Digital sub-brands: the key to low-risk digital transformation

Digital transformation can be challenging, particularly for established telcos

In the first instance you have the board, shareholders and other key stakeholders advocating the urgent need to ‘go digital’ and benefit from lower costs and increased opportunities to grow revenue; but on the other hand telcos are up against legacy processes, systems, legacy thinking and inflexible vendor models.

The conflict between the two frequently stalls the best intentions of telcos seeking to evolve into new, digital-first companies as they hit ‘legacy roadblocks’ that result in increased pressure and reduced performance. 

Being able to innovate and digitally evolve to the point where they are in a position to offer and sell a whole range of digital services across multiple digital platforms to an ever-increasing digitally-savvy customer base is therefore often a precarious journey.

Last year, the TM Forum published a report, ‘Digital Maturity: Are We on the Right Path?’ highlighting that a major factor for the difficulties CSPs are facing in digitally transforming is legacy systems and technologies.

The report notes that as a result operators are too busy trying to handle the day-to-day challenges of running their business to be able to spend any time looking at their digital journey. In other words, there appears to be a reticence to focus on the ‘urgent’ instead of the ‘important’ and this is actually inhibiting their ability to grow.

Out with the old and in with the new: A ‘digital second brand’ strategy

In an effort to speed up the process of digitalisation, many telcos are increasingly adopting a ‘digital second brand’ business strategy. This involves the development and launch of new, dedicated digital propositions as second brands or sub-brands alongside their current service offerings.

These new digital brand services are built on new modern systems and operate in an agile way without any legacy systems, thereby enabling each one of them to operate as a truly digital business from the outset.

Such an approach is proving to be increasingly favourable among telcos as it enables them to launch new, differentiated and more personalised brand services built on new digital business platforms quickly and independently from the mainstream legacy business. According to GSMA Intelligence, over 200 of these sub-brands have already been launched globally as telcos increasingly look to gain the fastest-time-to-market

What’s more, a recent McKinsey & Co. report found that these new digital ‘attacker’ brands generally contribute approximately 25% of the overall gross additional subscribers to incumbent operators within four quarters following their launch.

However, the benefits don’t stop there. As well as adding new subscribers, McKinsey & Co also state that these additions are also more than 5% profitable. CSPs also benefit alongside this success by creating a digital foundation for their business that is future proof and provides the capability to migrate the legacy business to the new digital platform in the future when the time is right.

A digital first strategy – providing the foundation for low-risk BSS transformation

Digital greenfield brands are undoubtedly one of the fastest-growing sectors in the mobile industry, providing telcos with a blank canvas to digitally transform and empowering them to grow a new business offering.

One of the outcomes of COVID-19 crisis is the increased levels of digital literacy among all consumers. This, according to TM Forum’s Digital Transformation Tracker (May 2021), is bringing forward the digitalisation of customer experience and business operations of operators among CSPs. And this is having an impact on how CSPs view their digital sub-brand.

When initially launched, digital sub-brands were often aimed at a particular segment, such as 16 – 24-year-olds who were ‘Digital Natives’ and may have viewed the parent brand as being too ‘old fashioned’ or ‘traditional’. They also operated on a lower-cost model and the main proposition was based on price – e.g. 100GB of data for €10 per month.

However, that is changing. Over the last few years almost everyone in society has become more digitally literate. People have learned that they don’t need to go into a physical shop to change their mobile operator or to buy a new entertainment offer.

The initial proposition of a digital-first sub brand aimed specifically at a sub segment of the market, due to the digital literacy of the customers in that market segment, is no longer valid. There is a much higher level of digital literacy now and as such the digital-first approach is now applicable to most customers.

CSPs are now looking at the digital-first operating model of their sub-brands and the Digital BSS used to enable this model and asking questions about running the ‘parent brand’ on the sub-brand BSS. This could be done by setting up the ‘parent brand’ on the Digital BSS and carrying out an organic and commercial BSS migration.

This involves the parent brand adding new customers to the Digital BSS (and not the legacy system) and any upgrading customers (e.g. people upgrading from 4G to 5G offers), are added to the Digital BSS and switched off as live customers on the legacy BSS. In this case they are effectively treated as new customers with historical customer data only retained on legacy BSS for retention purposes.

This approach sees the legacy problem go away in a low risk and cost-efficient manner. As innovative Digital BSS are built using the latest no-code and cloud native approaches the end state of having all CSP customers (for all brands) running on a Digital BSS could be closer than many CSPs think.

About the Author

Jukka Heiska is Qvantel’s Chief Marketing Officer. Jukka has close to 20 years experience from telecom and software industry – starting from the early days of mobile internet at Nokia, to today’s cloud based service solutions that accelerate transformation of the telecom industry.

Featured image: ©Kaikoro