New Business Models? What New Business Models? Part II

Part Two

In my previous post I discussed some ideas that were stimulated by a UK business news piece on Tune hotels.

The second piece in that bulletin concerned Hamleys, the biggest toyshop in London, and arguably one of the most famous in the world. The CEO was being interviewed about the impact of the recession on the store, which doesn’t discount its items. Wasn’t the recession driving their customers elsewhere, asked the interviewer – to go online, for instance, or to visit “stack-‘em-high, sell-‘em-cheap” out-of-town retailers, like Toys‘R’Us?

No, he replied, that hadn’t been their experience, and nor had they been forced into price wars with low-cost rivals.

What kept people coming to Hamleys, he said, was the unique experience that the store could offer, and the company had focused even harder on that. Rivals had a lower cost base and could always beat them on price, even on stock and range, but they couldn’t match the experience of visiting the biggest toyshop in the world, right in the middle of London and all the fun that went with that.

Again this is something that we seem only slowly to be coming to terms with in telecoms: that price doesn’t keep customers loyal – there’s always someone cheaper, and over time the price differentials get smaller and smaller. Nor does technology and products – any new product is quickly matched by rivals, particularly in these digital times, and rarely justifies switching.

What really differentiates a telco – or any other company – is the customer experience.  This is slower and harder to develop, for sure, but is also much harder to imitate, which in the long term makes it a much more effective way of generating customer loyalty and spend.

The telco’s interactions with its customers, at critical points in the customer lifecycle, are likely to be much more influential on their loyalty and their inclination to spend than a discount of a few percentage points. As a customer, how I feel about my telco is more likely to be influenced by how fast and how accurately my new handset or DSL line was delivered, whether it worked first time, how quickly customer service responded to my query, whether they knew what products I had and how I used them, whether they offered me an upgrade to a new handset without me having to ask… by any one of dozens of possible interactions where the telco has a chance to impress – or disappoint me.

So what did I take away from listening to these pieces?

Telecommunications is an increasingly open and competitive business – telcos compete not just with other telcos but with many other providers of apps, content and services. Utility-oriented business models and supporting systems won’t cut it any more.

New business models are needed if telcos are to be competitive in this new world, but maybe there’s less to fear than the industry sometimes seems to think, as whatever issues we’re struggling with, other sectors have often been there already and have found ways to be highly successful. In processes and systems there’s a lot we can learn, and maybe copy, from the wider economy.