What can a bank’s failure teach telcos about digital transformation? The cautionary tale of the UK-based Co-op Bank's ambitious yet disastrous attempt to overhaul its software infrastructure holds valuable lessons for the telecommunications industry. 

Back in 2006, UK-based Co-op Bank began a USD 3.8 million/  £1.5 million overhaul of its software infrastructure. It dreamt of becoming the first UK bank to fully replace its core banking systems. Instead, it resulted in a USD 1.9 billion/ £750 million nightmare. Here are three critical lessons from this experience that telcos can learn from:‍

No Clear and Achievable Ambition: 

Co-op Bank's project was akin to replacing the logs of a raft while still using it. The bank underestimated the project's complexity, leading to numerous problems. 

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Inconsistent Leadership: 

Prominent IT leaders left mid-transformation and senior staff didn’t engage with the initiative fully, creating a void in direction and expertise. Strong, consistent leadership from the start at all levels is essential.

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No Stable Roadmap: 

The project lacked a clear and consistent roadmap, leading to instability and vulnerability to scope creep and budget overruns. Undercooked plans that were constantly revised ended up making things worse. 

These challenges are strikingly similar to those faced by telcos attempting to transition into techcos. As the telecommunications industry navigates its digital transformation journey, there are even more lessons for us to learn.  Let’s dive in.

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Why Do Digital Transformations Fail?

Digital transformations fail primarily due to the absence of a clear vision for the organisation and the lack of change management plans. 

The issues that Co-op bank ran into line up with what McKinsey and BCG also believe cause telco digital transformation efforts to fail:

Missing The Big Picture

Our CEO, speaking to digiconasia says that digital transformation is “about redefining the organisation to survive what is an unstoppable paradigm shift.” 

Rameez mentions that “Corporate history abounds with companies that were so focused on details and making incremental improvements to existing products that they failed to understand that their sector was going through such a paradigm shift: Kodak failed to anticipate digital cameras and the end of physical film; Nokia and Blackberry had fantastic devices but the iPhone changed the entire purpose of a mobile phone.”

This aligns with McKinsey’s definition:

“Digital transformation is the fundamental rewiring of how an organisation operates.”

There is a tendency to think that digital transformation is mostly an IT exercise without considering how these initiatives can impact the rest of the organisation.

IT departments often have a positive track record for smaller-scale shifts to new solutions. However, digital transformations require collaboration across the whole company. 

If the business-side is not involved from the beginning, there won’t be clarity around the project scope, sourcing strategy, operating model and business impact - causing ripple effects down the road.

For example, creating IT savings through rigid standardisation can also make your telco unable to offer customised plans. Adjusting as new issues arise can lead to more complexity, costs or delays.

Circles CEO Rameez Ansar calls this putting lipstick on a pig. He mentions that companies get distracted by the word “digital” and consider digital transformation to be tech projects handled by their CIO instead of treating it as the fundamental company rework it actually is.

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No Strong Vision to Align The Organisation

Oftentimes, the CEO doesn’t set an ambitious enough vision nor does the CEO rally the team behind the digital transformation initiative. Without organisational buy-in, the change will fail.

All the points we covered earlier shows that “Digital Transformation” has the same “difficult to define” problem that “big data” had where nobody can agree on what it means. The leadership needs to take the lead in defining what digital transformation means and how to organise the whole organisation around it. 

Our CEO Rameez mentioned that “many DX projects fail is that they did not take sufficient account of the human element: in other words, the people working there. More often than not, senior leadership believed it was undertaking a technology project when, in reality, it was trying to transform the company’s strategy, operating models, and, most notably, the individual mindsets within the internal social collective.”

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Forgetting to Align Incentives

Different stakeholders often have different goals and priorities. For example, business aims to increase revenue, improve the customer experience and lower costs. IT seeks to reduce software costs and make IT architecture easier to maintain. 

If incentives are not aligned, choices may work for some but not for all - and certainly not for maximising value from the transformation.

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Not Freeing Up The Right People

The leadership team needs to consider the skills needed for digital transformation within their organisation.

Digital transformation efforts are like overhauling a raft that you are currently riding on the ocean - the people who might be able to spearhead the transformation may also be crucial for steering the craft. Not freeing up the right people to focus on the transformation will lead to failure.

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Lacking a Control Tower

Effective program management is crucial for keeping a transformation on track and aligned with its objectives. Without a "control tower"—an independent, C-suite-empowered entity to monitor and ensure the transformation creates value—making necessary course corrections becomes challenging.

Many organisations also lack robust change-management infrastructure, or fail to schedule proper leadership oversight meetings and performance-management discussions to track progress.

In summary, digital transformations fail when there is no clear vision, insufficient organisational buy-in and departmental alignment, and inadequate monitoring to enable timely adjustments.

Given the importance of a clear vision, we invite you to join us in discussing what an ideal telco digital transformation vision could look like.

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Our Idea of a Techco, the Ideal Digital Mobile Operator (DMO)

At Circles, we are committed to helping telcos evolve into techcos. We provide a comprehensive roadmap for telco to techco digital transformation for our international partners.

The ideal DMO we envision for our partners embodies the following characteristics::

• Customer-centric
• Innovates rapidly
• Leverages strengths and partnerships to diversify beyond connectivity revenue

These characteristics are  tracked according to: :

• Industry-leading Net Promoter Score (NPS)
• Maximizing profitability
• Achieving a high and diversified Average Revenue Per User (ARPU)
• Sustainable low cost structure

From our experience with Circles.Life, techcos that embrace these qualities can effectively meet consumers' evolving needs and expectations while maintaining competitiveness.

From an execution standpoint, we consider the different departments’ business priorities and balance the following together before we embark on telco-to-techco transformation:

• Chief Executive Officer: Image: Focus on innovative new techco overlay services to enhance the company image among investors
• Chief Marketing Officer: Market: Increase revenue and/or create new revenue streams with different segments while providing best-in-class CX to attract and retain customers (NPS)
• Chief Financial Officer: Financial: Lower cost via tangible drives (e.g. reduction of churn, marketing cost, low-value subs), thus increasing EBITDA while increasing average revenue per user beyond connectivity
• Chief IT Officer: IT: Protect existing user base and reduce operational costs while ensuring seamless day-to-day operations.

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This is just a glimpse into our vision of the ideal techco. Stay tuned for our next article, where we’ll explore the concept of the Ideal Digital Mobile Operator (DMO) and delve into our comprehensive full-stack digital transformation approach.

If you’d like to learn more about our digital transformation capabilities or discuss how we can assist your telco, reach out to us here!