariff discounts, bonuses, off-peak rates etc, which offer a tangible financial proposition to the customer, banks are struggling to show cause why they merit market attention.

The sector has deteriorated into a dull, stagnant industry starved of new ideas and innovative offers.

The reality about the Zimbabwean banking market is that there is a significant market currently unbanked (about 70%). Yet what we hear are all sorts of excuses from bankers on why so much of the potential market remains unbanked. One thing for sure is that it is not strictly a liquidity constraint, because transactions of a significant aggregate value are taking place off-line.

Risk aversion and uncertainty after the bank failures of the last seven years are often cited as the major reason why mainstreaming transactions are still a challenge for the sector. Are these excuses made in lieu of failure to innovate?

There are three fundamentals that banks should focus on in order to enhance their capability for innovation. These are:

Product and market development
Traditionally known as Research & Design (R&D), this is a critical function when an organisation’s competitive model, either on a survival or growth focus, is new product development.

Successful players in the telecommunications sector have R&D functions in the form of product and market development managers.
What is unique and interesting about the telecoms industry is that products and solutions are developed based on well-researched consumer needs and trends, with a go-to-market strategy clearly articulated well before product or solution engineering takes place.

A survey in the banking industry revealed that in the place of R&D or product and market development specialists, banks instead have a dedicated strategy office that is expected to champion research as well as product and market development.

Therein lies the problem. In the telecoms industry, the strategy office is referred to as the Business Intelligence (BI) office and its focus is evidently different from product and market development.

It is important at this point to bring back the blue ocean/red ocean concept because it is well understood and well utilised by the telecoms sector than the banking sector.

The BI office is preoccupied with strengthening the competitive footing of a telecoms player in the current market space (the red ocean). It is resourced by analysts whose main capabilities are obviously analysis and trouble-shooting.

The product and market development office is preoccupied with identifying new market spaces or windows of market opportunities (untapped markets), and crafting solutions to address these spaces/windows (blue oceans). It is no coincidence therefore that a product such as EcoCash was pioneered by a telecoms engineer rather than a consumer banking specialist. If bankers did not feel insulted, then we probably have lost passion in this industry.

Climate for innovation
When the term “climate for innovation” is used, most leaders do not understand what it entails.

It is an environment where the strategic focus, resource deployment, leadership style, and incentive structure, are all skewed towards the development of new products/solutions, new markets, and new business processes. These four factors are termed “innovation drivers” because they are precedent factors to any meaningful innovation; they are requisites.

If banks are to become innovation hubs, their strategic focus and key staff investments should naturally shift from relationships management to product and market development. Relationship managers should be motivated and incentivised to identify and develop blue ocean opportunities in both product and market terms.

If only 30% of the potential market is currently banked as statistics, suggest it goes without saying that there are immense opportunities (a vast blue ocean) for business in the banking sector. It is not a market confidence constraint or a liquidity constraint as we are persuaded to believe. The 70% remains unbanked simply because there are no suitable banking products and solutions for them.

The onus is on banks to understand why such a significant market potential remains unbanked, and what specific banking solutions this potential market seeks that it is obviously not getting at the moment. The banking sector is stagnant, obviously because it is not “thinking”, it is not stimulating and sustaining “thinking”. I doubt if a bank is still as exciting a place to work as it used to be 15 years ago.

Tenga is a talent consultant and managing director of Clinique Talent Consultants, Zimbabwe. He has experience in talent management, team-building, leadership development and change management. Contact him on (+263) 4-2933 444 or (+263) 772 477 974 or e-mail chris@cliniquetalent.com