The impact of over-the-top (OTT) communications services, such as WhatsApp Messenger and Viber, is undisputable. Use of OTT services will continue to grow as take-up of smartphones increases. About 11% of smartphone owners use mobile VoIP applications regularly, compared with only 5% of mobile users as a whole (see Figure 1). Even more striking is the level of usage of OTT messaging services: about 29% of smartphone owners use them, compared with 17% for all mobile users.
Figure 1: Usage of over-the-top services [Source: Analysys Mason's Connected Consumer Survey 2012]
1 Various questions; Denmark, France, Germany, Poland, Spain, the UK and the USA; n = 7485.
When identifying an appropriate OTT strategy, it is important to understand why such services gain traction in the first place, and with whom. For example, the adoption of mobile OTT services may indicate that some users are willing to sacrifice certain features, such as extensive customer care capabilities, in favour of others, such as group chat messaging. The success of OTT players may also demonstrate that value can be found from a highly segmented approach to the market. By focusing on features that are valued by particular users, OTT service providers can apply an alternative business model, often at no additional cost to the user.
Operators have reacted to the threat from OTT service providers in various ways. Responses include doing nothing, blocking OTT services (or at least, trying to), and building services based on RCS-e and competing OTT solutions. The typical approach is to brainstorm, shape, prioritise, validate and implement those customer value propositions deemed most attractive by an internal team. Research shows that this 'ideas first' approach to growth planning enjoys a success rate of just 17% – about the same as rolling a die.1 Established responses to the OTT threat may be difficult to implement and could be unsuccessful.
However, the successful development and implementation of a more-robust OTT growth strategy (that is, not an 'ideas first' approach) may be feasible. By segmenting the customer base and characterising groups by the outcomes that they value, rather than demographic profile, operators can create targeted propositions that deliver on valued outcomes.
This approach to segmentation is inherent to Outcome-Driven Innovation (ODI) – a Harvard Business Review award-winning, proven methodology developed by Strategyn that helps companies to discover product and service opportunities regularly, and enjoy fewer abandoned and failed product efforts.2 Analysys Mason is working with Strategyn to apply this methodology to the telecoms sector.
The ODI method is based on two simple yet compelling principles:
- customers use products and services to help them get 'jobs' done
- customers have a range of measurable 'outcomes' they are trying to achieve as they try to get a job done.
By identifying important yet poorly served and unimportant yet over-served jobs and outcomes, ODI uncovers areas of opportunity for new value creation or over-served areas suitable for disruption (see Figure 2).
Figure 2: Identifying opportunities for new value creation [Source: Strategyn, 2012]
When applying this approach to communications services, it is possible to:
- characterise the range of outcomes valued by different user segments
- identify the outcomes that are inadequately served, and therefore represent an opportunity for customer value creation
- develop compelling propositions that satisfy key outcomes and diminish the attractiveness of competing OTT solutions.
For example, when a supplier of specialist radio products used ODI it uncovered three unique and previously unknown segments, and identified the range of poorly served outcomes in each segment. By moving away from its previous 'one-size-fits-all' product approach, the company was able to deliver an optimised product for each segment. Through launching better products at a lower price, the company increased overall customer satisfaction, secured the market leadership position and achieved an annual revenue growth rate of 18% in an otherwise stagnant market.
To find about more about transforming your OTT strategy, or to find out whether the ODI approach can help you create compelling strategies around other opportunities for growth, please contact Tom Rebbeck, Head of Custom Research (firstname.lastname@example.org).
1 Strategyn (San Francisco, CA, 2010), Innovation Track Record Study. Available at: http://strategyn.com/request-an-invitation/.
2 Strategyn (San Francisco, CA, 2011), What is Outcome-Driven Innovation?. Available at: http://strategyn.com/request-an-invitation/.