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Next-gen success demands
forward-looking KPIs

 
 

Communications service providers (CSPs) offer far more than mere connectivity to customers, but the challenge is to communicate this value and—most important of all—leverage it to achieve serious revenue growth in the 5G era.

Real-time geolocation data sits at the forefront of many customer experiences. It means you can order takeout at the click of a button, your injured friend can quickly find the nearest hospital, and that your card fraud detection provider can be almost certain that those 2am Dubai transactions aren’t yours.

CSPs had access to this data two decades ago—long before anyone ever heard of Google Maps. Yet being first wasn’t enough. CSPs had the technology, but they weren’t able to get out front as the go-to provider for navigational apps because their business models were out of step with the times.

Flash forward to today and there’s a risk of something similar happening with 5G. The possibilities of the technology are tantalizing, but if CSPs don’t change their behavior and think like innovative, customer-centric digital service providers (DSPs), they could miss out again.

“We are in an industry that seriously needs to reorientate for growth,” says Stephen Rose, Senior Partner at Bell Labs Consulting, who notes that CSPs have been pushing up against a hard revenue ceiling for years. “To capitalize on 5G and other next-gen network experiences, there has to be a radical rethink around how we measure performance and drive outcomes.”

Why legacy KPIs need to be overhauled

In Rose’s view, an essential first step in becoming a DSP is to reinvent the key performance indicators (KPIs) they have relied on for decades—the traditional financial/operational metrics such as total cost of ownership (TCO)—to focus more on the customer experience and value creation. But breaking that mindset will be tough.

A major reason why is that, over the past five years, CSPs have been outstripped by webscales when it comes to generating shareholder value. As a result, they have doubled down on their financial/operational KPIs, using these dated metrics to guide cost-cutting measures or to justify new investments intended solely to boost the bottom line.

Focusing on these kinds of point-in-time measures, which track historical trends rather than progress toward business transformation targets, leads to what Rose calls “non-growth solutions that guarantee non-growth outcomes.” He says that when CSPs are too focused on TCO it just leads to a race to the bottom, ultimately constraining innovation and growth, both of which will be needed to succeed in the 5G era.

“Once you're doing that, you're in a vicious cycle,” Rose says. “It’s something that we as an industry need to break.”

To capitalize on 5G and other next-gen network experiences, there has to be a radical rethink around how we measure performance.
Stephen Rose
Senior Partner, Bell Labs Consulting

Is it time to say goodbye to KPIs completely?

In an attempt to break that cycle, many organizations are replacing classic KPIs with objectives and key results (OKRs). Instead of focusing solely on numerical targets, OKRs provide a collaborative, big-picture framework for goal-setting, calling out the relationships between strategic business objectives, measurable results and the day-to-day work done throughout an organization. Anything being tracked must be strategically aligned with where the business wants to go, especially in terms of the customer-centricity and focus on value creation required to make the most of the 5G opportunity.

“Every part of your organization, from the chief technology officer to the chief marketing officer, should all be driving toward the same business outcomes,” Rose explains. “Once you’re aligned with the desired outcomes at both the strategic and operating levels, you should be coming back to the table and asking, ‘What are the measurements that all of us are actually going to be working toward?’”

Adopting this kind of objectives/outcomes-based approach may take CSPs outside their comfort zone, according to Rose, but it’s essential if they want to make the shift to becoming DSPs.

Be customer-obsessed

Many webscales have adopted OKRs because they enable a more customer-centric approach than legacy KPIs. They go far beyond simply “focusing on the customer” to embed customer value creation into every aspect of the business and every decision point, asking questions such as: What type of customer experience are we looking to achieve? What position are we looking to achieve in the marketplace?

Deutsche Telekom is one CSP that has latched onto that same mindset and now claims some of the highest customer satisfaction rates due to its obsession with providing value to customers.

“Everything has to start with the customer,” says Axel Menneking, Vice President of Start-up Incubation & Venturing at Deutsche Telekom, at a recent Real Talk event. In his view, the challenge in measuring aspects related to the customer experience is that the benchmarks are always changing based on what webscales like Apple, Google and Amazon are doing. But if a CSP has a strong internal culture that prioritizes customer-centricity in everything it does—from leadership on down—the value created should be easy to see.

Alex Reiniger, Senior Business Development Manager at open-source software developer Red Hat, agrees that whether CSPs adopt OKRs or stick with evolved forms of KPIs, the measures they use have to be more focused on the customer than ever.

What does a DSP KPI look like?

There’s no fixed set of measures, but potential KPIs that fit the DSP business model could include:

  • Target customer experience
  • Target marketplace position
  • Process automation
  • Outsourcing vs. in-house solutions
  • Automated interventions vs. manual interventions 
  • Ideation and innovation time
  • Ecosystem and relationship cultivation
  • Contracts developed on basis of shared outcomes
  • Ability to onboard new ecosystem partners 
  • Ability of ecosystem partners to monetize time invested
  • Cross-sell and up-sell opportunities between development communities
  • Positive network effects of ecosystems

“As customer perception comes to the fore, KPIs must move from being a pure revenue measure to include customer experience and retention,” says Reiniger. But CSPs can’t just go on using customer-related KPIs to reduce subscriber churn, because that won’t lead to growth. They need to use their measures to evolve their business models, create new value and enable all-new experiences.

In Reiniger’s view, artificial intelligence and machine learning (AI/ML) will be essential to achieving that. Automation will also be key to enabling real-time monitoring of KPIs. Reporting hours or weeks after the fact will no longer meet customer expectations: CSPs need immediate awareness of whether KPIs are being met so they can respond accordingly.

KPIs must move from being a pure revenue measure to include customer experience and retention.
Alex Reiniger
Senior Business Development Manager, Red Hat

Look to the future

Beyond being outward-looking and customer-centric, Rose says CSPs’ KPIs also have to be future-facing, tracking progress toward a goal, such as levels of process automation or cloud penetration, ratios of outsourcing to services built in-house, shifts in revenue structure and business enablement capabilities.

KPIs such as mean time to repair/resolution (MTTR) will have to change to fit this new mold. Rose says, “When you’re a DSP, it's no longer useful to look at the number of tickets and how quickly they were dealt with, because it doesn’t really tell you much about the value provided to the customer. Instead, the thing to track is how many interventions are handled in a completely automated way—avoiding issues entirely—versus how many problems require reactive, human intervention.”

Mahender Nandikonda, Head of Key Accounts and Sales for cloud-based business support system provider Qvantel, says that KPIs that measure the rate and success of digital transformation will be some of the most important going forward. What’s the use of measuring how many customers downloaded your app, he asks, when many download apps and don’t use them? “CSPs need to measure and report on the percentage of customers who are actively using their app for sales and care services.”

As CSPs begin to sell a much wider range of services than just connectivity, Nandikonda says they will also need better ways to report on non-connectivity sales, including understanding and measuring the likelihood of their customers buying non-connectivity services.

Evaluate the broader ecosystem

For DSPs, everything will be connected. As services become more dynamic and share underlying infrastructure via software-based networking, KPIs will need to show how well the overall infrastructure is performing instead of looking just at individual components, says Red Hat’s Reiniger.

That interconnected view will need to extend beyond the limits of the DSP’s own organization to include the broader ecosystem of customers and partners in a collaborative way—a significant shift from their historically competitive attitudes.

“Destroying each other’s profitability to claim victory is a short-lived win,” Rose says. “If the industry wants to grow, it has to focus on driving behaviors and outcomes across the value chain that promote added value.”

That means embracing outside innovation and getting insight into what's happening across the value chain with KPIs that track relationship cultivation, ecosystem contracts based on shared business outcomes, the ease with which partners can monetize the time they’re investing in the ecosystem and more. It’s about measuring how ecosystems are evolving and the extent they are generating positive network effects.

“What the webscale competitors all have in common is that they leverage their developer ecosystem,” Menneking says. “CSPs need to be ready to attract developers onto their next platform—the 5G platform—to stay in the game and not become a dumb connectivity pipe.”

He says becoming more “developer-centric” and open to working with as many partners as possible to provide more services to customers has been key to Deutsche Telekom’s recent success.

That aligns with Rose’s view. “As a CSP, one of the things I would be looking at are cross-sell and up-sell opportunities between different development communities. That is going to be a key metric in the future,” he says.

Destroying each other’s profitability to claim victory is a short-lived win.
Stephen Rose
Senior Partner, Bell Labs Consulting

No one-size-fits-all solution

Rose believes that with CSPs already providing more value to their customers than ever before, evolving their KPIs will give them more ways to communicate the value they deliver and help them speed up innovation and time to market.

Because every CSP’s market, infrastructure, customers and business goals are different, no universal measurement solution will meet all needs. Coming to the right measures can be an intricate process that involves complex thinking. But to avoid repeating the mistakes of the past—and to prevent the webscales from taking all of the 5G pie—reinventing traditional KPIs is a process that must begin now for CSPs and the industry as a whole.

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