In the telecommunications industry, being bigger is not always better, as challengers have seen success by staying lean and focusing on innovation. Miguel Simoes de Melo, a partner with Bain's Telecommunications practice, discusses how challengers have embraced five key strategic principles to win against larger players in the market.
Read the Bain Brief: The Art of Battling Telecom Goliaths
Read the transcript below.
MIGUEL SIMOES DE MELO: In the telecommunications industry, most of the players have been working around one big premise: big is better. It was the big incumbents that had the money to spend more on capex, more on retail stores, more on brand, more on talent, and so on and so forth. Now, when we look at the detail, actually what we see is that the big incumbents have not really gained ground. They've been more marking time.
And it's really the small guys, these challengers that have been doing a lot of new things that have really moved the needle. We took a very good look at these challengers, and what we realized is that they have been winning across five dimensions. The first one is they have a very differentiated way of how they win in the market -- the "where to play."
They know very well what customer segments, what episodes, what channels, and what products they want to get to the customers. The second one is they have a very differentiated "how to win." They really give more for less, but not across the board. They know very well what parts of the customer experience and what specific products that customers want.
Thirdly, they have a very good understanding that you need to be lean to survive. So they apply all the smart tools that they have on the digital space. And they operate in a very lean way across the board.
Fourth, capex. They understand very well that capex is a strategic weapon. They don't spread the butter over the whole toast. They know that they have limited capex, so they really double down on what are the specific battlegrounds that they want to win. And they put all the chips there to outspend their competitors.
And the fifth one is just a mindset. It's a general culture that they apply in the operation. They are insurgents, and they take that at heart. And that allows them to not only operate in an Agile way, but it breaks all the silos, and they are much leaner, much faster, and much more efficient in how to get to the market.
So this is very exciting. And we've seen many of these players, when they apply this playbook, they can achieve up to 60% increases in EBITDA in a three- to five-year period.
So what we think is, if you're insurgent, these are great, great times for you. And you can really outsmart big. If you apply a very customer-centric transformation to your business, you not only will achieve very profitable growth, but you will set up the right platform to achieve the objective that you need in the next five to ten years.
The Art of Battling Telecom Goliaths
A handful of challengers are writing a new playbook for growing market share and disrupting incumbents.