The Essential Shift from Telco to Techco

The telecommunications sector finds itself at yet another crucial juncture in a landscape perpetually in flux; I have been working with several Telcos on the journey to becoming their version of a Techco. The move from Telco to Techco represents a shift in operations and a profound transformation in executive vision and philosophy; communicating the context to all levels of the organization is a challenge. This Techco capability transition, driven by an insatiable quest for growth over mere margin improvement, promises to redefine the new Techco industry's value creation parameters.

The Imperative for Growth

The essence of this transformation lies in recognizing that growth is the most potent means by which telco operators can engender tangible value creation. Traditional models focused on connectivity are expanding, incorporating B2C services in adjacent businesses, ecosystems supporting digital services portfolios, and B2B digital businesses, including sector-specific digital solutions, cybersecurity, cloud, and consulting services. This dynamic shift necessitates rapid movement and unwavering determination from operators to build investor confidence and capture the substantial new growth horizon within two to three years.

Successful companies transitioning from traditional telecommunications service providers to technology-centric firms, or Techco, are setting the bar high. One notable example is AT&T, which has invested heavily in digital infrastructure and platforms to offer a wide range of tech services beyond core telecommunication. Similarly, Etisalat and Verizon have made deliberate strides towards innovation in 5G technology, which has opened new markets in IoT and cloud services. Both companies exemplify how embracing the Techco model facilitates an agile approach to business, a sharper customer focus, and the cultivation of new revenue streams.

The opportunity presents to focus the traditional digital transformation program on the challenges of 'digitizing the existing telco' while spinning off a separate entity to 'create a new digital services operator or Techco.' This will allow the Telco to focus on the dual tracks of evolving towards a long-term sustainable infrastructure business with smaller but stable and profitable revenues and supplementing this with a digitally native company that can compete directly with OTT players, operate at a higher margin, and be viewed by the market as having a much higher potential PE ratio.

Exploiting New Technological Frontiers

As we stand on the precipice of technological revolutions such as advanced gaming, IoT applications, applied AI, immersive reality, and Web3, the opportunities for B2B2C engagements loom. Operators are uniquely positioned to control the APIs linking new applications with high-performing connectivity and computing platforms. This control allows them to monetize their platforms effectively, securing a larger value chain share than previously achieved.

The Strategy of Delayering to a Techco

Central to the Telco to Techco transformation is the strategic process of delayering. This organizational overhaul separates activities into focused, independent units, each honed for growth. Be it through a B2C, B2B, infrastructure, or wholesale services lens, this clustering enhances the understanding of disparate business segments and primes them for improved performance and growth.

Focused Attention and Expertise

In an integrated company, attention and expertise have historically gravitated towards either the core network business or the promotion of new products - often at the expense of intermediate segments. Delayering addresses this imbalance by channeling attention and expertise where needed, facilitating a clearer identification and capture of growth opportunities. Considering the strategic shift from Telco to Techco, channeling attention and expertise toward building digital talent is paramount. This digital pivot necessitates a strong workforce adept in new technologies and innovative thinking. Reskilling current employees and attracting tech-savvy talent is critical for telecommunication companies to remain competitive. The industry must invest in comprehensive training programs that hone existing skills and inculcate a culture of continuous learning, ensuring that the workforce can navigate and lead in an ecosystem persistently disrupted by technological advancements.

Agility and Transparency

The resultant organizational clarity fosters agility, particularly within B2C and B2B units, encouraging collaboration and partnerships with external entities. Furthermore, this restructuring unveils the true performance of each segment, prompting necessary reorganization or the launch of new ventures supported by differentiated KPIs for accurate tracking.

Stakeholder Engagement

Crucially, a more targeted and transparent structure is inherently appealing to many stakeholders. From attracting talent and engaging investors to making M&A, JVs, and partnerships more feasible, focused units present a clear growth narrative resonant across stakeholders.

A Journey of Commitment

Yet, it's pertinent to acknowledge that the path of delayering to a Techco is intricate. It demands a vision of the future married to a flexible approach to change. Executives must delineate the scope of each unit, endow them with necessary resources, and maintain coherent mechanisms for cross-unit collaboration. The complexities of this endeavor underscore the necessity for unwavering commitment from both the management and shareholders.

Beyond Delayering

While a pivotal element, it's critical to understand that more than delayering is needed to catalyze the complete revitalization of Europe's telco sector. Its impact, potentiated by the size, complexity of operations, and market dynamics, must be complemented by additional performance-enhancing measures.

The transition from Telco to Techco, underscored by strategic delayering, heralds a new era of focused, growth-centric operations. It offers a vivid blueprint for telecommunication entities navigating the uncharted waters of technological advancement and market evolution. For telco executives, shareholders, and industry analysts alike, it marks the beginning of a concerted drive toward reimagining the future of telecommunications. In this future, the convergence of technology and telecommunications heralds unparalleled opportunities for growth and innovation.

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