Beating the crash: What’s coming?

Signs of tougher times

Tough times are ahead…

As we look ahead, the world faces a number of significant challenges:

  • Global / OECD consumer confidence is diving to startling new depths as people increasingly feel the impact of inflation, supply constraints and a cost of living crisis.
  • This follows the war in Ukraine, the Covid pandemic and long Covid, stresses resulting from diverging political ideologies, growing social unrest, and the ever increasing realisation of the impact of climate change.
  • These seismic tensions are all driven by nearly 8 billion (and growing) people vying for resources and a vision of the future that they can continue to thrive in.

…but it’s not our first rodeo…

We have previously written about, for example:

And before that, there was the Credit Crunch series (2008), the Eurozone Crisis (2012), and technology and market disruptions too numerous to name.

There is always a temptation to think that the latest crisis is the worst. Each one tends to temporarily obliterate one’s view of the future as our imaginations are so absorbed in dealing with the nearby threat that all other considerations become secondary.

…and we believe we can bring some hope

Our solution to these challenges is two-fold. First, there is a lot that can be learned by looking at the lessons from previous traumas. Secondly, it is extremely helpful to be able to position all the individual events within an overall context, as it enables us to more rapidly reorientate after the latest shock.

Our context is The Coordination Age – the vision that the world is entering into a new era where:

  • The primary need is to make better use of available resources (e.g. money, carbon, time, assets, etc)
  • And that connecting technologies (e.g. telecommunications, data, automation and AI) are key elements of the solution.

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Making the Coordination Age work

making-the-coordination-age-work

Source: STL Partners

This report uses these learnings to look ahead to what we see as a challenging time. While some of the forces we outline in this report may seem alarming, this is not a pessimistic picture. We believe that the vision we describe brings opportunities for telecoms – but only if leaders in telecoms and elsewhere act on the vision. We are striving to make this happen, and we hope we can help you do that too.

A scale of discovery

To help contextualise the many forces of change, we have developed a six-stage schematic to generalise how people deal with new forces and changes in their lives. It progresses from the first recognition of a new theme or issue through to normalisation, the point where something is no longer new or different. The graphic below highlights the six stages, and general heuristic descriptions of what you might hear said, risks and threats, mitigations, and the general psychological and emotional mindset of those processing the change or issue in question.

Six stages of dealing with new ideas

six-stages-dealing-with-new-ideas-stl-partners

Source: STL Partners

The body of the report covers the drivers, their impact and consequences for telecoms:

  • Economic drivers, such as consumer confidence, inflation, and rising living costs
  • Environmental drivers, including climate change and carbon reduction
  • Political drivers, including the War in Ukraine, China / US tensions, trade wars and tensions
  • Social drivers, including Covid and Long Covid, inequalities and social polarisation.

Economic drivers: A crisis of confidence

In this section we examine drivers in consumer confidence, inflation / cost-of-living concerns and the consequences for telecoms.

Consumer confidence: An all-time low

The OECD consumer confidence index is a barometer of consumer sentiment. It reflects people’s confidence in their economic prospects. The chart below shows that it is currently reaching record new lows.

The OECD Consumer confidence index is at its lowest ever level

OECD-consumer-inflation-index-june-2022

Source: OECD

This means that consumers feel extremely pessimistic about their economic prospects. The average score is now below where it was at the peak of anxiety about Covid in early 2020, and below where it was in the financial crash in 2008-09. Indeed, the OECD average is now at its lowest ever level since global measures were introduced in the early 1970s, with only Mexico and Indonesia bucking the downward trend.

People are now preparing for a tough period in their economies. Some are worried about making ends meet – having enough to live to the standard they normally expect. This usually means that they will look to cut back on spending, especially for non-essential things.

Inflation is worrying everyone in Summer 2023

The pressures behind this trend are a generalised concern about inflation (rising prices on essential items like food) leading to a cost-of-living crisis.

Inflation overtook other global concerns in April 2022

Inflation-overtook-global-concerns-april-2022-stl-partners

Source: Ipsos

The Google trends chart below shows search interest in ‘inflation’ globally, which is an even more immediate signal of concern. It clearly spikes in July 2022.

Google Trends – searches for “inflation” spiked in Summer 2022

google-trends-searches-for-inflation-summer-2022-stl-partners

Source: Google

The problem is not confined to one or two economies: it is widespread, as the image from the interactive chart below shows.

inflation-global-challenge-2022-stl-partners

Source: FT

The rest of the analysis in this report reviews the macro-economic trends – i.e. the economic, environmental, political and social drivers of change. In a second report, we will cover telecoms industry trends, including technologies, policy, propositions and industry structure.

 

Table of Contents

  • Executive Summary
    • Not one crash, but many
    • 1. Actively realigning with stakeholders
    • 2. Accelerating operational innovation
    • 3. Enhancing resilience and customer security offerings
    • Next steps
  • Introduction: Signs of tougher times
    • A scale of discovery
  • Economic drivers: A crisis of confidence
    • Consumer confidence: An all-time low
    • Inflation is worrying everyone in summer 2022
    • Interest rates: A blunt tool?
    • Stock markets: Not quite sure…yet
    • Moving out of denial on economic problems
    • Consequences in telecoms demand
    • Recommendations
  • Environmental factors: Heating up fast
    • Climate change: Denial is hard these days
    • Decarbonisation: Digitising the industrial landscape, fast
    • Environmental concerns are now mainstream
    • Consequences for telecoms
    • Recommendations
  • Political: Drawing new lines
    • Ideo-conflict: Who’s side are you on?
    • The war in Ukraine: The first Coordination Age war?
    • China and Taiwan: Watching, waiting, wondering
    • Trade wars and barriers in general
    • Global instability: More trouble ahead
    • Consequences for telecoms
    • Recommendations
  • Social: A new order
    • Covid and Long Covid: Living with the virus
    • Rising resentment of inequalities
    • The United Nations Sustainable Development Goals
    • Consequences and recommendations for telecoms
  • Analysis
    • Getting the news in context
  • Appendix 1: Waste, pollution and air quality
    • Waste and pollution: Cleaning up
    • Refugees and migrations: Seeking solace in troubling times
  • Appendix 2: The 17 Sustainable Development Goals

 

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Sustainability: Why it’s good for business

Introduction

In the last year, businesses all around the world underwent unprecedented changes and had to adapt to the most challenging of circumstances. Priorities shifted for all stakeholders with telcos operating in an increasingly complex world and having to rethink how they do business.

The world is connected digitally now more than ever. With office closures and working from home, Zoom calls with loved ones having been the only way to socialise and to carry out online schooling, telecoms and technology have become even more relied upon industries in the last 18 months.

The idea that a strong corporate social responsibility and sustainability strategy is good for business has been around for decades. This report outlines how telcos can evolve their purpose beyond just being profit driven by aligning core strategy with sustainability initiatives and a sustainability policy, and in doing so benefit their business and add ‘society’ or ‘the world’ to their stakeholders.

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Scope of Research

The modern concept of ‘sustainability’ is composed of three components: economic, environmental and social. This is also sometimes called the ‘triple bottom line’ of business – stating that businesses should commit to measuring social and environmental impact, as well as financial performance, rather than focusing solely on profit. The ‘triple bottom line’ theory states that businesses should focus on the “three Ps”: people, profit and planet.

The three components of sustainability

three-components-to-sustainability-stl-partners

Source: STL Partners

Modern discussions of ‘sustainability’ refer to the economic, environmental and social effect an organisation has on the societies or markets in which it operates. It is an umbrella term that covers issues such as diversity and inclusion, energy usage, human rights and supply chain management.

Through this research we sought to understand if there is a business value to incorporating sustainability into a telecoms operator’s purpose and strategy. Speaking to seven operators across the world, some of whom are named in this report (Telstra, Globe and Orange), we wanted to know how telcos are thinking about sustainability, and to learn more about the following:

  • Telcos’ perception of the impact of sustainability initiatives in wider stakeholder groups e.g. employees, customers, shareholders, society
  • Which sustainability issues telcos are focusing on
  • The business benefits of sustainability initiatives
  • Case studies of companies that have incorporated sustainability into their company strategy
  • The effect the markets in which a telco operates in has on its sustainability initiatives (e.g. developed vs developing)

To gain an idea of how sustainability affects all aspects of the business, we interviewed employees in telcos’ sustainability and CSR teams, as well as in corporate strategy and product management.

All interviewees were asked largely the same questions, covering topics including: the initial motivations for engaging with sustainability; the effect of sustainability on multiple stakeholders (including customers and employees); if being sustainable puts telcos at a competitive advantage; important sustainability issues and solutions; successes and challenges of different sustainability initiatives; adapting sustainability strategies in different regions and the selection of their term for what we are calling ‘sustainability’.

Notably, some of the telcos we reached out to were not willing to participate in interviews because they were in the process of revising, changing, or updating their position on sustainability. In itself, this tells us that sustainability is an important and topical issue that many are still figuring out how to “get right” and how to incorporate it into their company strategy.

Sustainability is a cornerstone of the Coordination Age

As we outlined in The Coordination Age: A third age of telecoms, we believe that the telecoms and the wider digital economy is in its third age, ‘The Coordination Age’, which builds on ‘The Communications Age’ and ‘The Information Age’.

The three ages of telecoms

coordination-age-basic-stl-partners

 

Source: STL Partners

The Coordination Age is a result of the changing needs and demands of the world’s people, businesses, and governments, evolving technological solutions and possibilities, and the need to preserve the most habitable possible future environment for the world’s population.

To create major growth and advance as a telco, operators need to help solve some of the world’s biggest problems. We believe some of those major problems are:

  • A desire for greater business efficiency and productivity
  • The distribution and availability of human resources and services such as healthcare, education, employment, and entertainment
  • Mitigating climate change and minimising its effects
  • Reducing the amount of waste and harmful by-products polluting the environment
  • Concerns over employment due to automation and global economic changes

These major problems can and are starting to be addressed through sustainability initiatives set out by companies in their agendas and policies.

In addition, telcos have important and unique assets, as well as specific resources and capabilities, such as access to data, technology and their prevalence in the everyday lives of their customers, that can enable them to contribute to tackling some of the world’s problems and ‘help make our world run better’. A specific common problem is to help companies and people coordinate their resources in or near to real-time.

For example, a major problem in delivering sustainable energy is ensuring that the variable demand of populations is coordinated with supply. Wind turbines and solar panels cannot be relied on to produce at peak capacity at exactly half-time in sporting events, when the audience goes to make a cup of tea by boiling their electric kettles. As such, supply needs to be very flexibly managed in relation to demand.

This means sharing information about those resources and demands effectively, which in turn takes modern communications in some shape or form (although connections may not always need to run through a telco network, for example Bluetooth, WiFi, etc.) Given his common need, telcos are well-equipped to help enable sustainability.

The motivating value of a compelling purpose

Protecting the future of the planet and society is a compelling purpose, and one which is progressively becoming part of our daily lives.

Our research on sustainability found that that there are a number of benefits for different stakeholders when telcos incorporate sustainability into company strategy, including increasing employee engagement. Sharing a mutual goal or purpose unites a team and creates value, which is important for business performance, and thus a business benefit of sustainability.

How a unifying purpose helps create value

unifying-purpose-CSR-stl-partners

Source: STL Partners

A clear unifying purpose applied successfully creates a virtuous cycle:

1. Clarity of direction: A clear purpose can provide direction for people at all levels. E.g. incorporating the UN Sustainable Development Goals, such as Goal 7 – Affordable and Clean Energy, into company strategy and developing processes around it that involve employeesat all levels.

2. Energising work: Most people work for money, to a greater or lesser extent, and a range of other drivers: status, socialcontact, etc. However, work with a clear purpose is much more energising, especially if (like sustainability) it has some broader merit or meaning. It can make work ‘worth getting up for’. All the telcos we spoke to said that their employees are motivated by the sustainability work their company does.

3. Switched on people: If a telco is full of people that care about what they are doing, and know what they are trying to do, it will be a much more enjoyable and attractive place to work for everyone. Telcos we spoke to also said that sustainabilityis beneficial for talent attraction and retention, as employees want to work for a company that they feel is making a positive impact on the world

4. and 5 – Compelling offer and support, and attracts and satisfies customers: The combination of engaged people in the company and a compelling offer will be attractive to customers. Telcos we spoke to also referenced the need to be attractive to and satisfy different types of customers through their sustainabilitywork, such as the socially conscious Generation Z, and the older generation who can be engaged through digital inclusion

6. Feeds the business: The combination of internal clarity and alignment, motivation, and external attractiveness creates a virtuous circle that benefits telcos and drive business growth.

We think that engaging with sustainability and incorporating it into company strategy is a crucial part of operating in the context of the Coordination Age, and fundamental to operating in this way successfully. To support our hypothesis that having a clear and motivating purpose (in this case sustainability) can help to enhance currant performance, engage its employees, and find and nurture new areas of growth, we interviewed telcos to better understand how they define and measure the benefits of sustainability for their business. The research conducted for this report further validates our belief that commitment to sustainability is crucial to telcos’ success and growth in the Coordination Age.

Table of Contents

  • Executive Summary
    • Context
    • Key findings from research
    • Recommendations
    • Next steps for research
  • Introduction
    • Scope of research
    • Sustainability is a cornerstone of the Coordination Age
    • The motivating value of a compelling purpose
  • Defining and contextualising sustainability
    • ‘Corporate social responsibility’ vs. ‘sustainability’
    • The United Nations Sustainable Development Goals
    • Where are telcos focusing their efforts?
  • What are the business benefits of sustainability?
    • Employee benefits
    • Customers and government
    • Shareholder benefits
    • Challenges of sustainability
  • Conclusion
    • To what degree are telcos taking a holistic approach to CSR and sustainability?

STL Partners’ telecom sustainability hub:

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