In my July blog I touched on the need and trend for CSPs to become more like DSPs (Digital Service Providers) and be able to provide a much higher level of customer interaction at a much lower cost to serve. Here I would like to take a more detailed look at what it means to be a DSP and the emerging ecosystems that enable this model, which we like to call the Interactive Digital Ecosystem (IDE).
The simplest definition of a DSP, according to Wiktionary.org, is a company that provides an outlet to distribute media online. In fact, they run their whole operation online via digital channels. They tend to offer excellent customer service but it’s purely online (try calling Amazon or Apple), and their catalogs of goods for sale, pricing and promotional offers are all changing rapidly.
DSPs generally operate on open platforms that encourage online digital interaction with partners as well as customers. Speed is a critical component of competitive success, quick to market, quick sale and immediate revenue recognition is key to the business model.
The shift from communications to digital can be defined in many ways but I like to view this shift as four key strategic transformations:
DSPs do more than 80 percent of customer transactions online. From my own research and via customer estimates, CSPs currently do less than 20 percent of their interactions online, some much less. The remaining 80+ percent is done via call centers and retail outlets. This model is both expensive for the CSP and cumbersome for the customer. It also defies the trend of online shopping and self-service across most industries including banking, travel, and even insurance. Companies that focus on online channels for sales and customer service report higher levels of customer satisfaction. For the DSP, this experience is actually much cheaper to provide. The CSP customer experience needs to shift from an outdated ‘utility’ model to a company with internet mentality and a goal of achieving Net Promoter Scores (NPS) to rival other digital retailers
DSPs focus on ARPA not ARPU. Fundamentally, this is redefining the relationship between customers and services. For a CSP, the ‘U’ in ARPU is the User and is actually representative of a line, port, SIM, or some other connection trapped in a product silo. This means a single customer/account can be viewed as several ‘users’ and the revenue is measured at the connection level rather than looking at the customer account as a complete entity. The concept of ‘User’ must shift to ‘Account’ with multiple devices and services that can share assets. Traditionally there has been segmentation across payment methods (pre-pay and post-pay), access networks (3G, LTE, Wi-Fi, DSL etc.) and line of business (consumer, small business, enterprise etc.). DSPs look at the business differently and see the customer as a single entity that has multiple services, devices, personas and payment methods with revenue measured on that customer as a whole (Average Revenue Per Account). This is the only way forward in monitoring successful revenue growth in the digital economy. Verizon has already made this shift.
DSPs offer a service that can be accessed across any device with a consistent experience for the customer (think Netflix, iTunes, etc.). DSPs manage customer segments and lines of business as an integrated offering through their IT infrastructure so that they can deliver a standard customer experience regardless of how the person is accessing services. No silos here!
DSPs are capable of rolling out new products or propositions in days or weeks rather than months or years. CSPs tend to launch a limited number of new products and propositions each year, often limited by internal processes. This is primarily due to outdated IT infrastructure and the business processes that have been developed to mitigate risk within a complex environment.
DSPs have more streamlined business processes and a modern IT infrastructure that support these processes and are not driven by them. This makes them more agile, with product development cycles much shorter, cheaper and therefore more prolific.
This is not to say that all CSPs fit this mold and those able to make the transformation quickly may be more likely to succeed against what they consider as OTT competition. The move from CSP to DSP may prove too big a jump for some and only time will tell if they can survive in the digital world, at least in terms of offering competitive products and services in a timely, profitable manner. We are working on DSP deployments with market leading operators who have seen the digital future and have asked MATRIXX to help them make it happen.