The Four Myths About Transformation

Transformation is a hugely important topic for our industry, but it's bedeviled with myths!

The first myth that we need to dispel about transformation is that it only applies to long established incumbent service providers.  People tend to associate the transformation word with huge network transformation programs such as the BT 21C program that received great attention over the past five years.  However, transformation is a much more generic term that applies to a series of constant improvement activities that all service providers must continually pursue in order to achieve sustainable profitability.  So the principles of transformation apply equally to the small, but rapidly growing new mobile operators, as they do to the large and stagnant monopoly operator. 

 The second myth about transformation is that it essentially refers to the challenge of a major network swap out activity.  Undoubtedly, the challenge of moving from  a circuit switched network paradigm that has held sway for the past century, to a next generation all IP core and access network that will support a dizzying array of new services, is a non trivial challenge.  But there are many different types of transformation and only one involves the massive capital expenditure challenge of a network renewal.  The other types address system transformation, business process transformation, product portfolio transformation and business model transformation. 

The third myth is that transformation is all about squeezing costs, in particular labour costs, out of current operating models.  Without a doubt this is an attractive first port of call for any organisation looking to reinvent itself, or to embark on a process of continuous improvement.  However, focusing entirely on the topic of cost reduction tends to produce short-term wins and longer-term stagnation.  All transformation initiatives must keep their eyes firmly  fixed on the three aspects in the eternal business effectiveness triangle that underpins our industry:  Cost Reduction - New Revenue Generation - Customer Experience.  By placing too much emphasis on one aspect of this triangle and ignoring the other aspects we create an unbalanced business model.  For example an organisation that focuses too much on downsizing tends to create problems with customer service, which then causes customers to churn.  Likewise a company that focuses too strongly on new revenue growth tends to rapidly lose control of their cost base and their ability to manage the customer experience.  History has shown us again and again that this sort of one-sided approach to business tends to require an eventually compensating activity, and in the process an organisation often loses momentum.  Undoubtedly there are times when a myopic approach to one of the aspects becomes unavoidable, but at the very top of the organisation every on-going transformation effort has to bear in mind the three corners of the triangle and attempt to maintain a balance between them.

The fourth myth about transformation is that it is solely an inward focused activity.  In a communications world increasingly reliant on complex , multi-player value chains, all the transformation activities of an organisation have to be both inwardly and outwardly focused.  While the bulk of the revenue from communications over the past century has derived from voice related services it is clear that the bulk of the profitability from the next two decades will derive from much more complex services that involve content either generated by the user or delivered to the user in a timely fashion.  It will also involve much more complex business models that extract a economic wage via differing mechanisms such as advertising based models, etc..  Any company that has ambitions of being successful in this new environment has to absorb the fact that they will be one of many players involved in the creation and delivery of a given service, and so their transformation activities must make them better capable of building effective, flexible partnerships with both suppliers, customers and competitors.

Read more about Transformation in TM Forum Transformation Report