Road to successful digital transformation: Platform, Ecosystem, and Continuous Reinvention

There aren’t many telecom operators in the world that have not yet realised the importance of digital transformation. However, too often we have seen piecemeal measures being taken, which almost invariably lead to unsatisfactory results.

To succeed in digital transformation, telecoms industry stakeholders need to collaborate and embrace a holistic approach, building from platform up, reaching out to partners beyond the conventional telecoms domains to develop an ecosystem that can address changing market demands, and continuously delivering the most up to date solutions to enable customer value creation.

It is a valid statement that every telecom operator is different from the next one, because the customers they are serving are different, by geography, by segment, or by demographics, often by all of these factors. On the other hand, there is also strong commonality between operators, because the fundamental requirements to support digital service provision that most of the customers demand are the same. These include data collection, storage, governance, and cross-domain data analysis, frictionless handling and delivery of content and service, accurate billing, payment settlement, and many more.

This makes it a classic scenario where the 80:20 principle should apply. In other words, about 80% of a typical customer’s demand to power their digital services can be satisfied by a strong unified platform. Such a platform should be able to satisfy most use cases, carry out common tasks like network planning, construction, maintenance, optimisation, and operations, and should be equipped with the full AI suite, including AI algorithm engine, one-stop AI development environment, and AI service operation.

The platform should also have the flexibility to enable partners to develop or customise their own use cases. This is where the other 20% of customer requirement should be addressed. Despite the strong commonality between operator demands, no single platform can satisfy all the different requirements, and these are better served by a vibrant ecosystem gravitated towards the platform. Such a “pull” effect can be achieved with the platform’s capability to enable, to certify, to support, to incentivise, and so on.

When it comes to incentives to attract more partners to the ecosystem, different revenue sharing schemes can be implemented. For example, if the customer’s demand can be satisfied by a partner’s standard solution, in other words, if the partner does not need to customise its solutions for the customer, revenues may be split equally between the platform and the partner. In cases where partners need to customise their solutions to meet customer needs, the partners should have a bigger share of the revenues. The platform can also set up an “application marketplace” to host apps developed by partners. In such cases, dominant revenue sharing models used by leading consumer and business application stores, for example Salesforce AppExchange should be applied.

One operational characteristic that has separated internet companies from conventional telecom operators is that internet companies would undergo continuous delivery of new features and functions while telecom operators’ networks and services are more static. This needs to change if telecom operators’ digital transformation is to succeed. Such continuous reinvention is not limited to functions and technologies of the digital platform either, it should also continuously improve the enablement of the ecosystem that the platform orchestrates. Equally important is that such continuous delivery of improvement should not only be frequent but also discreet, without interrupting customers’ business operation.

As we can see, successful interaction between the three key elements, the platform, the ecosystem, and the continuous operation, to create values for customers relies heavily on the strengths of the platform.

Source: Huawei

Huawei’s General Digital Engine (GDE) is such a unified big data platform. It is built with the company’s expertise accumulated and refreshed from over three decades’ experience of serving telecom operators and other customers around the world. Such expertise has been with our engineers but with the GDE platform, it is now digitised and can serve all the customers in a broad range of service scenarios. It is also equipped with Huawei’s artificial intelligence and machine learning capabilities to help customers cope with and predict market and business demands that go beyond the capability of manual calculation.

Such expertise and capability are continuously being updated, to make the platform more powerful and able to meet more customer needs, therefore simplifying the transformation, shortening the time to market, and optimising lifetime total cost of ownership. Huawei will keep updating the platform, at least twice a year, to enable partners to deliver customisation more easily.

The platform is also the anchor point of a broader ecosystem, working with operator customers to first engage qualified existing partners, then to recruit new partners.

Moreover, the platform, the ecosystem, and the continuous operation mode all live by these values:

  • Agility: always ready to adapt to new market and customer needs and opportunities
  • Openness: open-minded approach to new technologies and new approach to solve problems
  • Equality: treating all partners in the ecosystem equally and fairly

Alibaba revenues soar but profit column takes a hit on the spreadsheets

Alibaba comfortably passed analyst estimates for the three months ending June 30, as total revenues soared 61% year-on-year.

Total revenues for the period stood at roughly $12.2 billion, while the team brought in net income of $1.1 billion. Profits at the business have dipped quite considerably, 45% compared to the same period in 2017, though this was primarily due to share-based compensation for Ant Financials’ recent fundraising, and investments in new revenue channels.

“Alibaba had another excellent quarter, with significant user expansion and even more robust engagement across our growing ecosystem,” said CEO David Zhang. “Our China retail marketplace business continues to gain share, with New Retail initiatives driving further revenue growth and enabling our retail partners to seamlessly serve customers. We are executing our plan of providing more value and choice to users along the consumption continuum, with digital entertainment and local service offerings that tap into big addressable markets beyond core commerce.”

“The exceptional growth across our major segments of core commerce, cloud computing and digital media and entertainment validates our strategy of investing in customer experience, product, technology and infrastructure for the future,” said CFO Maggie Wu.

The core eCommerce business performed strongly as you would expect, the Taobao site increased monthly active users to 634 million for example, though the new investments are starting to make some waves.

The cloud computing business almost doubled with revenue growing 93% year-over-year to roughly $710 million, driven by land-grabbing additional customers and also increased interest in higher value-added products and services. During June, Alibaba Cloud’s product innovation focused on big data analytics, artificial intelligence, security and IoT applications, though products which enabled migration from on premise data centres onto the public cloud platforms were a notable driver of revenues.

Over at the Digital Media and Entertainment business unit, revenues reached roughly $910 million, a year-on-year increase of 46%. Success has been primarily attributed to Youku, its video hosting service and China’s answer to YouTube, with daily average subscriber growth of 200% year-over-year for the period. Part of this growth will be down to partnerships, such as the relationship with China Central Television (CCTV) to stream all 2018 FIFA World Cup games to hundreds of millions of fans in China. While this is of course a massive boost for advertisers, without such a show-piece next year, the team will have to think of some new ideas.

While Alibaba does seem to now be taking the traditional internet giant approach to business, grow today and make money tomorrow, it does not usually sit well with investors who are in it for the cash. That said, investors will be happy to see success in the new ventures. Profits might be down, but with the cloud and digital media business units performing well, investors will sit easier with other investments in areas such as its AI-powered voice assistant Tmall Genie and online food delivery service Ele.me. Alibaba is demonstrating industry trends are not just myths.

Investors will also be extra pleased with this performance considering the woes of rival JD.com. Last week, the group reported a 31.2% year-on-year rise in revenue to $17.8 billion, though this was short of analyst expectations. This quarter usually sees a boost in revenues due to the mid-year ‘618’ shopping festival, though execs blamed a crossover with national holidays as the reason for declined sales this year.

There’s nothing quite like money in your pocket, but Amazon has proved the ‘invest in tomorrow’ business model can work. Alibaba might have bought itself a bit more breathing room to forget about profits and focus more intently on diversification.

Synchronoss misses deadline for restating accounts – Nasdaq delisting looms

Telecoms cloud services provider Synchronoss has missed a deadline for restating its accounts, making it likely that it will be delisted from the Nasdaq.

When we spoke to CEO Glenn Lurie at MWC earlier this year he was excited about getting all this accounting business sorted and being able to focus entirely on the future. By the end of March Lurie and his CFO were still confident of hitting the 10 May deadline. But in the intervening month or so it became clear that the web of Synchronoss accounts for the past few years was just not going to be fully untangled by today.

“We are disappointed in our inability to meet the May 10 deadline for regaining compliance with Nasdaq listing requirements,” said Lurie. “However, we have made tremendous progress and expect that the audit will be completed no later than June 30, 2018. I also want to thank Ernst & Young for the efforts it is making toward completing the task at hand.”

“Our underlying business is solid and sound,” added Lurie. “We have a strong financial profile with ample liquidity. At the end of the first quarter we had approximately $300 million in cash. Further, as evidenced by our recent announcement that we have entered into an agreement to acquire honeybee Digital Solutions, we are aggressively executing our strategy of putting in place the right people, product portfolio and customer base for long-term profitable growth.”

We checked in with Synchronoss CMO Mary Clark and she echoed the feeling of disappointment. These accounts are a massive sword of Damocles hanging over the new executive team that had no involvement in whatever dodgy book-keeping contributed to this situation and you can tell from Lurie’s official statement how desperate the team is to focus on positive stuff.

Clark told us there has been no correspondence from Nasdaq on the missed deadline but the strong implication from previous statements is that Synchronoss will be delisted. While that would be bad, there is presumably a path toward relisting once they finally get their accounts in order. Synchronoss shares fell by around 20% on the news.

The tone of our conversation took on a much more positive tone when we asked Clark about the recent acquisition of Honeybee Digital Solutions, a ‘customer journey’ software specialist that had been created by Carphone Warehouse here in the UK. This acquisition is designed to augment the Synchronoss legacy handset activation business and Clark said she was excited about the technology and talent it will add to the business.

Under Lurie and Clark Synchronoss is crystallising its identity as a B2B2C partner for operators, providing white-label digital products and services for them to pass on to their customers in the hope of adding a bit of value to their experience. This is the message they desperately want to evangelise, but it looks like they’ll have to wait another month or so to be able to.