A pandemic ridden 2020 has flattened so much of the economy, however, appetite for 5G appears to remain undimmed. Indeed, Covid-19 is fast becoming the great accelerator. It has proved a catalyst for the Schumpeterian creative destruction of those businesses that are less digitally adept. Unsurprisingly, the response from businesses is to hit the ‘fast-forward’ button on their own digital transformations. Spurred on by governments funnelling vast amounts of cash within their post-Covid recovery plans to help business take advantage of digital technologies to expand and create new jobs and economic prosperity. 5G is riding high on a wave of opportunity for those digitally savvy enough to take advantage of it, but who needs to be in the driving seat?
Rewind to this Spring, when Covid-19 was yet to dominate newspaper headlines, our research showed that 75% of enterprises believed 5G was highly relevant, but 62% warned they would only purchase 5G as part of a pre-integrated solution that out of the box solves a genuine business problem like automating factories and taking out costs using all the latest technologies. Fully packaged solutions require a much fuller set of capabilities that typically come from partners.
This suggests a difficult choice facing the telecoms industry as they gear up to spend $1 trillion on new 5G networks whilst revenues are predicted to grow by less than 2%. Do they choose to remain loyal to their 4G business model, selling standard connectivity products and allowing others to own the customer relationship? In short, becoming a wholesaler competing on price and facing competition from new entrants in the software and mobile edge value chain. Or, do they add new business models to sell customers what they actually want to buy? This strategy is to capture a much larger share of the revenue over the top of 5G connectivity by switching to sell differentiated solutions which drive their customers’ digital transformation - increasing added value and loyalty.
What we have seen in 2020 is that CSPs continue to make great strides down the path of 5G technology success in parallel with some experimentation. However, their progress generally wanes upon thinking about what customers want to buy – for example adding to the CSP mission words like technology or data services. Consequently only 21% of solutions within Omdia’s 5G innovation tracker are CSP led, extremely worrying when 32% of enterprises are going DIY and 40% with other providers. This means CSPs are already in catch up mode and must rapidly shift from a product silo way of working to a much more customer-centric solutions business, whilst also making the deeper organisational changes.
A new school of thought believes that putting the Chief Product Officer (CPO) in the driving seat for 5G will elevate what customers want to buy from an afterthought, to have more equal prominence in important technology decisions. This is in no way to diminish the important role of the CTO in building the network, but a CPO-led organizational model is precisely what any start-up, unicorn, webscale or digital native would adopt. It makes the model driven by the target customer and assumes both business model and what customers want to buy will automatically change. So, is it time for CSP to follow suit?
A solution requires CSPs to combine new 5G connectivity with cloud, IoT, VR/AR, MEC, AI and IT applications to help businesses solve their operational and business problems. CTOs have the knowledge and experience of these technologies and how they can best integrate them to deliver optimal results.
However, despite this knowledge, there’s a risk that the CTO is too remote from the customer and too technology focused, not radically rethinking how best to follow the money when it comes to experimenting with business model change and interacting with customers and partners (who might traditionally compete with their own technology organisation within the CSP). Listening to the customer means providing what they want to buy. Afterall, many of these solutions start small and may take 3-5 years to build material volume. Often the CTO’s budget and priority list are influenced by more immediate problems to keep the lights on for current revenues and current products.
Being more focused on the cost-benefit and return-on-investment analyses of which platforms and solutions have the best chance of paying off, CTOs are better adept at realizing value from 5G as they can better identify the right partner with whom to co-innovate and co-create. But are they really able to elevate above the Network technology and see the value in ecosystems with third-party partners to address the needs of businesses who want the ‘perfect’ solution to their problem: not too slow nor pricey, and not in the form of multiple products?
The CTO’s knowledge of the technology is key, however, you need someone to sit customer-side to wrap up these technologies with security and a service wrapper to ensure they work for the customer. As the CPO is generally heavily focused on interacting with and engaging customers to grow revenue, this is where they are key to the successful delivery of 5G solutions.
The CPO has a thorough understanding of customers’ needs and behaviours due to the time spent engaging with them and the people internally who serve them face-to-face, but also the competitive landscape. CPOs are also in a position to bridge across all internal product silos and ensure the customer gets what they need. This is becoming especially critical when there are so many technologies out there - you have to get into the mindset of the customer and shift your mindset to the solution, getting the customer into the room to provide feedback and help guide a solution to both create positive business outcomes but also be able to explain in customer’s language.
As the CPO is hyper-focused on driving change and problem-solving, they can better manage the complicated omni channel and orchestrate the right ecosystem of components to deliver solutions that perfectly solve customer’s problems.
More than ever before, CSPs need to get closer to both business customers and the partners who also work with them. However, CSPs are organized in such a way that they presuppose the existing business model, making them easy to run, but not easier for the customer to buy what they want. This is why the current organizational structures contradict the formula used by more digital native organizations where customer centricity is part of their DNA.
5G is set to open a world of new possibilities for SMBs and Enterprise so it’s important to recognize this early and be able to pioneer both the technology and innovate those 5G connected solutions with partners that customers want to buy. As the lines blur and technology is what the product teams are creating, there will be a natural overlap in duties. However, if strides are made to close the gap, both can then work together in harmony to innovate and deploy the right solutions for their business customers, enabling them to build a compelling portfolio of out-of-the-box solutions that are easy for customers to try, buy and consume to solve real life business problems.