"What keeps you awake at night?" is the question that was asked of 100 top CEOs by Ernst & Young International, during a survey on the impact of the telecommunications revolution upon their business operations and society as a whole.
"The old industry is already dead. All that's left is inertia."
That statement, by a leading communications industry CEO interviewed in The Connected Society survey, accurately sums up their position.
CEOs throughout the communications industry see themselves in the midst of a revolution. The communications industry is absorbing so much change, in such a short space of time, that it has become nearly impossible to predict business outcomes with an acceptable degree of certainty. Out of this blurring of vectors and variables facing the industry, CEOs interviewed identified five key trends that will shape the communications over the next five years:
The connected society
A new global culture and economy is emerging out of the communications revolution, an economy where businesses and individuals are connected in a high-speed communications fabric that enables digital transmission of voice, data and video, anywhere, any time. The network has yet to reach all corners of the globe, but as one CEO put it, "The future is already here - just unevenly distributed." In this Connected Society, business, personal and entertainment transactions are migrating from the physical world into the electronic world. And, as the new society takes shape, the consumer, not the regulator becomes the number one industry driver, resulting in a market where CEOs must compete for customer loyalty like never before, developing products, services and brands with a powerful allure.
Content packagers
Ernst & Young believes that in the new economy a new type of company is emerging as a potential gatekeeper in the information and customer-relationship value chain. These entities, the content packagers, as distinct from the content providers, consolidate the abundance of available information and filter it through a more productive user interface, making the users experience simpler, more tailored and more efficient options. As one CEO explained, "Players who win the content battle early will dominate by winning brand loyalty in a rapidly growing area." This battle for access to, and ownership of, the customer is already evident in a number of mergers, typified by the mega-merger between AOL and Time Warner.
Broadband connection
A major artery in the connected society will be the broadband connection. Although players have aligned in camps based on differing technologies, it is going to be marketing and customer service that will differentiate the winners in the end. Technologically speaking, the contenders are divided amongst digital subscriber line (DSL), cable TV operators, broadband wireless (satellite or terrestrial) and optical fibre. With no outright winner predicted in technological terms, Ernst & Young attribute success to marketing.
Mobile wireless
In the connected society, mobile telephony will become the standard for voice transmission. Although South Africa already has more wireless than wire line subscribers, the mobile wireless evolution is expected to proceed in a number of stages, namely:
The alternate stage, in which fixed-line services are either not available or very limited.
The complementary stage, in which developing mobile services complement a well-developed fixed line infrastructure and the two services coexist.
The substitution stage, in which mobile begins to displace fixed-line services for voice communications.
The saturation stage, in which mobile personal telecommunications is ubiquitous and is able to provide data and limited video as well as a voice.
Local wire-line services will suffer a slowdown or decline in the last two stages, and will have to develop new revenue models based on high-speed data and video transportation.
Long-distance transportation
Long distance transportation must evolve to offer end-to-end services to the connected customer. Over-capacity and intense competition are growing at unprecedented rates, which will fundamentally restructure pricing in the market. A consequence of this pricing adjustment will be that many players may not be viable on a standalone basis within the next five years, although some CEOs feel that low-cost producers may do well due to the exponential growth in data traffic.
Top ten challenges
The CEOs interviewed also concurred that primary challenges for companies in the communications industry were:
Gaining access to new markets
"Any company will need a global footprint to be successful."
Developing successful alliance strategies
"No one has all the skills and capital they need by themselves."
Optimising value extraction from the total customer pool
"We don't have to think in product margins but in customer margins."
Redefining brand promise
"The key to success will be whoever creates brand value, like 'Intel inside'."
Driving regulatory reform to promote competition
"Governments have been a barrier to the dawning of the new Information Age. Instead of constraining the industry, governments need to facilitate the entry of this age."
Creating a truly agile organisation
"The capacity to implement changes in a heavy and complex company evolving in an unstable environment will be our key future success
factor."
Accelerating new product development
"Success will be based on the ability to continually invent new and innovative competitive products and services."
Leveraging operating support systems (OSS) for competitive advantage
"When we come up with a new idea for an offering, our systems guy says, 'We can't do that.' This is a very big problem for us, because it holds us back."
Developing innovative ways to capture and reuse employee knowledge
"To empower employees, we need to empower them with knowledge."
Effectively managing assets
"If you are a facilities company, your excess capacity is your enemy."
For a full copy of the report, 'The Connected Society': Winning the new battle for the customer, e-mail Ernst & Young at tceinfo@ey.co.za or contact Jeremy Grist on (011) 498 1264 or Kathy Berman on (011) 498 1525.
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