McKinsey outlines “nine structural levers for success” – but misses one essential pillar

McKinsey outlines “nine structural levers for success” – but misses one essential pillar

Transforming telco businesses requires many steps, as McKinsey notes, but it must also include changing outdated and cumbersome procurement processes. Without extending supply chains and embracing smaller players and new entrants, telcos will be unable to benefit from new sources of innovation that can drive transformation.

The blueprint has a key gap

Consulting firm McKinsey and Company has just published a useful paper “A blueprint for telecom’s critical reinvention[1]”. It’s interesting reading and defines what McKinsey describes as “nine structural levers for success”. These address factors such as customer experience and engagement, operational transformation and IT processes – many of which will already be familiar to those keeping track of industry developments, but which are drawn together in a compelling synthesis in this paper.

However, there is a key gap. The successful implementation of these levers will depend, to a great extent, on the availability of appropriate and relevant solutions. You can’t, for example, deliver a “zero-touch service model” without appropriate automation solutions that can be effectively integrated.

Supply chains are too narrow – and procurement maintains the status quo

This means that telcos must work with the right kinds of suppliers. In the search for innovative, transformational solutions, new entrants often have an edge and bring new levels of innovation tot the market.

Yet, the problem remains that, despite pressure from many different quarters, most telcos still depend on a relatively narrow group of solution and integration partners. While many technical experts in telcos are quick to identify potential partners, often showing a willingness to engage with small, innovative start-ups, procurement processes militate against their selection.

That’s because, too often, the same kind of RFx approach is adopted. Vendors may be asked to conform to onerous standards, or to support a host of unnecessary functionality, rooted in legacy models. And, processes can take many months or even years. Decisions are not often taken quickly.

As a recent paper noted[2], “a new approach to collaboration with technology suppliers which eliminates the barriers to participation by smaller more innovative players; for example by simplifying the onerous requirements for procurement” is required.

Too often, we have seen - first-hand - a nimble, new provider, pass technical selection criteria, but fall short when entering the purview of procurement teams. They don’t have enough revenue, can’t entertain the sort of financing models open to Tier 1 vendors, must support payment terms of extraordinary length, and so on. The selection process defaults to existing vendor relationships.

Of course procurement teams have to safeguard the company and ensure that money is spent carefully but this has essentially narrowed the field, leaving newer entrants struggling to gain traction. Even if they do make breakthroughs, they are often prevented from sharing the news in the form of case studies and references – or it can take months for permission to be given.

For a variety of reasons, then, it’s tough to gain market share. Of course, breakthroughs are made, but it takes time – and, inevitably, many fall by the wayside or else focus on acquisition rather than really securing market share.

Transform procurement alongside other measures

So, the tenth lever really ought be the transformation of procurement and opening to a wider range of vendors. As we have seen in recent months, there has been considerable discussion of the need to diversify supply chains. Unless this is baked into the transformation of other processes, then it could simply turn out to be a lot of (virtuous) waffle.

McKinsey recommends “creating R&D partnerships with technology leaders in the dependent ecosystems”. But this must include start-ups, smaller players and research institutions that can commercialise innovations – and the ability to work with them. It may be a recipe for success, but it lacks a key ingredient.

Unless and until procurement processes adapt to embrace such stakeholders, telcos will miss out – and, without the right solutions, they will be hamstrung in their efforts to achieve their overall transformation goals.

 

[1] McKinsey and Company, April 2021

[2] “Accelerating innovation in the telecommunications arena” Chappell et al, June 2020

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