Capturing massive growth opportunities in B2B, long considered by telecom companies as the poorer cousin of the consumer market
For a decade or so, telecommunication companies in North America and Europe have been focussed on sustained growth in the consumer market, as smartphone ownership skyrocketed and companies sold TV, broadband and phone services as a kind of holy trinity to users at home and on the move. In the 21st century, these companies need to shift their management focus towards the less high profile but equally important business market where there are plenty of opportunities and untapped potential. Over the next three years leading up to 2020, business service growth is anticipated to outpace the consumer market and become a major growth engine for telecom companies. While the consumer market is expected to show flat growth annually, the B2B telecommunication market should grow in high single digits as a result of the demand from addressable IT services and mobile data.
The main constraint for telecom companies is how to identify the opportunity that exists beyond the market that has historically accounted for a bulk of their profits and reshape their organisational priorities to focus on and exploit the new situation that exists now. A seismic shift to embrace this opportunity will certainly not be a cakewalk. As consumers generate the maximum profits, the B2B sector is typically considered as a second tier, low-priority market. Thus, sufficient company resources are not allocated or the responsibility is delegated to low-level managers in the organisation. When business markets are pursued, the organisation is scattered thin with too many projects in several IT adjacencies simultaneously, ignoring the strong opportunity that exists in connectivity across corporate customers, small office and home office and medium size enterprises. Most of the opportunity in B2B revolves around increasing wallet share, managing migration to IP technology, reducing churn and maximising account profitability. Lastly, management frequently questions the profitability of telecom companies in the B2B sector as it is usually lower than the consumer market because of a higher level of customisation, lower margins in the IT business and more sophisticated buyers. To build a robust, viable B2B business, the management must consider the indirect benefits such as protecting the connectivity revenue and the need for a longer payback time post initial investment. To win in the rapidly growing market for IT services and business telecom, companies need to focus on the B2B market and have three critical capabilities –
- Understand customers and customise products – Successful companies create a detailed picture of their client’s needs, and they then use that information to segment their customers effectively. For small and home offices, they could consider two aspects – whether the service is used in the office or on the move, and the number of connections that will be required. Defining the right service model and go-to-market strategy for each segment is vital. SOHO customers prefer engaging through consumer channels, they expect quick problem solving and they are willing to pay a premium for better service. For medium businesses, the potential revenue is the most important segmentation while at the corporate level, industry segmentation is effective as companies can dedicate the sales team to tailor offerings based on the specific needs of their clients. Telecom companies might allocate resources to particular industries based on the industry attractiveness and their ability to dominate the market.
- Add growth domains to the core business – Telecom companies ideally start from the core connectivity and then focus on IT adjacencies where they can outperform competitors. Some categories with ample potential include machine-to-machine interaction, enterprise mobility, communication and collaboration, infrastructure, networks and data analytics. Most of the time, telecom companies make acquisitions or form partnerships to poach the required talent and gain marketplace recognition in these new areas. By forming the right partnerships, operators can build the necessary capabilities without directly investing in cloud infrastructure. These capabilities should be able to reduce customer churn and capture a lion’s share of customer spending.
- Build a scalable, modular product portfolio – Developing repeatable, modular and scalable product portfolios is an optimum way to fulfil a customer’s needs in the most cost-effective manner. Telecom companies should strive to meet 80% of client requirements with standard building blocks and the balance 20% should be customised based on the former. For smaller businesses, nearly all the components can be standardised. This improves sales efficiency and effectiveness by providing standard products for each target audience while optimising the automation of processes right from product design to end delivery.
While some telecom companies may take longer than their rivals to adapt, those that take too long or struggle with focussing their organisation stand to miss the ample opportunities available in B2B. Companies that can rapidly adapt to understanding B2B customer needs will emerge as the winners in the long run.