They may be at the forefront of technology, but the region's telcos still have a lot of catching up to do.
Telcos are meant to be champions and enablers of the digital age, so why have regional providers been so slow to take on the role?
The ultimate vision for any telco is to be an innovative technology company that enhances the customer experience by providing value-added services, product and content through a well establish infrastructure that reaches everyone - everywhere.
This vision is inspired by brands such as Apple, Google and Facebook that have managed to leverage their innovative technology to create powerful, useful and engaging services that impact individuals and businesses.
The leaders of many of the regional telcos have a clear understanding of the changes required for future growth, as well as how business must evolve to adapt to changing dynamics of the industry. The pace of technology demands flexible, nimble organizations that can react quickly and adjust strategy to respond to market and customer needs.
Telcos that do not adapt risk being relegated into basic infrastructure companies, or "dumb-pipes" in industry terms. Viewing the telco industry through the lens of Professor Michael Porter's Five Forces framework reveals the sector's challenging and evolving nature.
Network suppliers such as Huawei and Nokia Siemens are taking over the network operations side. Operators can now outsource their entire back-end to these network suppliers who can run it cheaper and better, effectively reducing telco to a marketing engine.
Technology companies such as Skype, Citrix (GoToMeeting), WebEx are putting pressure on the service side. For users, the online world is one and without borders, so why pay for international calls or roaming charges? That will soon be a thing of the past.
Today's developers eat into the telcos' value-added services revenue by creating apps that simply reduce billable call time (Viber - Whatsapp - any other application with an e-service ordering functionality).
Anyone from Gen Z will tell you that calling was for yesterday, messaging is for today, and apps are for tomorrow.
Despite all of these pressures on the business model and the tsunami of change that's on the way, Middle East carriers have been slow to transform and adapt for the following reasons:
Protect the bank Without a doubt, being a technology leader, means cannibalising, if not even potentially destroying certain revenue streams to improving the offering. We have seen how companies and technologies have been leapfrogged and disappeared, seemingly overnight. For anyone following RIM, it's easy to imagine a Palm scenario unraveling. Staying in the game means losing revenue is inevitable in the short term. Protectionism in the industry does not facilitate fast adoption. But as technology seeps in through the cracks, the days of cozy competition are over.
Nature of the beast The organisations are large, siloed and politically-charged with legacy technologies, outdated procurement systems, stringent internal audit controls, and staff competencies that vary dramatically. Add to that the complexity of semi governmental board of directors, and these companies face severe internal hurdles in the way of change.
Compare that to the business model of technology companies, their flat organisation charts, creative work environments, and young talent that create a culture that fosters problem-solving, innovation and entrepreneurship.
Regulations The sector is rife with security protocols, processes and restrictions on activities such as account opening, signature verification, and paperwork. Some are internal and others mandated by the regulatory authorities. The telco's job is to lobby for and enact change, and this change needs to come at a faster pace.
Comfort zone
Despite criticisms, glitches and complaints, telcos in the region make a lot of money. If it's not broken - yet - why fix it?
Embrace the future
No matter how much it hurts. This means innovating in ways that might cannibalise existing sales, but creates long-term value. Launch new products and technologies, and encourage consumer investment and engagement to improve and shape the offer.
Take more risks
There is a level of hit and miss with innovation but the only way to find out is to try. Given their vast resources telcos have the ability to act as VCs, allowing them to explore ideas, take them to market, learn, get exposed to ambitious entrepreneurs while hedging their bets on the future.
Move faster
Take products to market quickly, evolve them, kill them, but constantly keep learning and improving. Move with your consumer at their pace: Real time.
Channel ubiquity
Deliver a seamless brand experience across all channels, retail, phone, online, mobile. Don't force consumers to do one or the other, provide choices and deliver them.
Partner to find solutions
Everyone comments that e-commerce has not scaled up in the Middle East largely because of online security and payment concerns. As pillars of society and commerce telco - in partnernship with financial institutions - are best placed to provide solutions to spearhead growth of SMEs and trade online. We need to get to mcommerce quickly.
Internal culture Encourage innovation. Break down hierarchical layers, and minimise bureaucracy. Move away from the limiting mindset of systems and processes. Put the consumer experience front and centre.
Be inspired Be inspired by industries that leverage technology as a means to an end. Lots to do. We need to move at 100MB per sec.
Tarek Sultani, Director, Landor Associates© Gulf Marketing Review 2012
