The Barometer on Change 2015/16 findings resonate strongly with the challenges our clients face across the technology, media and telecoms sector.
49% of respondents stated cost reduction as a strategic priority for the next year. In TMT, the focus on cost reduction is now tied to an improved customer service mandate and new product development. However, this is difficult to translate into a cohesive transformation approach that address all of the interconnecting systems, people, data and process challenges.
Whilst merger and acquisition activity dominates the headlines, delivering the deal value that ultimately underpins the business case requires a clear vision, structure and an integration capability that will remain focused on delivering the benefits. Speed and agility of new products and services to market will be a differentiator and, during the last year, we have seen the businesses that place clear bets are driving the shape, direction and, more starkly, the growth in the market.
Customers are driving innovation and improved services
A focus on customer-centric services, increased efficiency and streamlined processes have provided a twist on what we have typically seen from a cost reduction perspective this year.
We have seen an increasing trend where firms are using cost savings to re-invest. Profitability is key and there are numerous examples of where we have seen how the savings are being used to finance investment into new products and services (creating or buying content / new media propositions), creating capital reserves to fund M&A activity or re-investment to lead and improve services. There is a clear drive to focus on, and improve customer service alongside new product launches. This is driving organisations to refresh their operating model, improve processes and transform their back and front offices through significant transformational change. This is all with the prevailing objective of improving customer service and providing an agile foundation to launch new services. Enhanced customer service and building loyalty are key for opportunities to cross-sell and providing bundle offerings (triple and quad play), but the key question still be to answered is whether the offering to consumers responds to what they need or ultimately want.
Mergers and acquisitions are a route to new offerings and efficiency
The UK’s TMT sector has been leading the charge when it comes to M&A activity. Whilst we await the decision of the regulators which will ultimately determine the outcome and direction on the biggest deals, modern history tells us that driving the benefits from the deal, delivering the vision and integrating the businesses is littered with missed opportunity.
The skill sets and experience required to successfully articulate and translate the M&A vision into a deliverable programme of work are thin on the ground with only 30% of firms really confident that they can access the skills required to achieve their strategy. Bringing together different organisations with the challenges of integrating everything from the brand, systems, services, products, culture and people are consistently deemed to be the hardest to achieve in realising the benefits.
Developing the capability to deliver
The amount of transformational change being prioritised in organisations is increasing year on year. A lot of this can be tracked back to an increase in customer expectations and demand which in a number of cases is challenging organisations as they often struggle to prioritise activity in their transformation portfolio and compounded by a shortage in capability to deliver. The latter can act as a bottleneck as businesses seek to differentiate their brand and get ahead. The capability gap in the TMT sector is a result of some tactical cost cutting which has stripped out and unsettled a skilled workforce, an over-reliance on contractors to deliver transformation and a shifting mindset to embrace change. It is not surprising that 76% of respondents will look in part to bring in transformation skills from external sources.
In 2015, we have seen an ever-growing demand for high quality, agile delivery and at a pace that responds to the convergence, consolidation and increasing agility across the sector. The TMT sector has been a hotbed of activity and a headline maker with the key themes from this year's Barometer clearly embedded within it. Innovation, flexibility, structure and focus seem contradictory but bringing them together with an agile capability and culture will mark out those that deliver their strategy and succeed in the future.
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