Digital leaders in telecom enjoy a substantial cost advantage

15 June 2020 4 min. read
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Telecom operators that have been quick to digitalise manage to save costs and improve performance in key functional areas, according to Kearney analysis. Some achieve a cost advantage of between 20% and 25% over their less digitalised peers.

Experts from management consulting firm Kearney assessed telecom companies against more than 350 digital key performance indicators, including digital customer engagement, automation investments and degree of automation in operations. The firm found that ‘digital leaders’ perform better across the board, enjoying higher profit margins by as much as 10%, while their cost base is lower by nearly 10%.

Broadly, most digital leaders have three things in common according to the researchers. They have been willing to substantially simplify their portfolios, platforms and processes; they have been selective and moved high-impact parts of their operations online; and they have used a variety of automated and digital tools to improve productivity, problem-solving and customer targeting.

In some functional areas, Kearney reports that the cost advantage for digital leaders is between 20% and 25%. These areas include network, sales, customer management, marketing & product management, IT, and support & overheads.

The performance advantage of digital leaders

So how do these leaders realise such market leading performance? In the area of sales, digital leaders have relied on a combination of moving top ups online while reducing electronic commission costs, in some cases down from 5% to 1.5%. However, digital leaders typically refrain from pushing all their online sales channels, but instead make their store operations more efficient to manage costs.

In the customer management space, leaders stand out for making the customer more autonomous. Self-care among customers is 200% higher among digital leaders than with their telecom sector peers, and have a 20% higher resolution rate in the first call for inbound customer calls as compared to other telecom companies.

Staying in the customer experience digitalisation space, digital leaders have moved their postpaid billing and credit management systems to automated subscription models. There is 50% more payment automation among customers of digital leaders than others.

Marketing and product management is another functional area where digital leaders manage a significant cost advantage, mainly by imposing 60% less tariffs than their peers. According to Kearney, this allows them to “capture the flow-through effects of lower operating costs in marketing, sales, care and IT”. These companies also use nearly 20% more digital marketing techniques to better understand and target their customer base.

Infrastructure and IT

Digital leaders also invest in making their network infrastructure more reliable. Tech tools such as internet of ihings (IoT) sensors and predictive analytics can improve preventive maintenance, while also making energy consumption more efficient. Digital enhancements have made infrastructure updates 70% faster to install, and leaders have also succeeded in improving their network quality by achieving 65% less congestion.

In the IT space, the authors report that digital leaders have simplified their IT landscape, automated development, and virtualised their infrastructure. These companies have 50% fewer applications, 75% fewer annual programming requirements and 40% more virtualised infrastructure when compared to their less digitalised competitors.

Lastly, digital leaders achieve significant cost advantages in the support and overheads space, with smaller support teams that are more efficient. As a result, they save on time and office space.

Kearney suggests that the telecom sector draw inspiration from these digital leaders, given the vast cost advantage that they are able to achieve. A strong and outcome-focused digitalisation strategy is crucial to survival, not only under the presently challenging circumstances, but also in a significantly more competitive telecom landscape in the long term.