Retail Services 2.0 - Output from Telco 2.0 exec brainstorm, May 09

Below is a summary analysis of the Retail Services 2.0 session at the May 2009 Telco 2.0 Executive Brainstorm. It builds on some of the issues about selling to the 'digital generation' that we described before the event here.

The session involved short stimulus presentations from leading figures in the industry, group brainstorming using our 'Mindshare' interactive technology, a panel discussion, and a vote on the best industry strategy for moving forward. Below is the vote, followed by some of our post-event analysis on key lessons and industry next steps:

Retail services vote


Participants were asked which of the following statements best described their views on the role operators should try to play in serving digital natives?

  1. Be a really good dumb pipe. Provide connectivity and voice messaging only and let the 'over the top' players get on with innovating services
  2. Retail supermarket. Sell Telco or third-party services via online platform.
  3. Enabler. Allow third-party innovators to do a better job by giving them access to Telco capabilities and assets (identity, billing etc).
  4. Retail - enabler. Sell own and third-party products AND ensure they are improved through access to Telco enabling capabilities.


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Retail services – lessons learnt & next steps


Taken together, the presentations, feedback and final vote highlight an industry in transition – but still very uncertain of the precise direction or roadmap for retail services, especially to the 'Digital Generation'. Early examples and case studies of new retail telecom business models are like gold dust - scrutinised and dissected to yield any generic insights. Irrespective of the aim to develop two-sided business models and open platforms, it is also clear that strategists are still focused on extracting the maximum value from today's existing services.    

Looking at the results of this section's vote, it is unsurprising that few people in the industry see the dumb pipe as an attractive future strategy. But more interestingly, the concept of a retail supermarket, which had been widely seen as an attractive option in the past, seems to have fallen away, reflecting a desire by Telcos to ensure that they can still differentiate and add value through their infrastructure. This shift may also reflect the awareness that this type of retail operation would put them head-to-head in competition with Apple's AppStore and various other service portals. It also highlights the dilemma of Telcos' desire for exclusivity, set against application providers' hope for the widest possible distribution.

The Telco 2.0 team agrees with the outputs of the vote – the most attractive options involve turning the operator's network (and possibly devices – see below) into a platform of “enablers” for third party services and applications. These assets and capabilities may not be easy to deliver – either organisationally or technically – but once in place, should provide a much more defensible source of value.
Marc Davis, Chief Scientist, Yahoo! Mobile: "Give the user ownership over this information! This is crucial! You could geocode all my photos or send me restaurant recommendations; but just give me value!"

There is a fairly even split between those suggesting that “enabled” services can be sold in retail by Telcos, versus those who believe that the exposed capabilities alone represent a more viable standalone basis for growth. In many ways, the reality will depend on a variety of factors – existing customer relationships, portfolio of existing inhouse services, ease of developing retail partnerships and so on. A tier-3 mobile operator with <1m subscribers and few smartphone users is going to find it hard to partner with the coolest web brands. A former fixed-line incumbent, in its home market, with enviable billing relationships to a sizeable % of the country, is in a much better position.

It is worth noting that various of these applications simply cannot be “sold” through an operator's retail store, as they will be small but integral parts of much larger services. In the same way, Amazon is able to enable the development and sale of a huge variety of other products and services, but would be the wrong company to try and retail all of them to its customer base. (Sellers of fresh food or fuels, for example, would not fit with Amazon's logistics business, but might still exploit its various online commerce enablers).
Richard Titus, Controller, Future Media, BBC: "In general, you need to remember that the data is the asset, not connectivity. Connectivity is a loss leader. But data is buried treasure."

In the short term, the following needs to occur:
  1. Continued emphasis on getting C-level buy-in and commitment to new business approaches
  2. Identification by Telcos of areas for quick pilot deployments
  3. A focus on deploying marketing services like Buongiorno's, which are “enhanced 1.0” models, with a relatively straightforward roadmap towards 2.0 options as they mature.
  4. Willingness to publish details of successes and failures – despite the competitive aspects of the marketplace, we are still at a stage where the industry as a whole needs validation.
  5. Awareness of tactical acquisition opportunities, given the contraints of the recession
  6. Pragmatism about retail services that can use “lowest common denominator” service components like SMS and the existing installed base of legacy phones or home gateways, even if they lack the “sexiness” of those that can exploit the latest smartphones or intelligent end-points.

Longer term, the emphasis clearly has to be on developing full-fledged platforms open to developers, as well as exploiting new distribution channels.

  1. Structure and incentivise the retail operations in a fashion that enables them to compete on a level playing field with future wholesale customers. This does not necessarily mean structural separation, but it will need some "chinese walls" and changing attitudes from protectionist to competitive.
  2. Go back to the drawing board and develop a full strategy for voice and messaging services. Despite the move towards cheap/free minutes, there are ways to extract value through other business models.
  3. Pragmatism about relationships with leading Internet players. Trying to compete head-on with FaceBook or Google is unlikely to succeed. There is more mileage in looking to enable peripheral service or capabilities, or partnering directly if the Telco has sufficient scale.
  4. There is no reason that Telcos should not retail each others' services if they are particularly good. At the moment, there are extremely few instances of Operator X selling an application developed (and maybe branded) by Operator Y. Would you really rather deal with Google than your peers?
  5. Invest in behavioural research, but in ways that directly translate to new relationships rather than putative services with a multi-year development timeline. Think "R&P" (research & partner) rather than R&D.

The full presentation transcripts, delegate brainstorm output, and long-term recommendations for industry action is available to event participants and to subscribers of the Telco 2.0 Executive Briefing service here