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  • Writer's pictureSlashData Team

Connect, Interact, Transact: How mobile operators can bridge the communications gap

[As mobile operators compete with the over the top players (Skype, Google and Facebook), many question whether operators have a real value to add besides a pipe. This is the playbook of Martin Geddes, a recognized thought leader who has held positions at companies including U.S. mobile operator Sprint and UK incumbent operator BT. As Strategy Director at BT Innovate & Design Martin was influential in shaping the carrier’s view on Cloud Computing. Peggy Anne Salz caught up with Martin to discuss how mobile operators can prepare themselves to compete in this new world.]

Philosopher and poet George Santayana tells us that “those who cannot learn from history are doomed to repeat it.” The history of telecommunications shows us that the evolution of communications systems is inextricably linked with the needs of commerce and enterprise. As requirements change, systems evolve. They ultimately disappear altogether when they cease to be useful.

The telefax and the telegram, which triggered a revolution in communications, have long been replaced by email and text messages. Now new players and approaches – such as Skype, Facebook and FourSquare – have stepped up to take their place. As telecoms providers prepare to do battle against these over-the-top (OTT) players, Martin argues that the real power lies in neither scale nor scope. In his view the answer is innovation that allows telcos to solve ordinary, everyday interaction problems between businesses and their customers.

The money is in the space between the enterprise and the consumer – a space I call the ‘conversation gap.’” Martin explains. “Take a company that delivers white goods like fridges. You make outbound calls to your consumer customers to schedule deliveries as part of your service. If that customer happens to be roaming abroad in an inappropriate time zone, then you certainly won’t get the result you want.  Same is true if the customer is on the middle of an important call. Or if the customer is on a smartphone, they might just want the company to send them a link to a web page where they can set up an appointment for the delivery on their terms.”

Martin’s point: no service provider does a good job of thinking about the needs of the enterprise and ways to help them connect, interact and transact with their customers. “There is a void and we’re starting to see companies like Facebook rise up to take that space – or at least try.” As he sees it: “The fear that the Facebooks of the world are displacing the telecom industry’s core products — is real. But we shouldn’t overestimate it since Facebook are showing they are pretty inept at business model design.

Connect, Interact, Transact After thinking this through carefully – and for nearly a decade — Martin has developed a new business model for telecom service providers determined to defend their turf from OTT players. He calls this approach, aimed squarely at enabling commerce and connecting enterprises with their customers, Connect, Interact, Transact.

So where will the Connect, Interact, Transact companies come from? Don’t limit your view to developed countries. To the contrary, Martin is convinced this new breed of company will rise from the emerging markets. A good bet is Africa. “That’s where we’ll see clever cloud communications companies that build products that target what’s known as ‘bottom of the pyramid’ consumers,” Martin says. “Not those living at subsistence level, but those who have a small disposable income. New business models evolve fastest where enterprises, NGOs and governments want to interact with these people – who are tomorrow’s consumers.”

Whether from developed or emerging markets, companies determined to compete against the likes of Google and Amazon should integrate with platforms these companies already provide.

After all, Google and Amazon have correctly focused their strategies on enabling commerce (Google dominates advertising and Amazon’s sphere of influence covers ecommerce and order fulfilment), and it makes little sense to reinvent the wheel. “If you are a small company, then you have to rethink your business to integrate with these companies and platforms to make communications with customers better and improve commerce. Put simply, you have to think about how to either use their APIs to improve business, or connect with those capabilities in some way to make your business more efficient and effective.”

Communications gap Martin also urges companies to open up to business models and focus their efforts on bridging ‘gaps’ – places where there is a disconnect or mismatch between how people and enterprises communicate and how processes function.

So who stands to win in this new world where it’s all about closing gaps in communication? Martin in convinced that having the connection to the customer is more important than owning the billing relationship. “It’s whoever holds the final interface to the user that has the power. That’s where we’re seeing a massive battle because the operating system, the browser, the unified communications app — all of these have real estate on your smartphone. So now owning the container in which the final experience is being presented to the customer is where the power is.”

Where does the mobile operator fit in? While many industry observers staunchly believe telecoms operators are doomed to be dumb-pipes, Martin vehemently disagrees with this blanket assumption. “It’s a gross mistake to underestimate the telcos. There are a lot of dead companies and business models that tried a direct full-on assault against the telecom industry and lost. Telcos also have an extraordinary range of customer data and relationship assets that, in principle, position them well to launch new ubiquitous communication products.”

However, operators also need to understand that competitive advantage does not lie in the offer; it lies in the size and breadth of the audience they can reach. “Telcos need to understand that they need to be able to have relationships with people whether or not they are customers,” Martin explains. “That’s particularly true in cases where telcos are trying to monetise services by offering business process efficiency effectiveness and security to third parties.  You don’t necessarily have to be able to bill the consumer at all; you want to just have millions of consumers who have relationship with you.”

Put another way, operators have a central position – one they can cement if they build an over-the-top experience that serves customers that aren’t necessarily their customers.

One operator that understands this model is France Telecom with its ‘On’ product. As Martin points out: “I can download On for my Android phone the Android marketplace and the mobile operator is in the middle of this experience, trying to capture that container experience for my address book dialler and other functions on my phone.”

Futureshock Clearly, the operator has the capabilities to compete and win against OTT players. But winning may require them to transform more than their business model. In fact, Martin believes that the words ‘mobile operator’ might not have any meaning by 2015.  “It might be that there is a marketing organisation, that has a relationship with the customer and potentially controls various storefronts. But there will also be an infrastructure company. So, you might buy the Apple iDevice in 2015 and it’s a device that comes with content and connectivity bundled in. You don’t need to go and buy a separate service from somebody else; you just pay your service money to Apple. But, of course, Apple’s buying wholesale data from telcos in vast quantities.”

So where will Apple – today’s OEM role model – be in 2015? “The Apple business has a nasty flaw in it. It targets the top 15 percent of the market to get 50 percent of the profits. Yet in a communications market, the revenues are in selling to the new consumers in emerging markets.”

If Apple’s model isn’t about achieving volume, then can it survive in a market where the winners will likely be a mix of communications giants and companies that make commerce more effective?

It’s a tough one to call but Martin believes Apple’s model has some mileage left. “Let’s say that there is enough life in the model to last until 2015, so Apple does have five years left.  Looking further out, the grand growth opportunities around machine to machine, communications as a service and communication-enabled business processes – everything we’ve been speaking about – are not where Apple is.”

So is the future for mobile operators bright? “Telcos simply got sidetracked by the media business and mobile advertising, areas outside their main focus, forgetting they’re in the business of communications and making communications simple and effective,” Martin observes. “The first thing telcos have to do is undergo corporate psychotherapy. They have to look at themselves in the mirror and accept that they are a phone company. They sell conveniently packaged communications.  If they do this, then they have a good answer to Facebook and Google.  If they stray from that path, then they deserve the awful fate that will become them.”

– Peggy

Martin Geddes is a thought leader sharply focused on what is right (and wrong) with business models in the telecommunications industry. His most recent white paper, Connect, Interact, Transact: A paradigm shift in the business model of communication service providers (, warns service providers of developments that could potentially wreck their current model and suggests new offerings that could secure them a new and even more lucrative position in the value chain.

Peggy Anne Salz is chief analyst and publisher of MSearchGroove, a top 50 influential technology site providing analysis and commentary on all things mobile.


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