Outlook Point of View, November 2008
Andy Zimmerman is the global managing director of Accenture communications industry.
The boundaries of the telecommunications industry continue to blur as technology, business and consumer trends redefine the digital services marketplace. Long talked about, "convergence" is now an accurate description of the current business model of the communications services industry. Carriers, software companies, high-tech firms, media enterprises, entertainment conglomerates—all may find themselves collaborating and partnering one day … and competing against each other the next.
But what exactly do these different players need to do to gain a competitive edge? A wide-ranging research initiative from Accenture—surveying industry executives as well as consumers in both the developed and developing worlds—creates some urgency around that question, especially when it comes to service providers.
Our global consumer survey of early adopters of technology devices and services—a group we term "tech forwards"—found that these users are quickly embracing the possibilities of a networked world. They are waiting—sometimes impatiently—for companies to take this vision to the next level by delivering a seamless experience, a common platform and a superior service.
At the same time, our interviews of executives representing carriers, software providers and media/content companies reveal a troubling sense of complacency among the companies that should be moving faster to meet the needs of these tech-forward consumers. Many carriers appear to be overly content with selling legacy services, attempting to recoup sunk costs for their existing communications infrastructure.
Accenture believes, however, that holding onto the past for too long creates inertia among carriers and impedes the transformation process needed to serve the communications and entertainment needs of today's consumers. Companies that expect to achieve high performance need to move quickly to meet consumer expectations.
Consumers Are Ready
Our research study examined the perceptions and usage of tech-forward consumers in the United States, Europe, Japan, Brazil, China and India. Participants were screened to ensure that they were part of a demographic that embraces leading consumer technologies.
The survey findings reveal a high degree of understanding among these consumers of today's key trends in the networked world. Accenture refers to one of the most important of these trends as "trivergence": the coordination of three components—devices, data and controls—over a ubiquitous network. The Apple iPod is perhaps the best way to understand trivergence. Unlike, say, a CD player, which contains within a single device both the data and the controls, a trivergent device like an iPod operates quite differently. The data or content resides in the device, as well as in a library, usually on a person's computer. The controls reside not only on the physical device but also on what we call a "soft panel"—in this case, the menus and screens made possible by iTunes software.
The most important message about trivergence and the networked world is this: Consumers get it. Only 3 percent of those with whom we spoke didn't understand the concept and capabilities of this networked, trivergent world. And 87 percent either agree or strongly agree with the prediction that most digital devices for a home, car or individual will ultimately feature a network connection.
Consumers also understand the value of trivergence. Almost 90 percent agree that trivergent capabilities will save them time. More than 80 percent affirm that trivergence can create more business opportunities for them. High percentages also believe that the new networked world will make their lives richer and more enjoyable, and bring them closer to their friends and family. Seventy-eight percent feel that trivergence can help them advance their careers.
The consumers in our study are also prepared to dream big about how a networked world might change the way they work and live. Ninety-three percent can see trivergence creating more energy-efficient controls for things like lighting, heating and cooling. About 80 percent can envision network connectivity for their cars, as well as their refrigerators, ovens, dishwashers and even small appliances such as toasters and coffeemakers. (Put the clothes in the washing machine but forgot to turn it on? No problem: log in at work to your appliances soft panel and turn it on remotely.)
Service Providers May Not Be Ready
If consumers are ready for the extraordinary world enabled by trivergence, industry executives are uncertain that companies are feeling a sufficient level of urgency.
While many respondents to our survey agreed that the trivergence trend will continue on a steep trajectory, too few companies have developed a set of well-formed implications about the growing plethora of networked devices. Concerns seem to be more tactically focused at this stage: Will more bandwidth be required? Will more databases will be needed?
The carriers with whom we spoke were confident about their ability to operate in the trivergent world; they believe themselves well-positioned to overcome the technical challenges in migrating to IP. They do not believe they are fated to become “dumb pipe” providers. In describing their future roles, carriers tend to view themselves as exerting more control over content and services than the technology/content partners will.
In the face of this overall confidence, however, are some concerns about carriers expressed by technology and content partners—specifically, that carriers are not thinking about the future in a sufficiently transformative way. As one tech company executive bluntly put it, "I don’t think the carriers are on top of IP transformation."
Another possible concern is that the forces of technological change are too great for existing carrier strategies. Another high-tech executive compared today's situation to the fate of middleware in the evolving Internet era. “There was a huge role for middleware in the early days of the Internet because companies were trying to figure out how to interface older enterprise systems with the Web. Now those companies are taking out the middleware and going direct. The same thing will happen in networking. There will be a need for 'glue' in the early days, but at the end of the day, every point will be a node on the network and the nodes will be able to communicate with each other without going up to a super node and coming back down.”
The potential stifling effect of legacy business models and cultures is another obstacle to be addressed by the carriers. One high-tech executive noted, "I’m still seeing an enormous cultural hold over from the old days of a monolithic monopoly. Carriers are making some progress, but they don’t show enough agility and flexibility in keeping up with the changes and what customers are demanding.”
So what is to be done? An executive from a device manufacturer pointed to a likely path forward: “To survive, carriers need some type of value proposition that deals with content itself so that it becomes more of a brand play—delivering the content that consumers value across different platforms.”
The Importance of Collaboration
Accenture believes that delivering a seamless customer experience over a common platform will require a distinctive collaborative mindset. Very few businesses have a trivergence strategy for the growing plethora of networked devices and services, never mind the resources to execute such a strategy.
Based on our interviews with executives, the various industry players all see the value of such collaboration. For example, one high-tech company executive said, “We don’t want to have the customer set up an account with us so that we collect the money and then pay part of it back to the carrier. That is a lot more arduous than using the billing relationship that the carrier already has established. Any time a company already has a good relationship with its customers, we try to leverage that.”
And, of course, the value of such partnerships between carriers and technology/content providers goes both directions. As another high-tech executive noted, “I think the financial opportunities for the carriers lie in unique partnerships where they can get content, special products, offerings or rewards—something that delivers unique and exclusive value rather than a 'me-too' proposition."
Building mutually beneficial partnerships with strategically aligned industry players will be a key to emerging as a provider capable of making all of these complex offerings work together. Carriers, software companies, Internet businesses, media enterprises and entertainment conglomerates will be both partners and competitors from day to day in the networked world. Choosing the right partner has never been more important.
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