"Where other carriers say, "That business is too complex", that's where we tend to excel."
Talk about a prophetic book title! Imagine: when the book was written, the Web had barely got off the ground. Broadband didn’t arrive till 1997; the iPhone appeared in 2007.
Being digital? Twenty-three years later we are digital — every one of us, across our personal and professional lives. And the digital era has ushered in enormous business opportunities.
How far have we come on the business side? Well, consider the chart below showing the 20 most profitable US companies in this year’s Fortune 500 List:
The twenty companies on this list captured $408 billion in profits in 2017, an astounding 40% of profits for all 500 companies on Fortune’s list. And notice: the digital business slice of the chart represents almost half of all the profits among the top 20!
So it begs the question: why do companies who deliver digital services and products do so well? And why, for example, was the largest Fortune 500 company, Walmart ($500 billion in revenues), less profitable by comparison?
There are no simple answers, but competition is certainly a key factor. Thousands of companies — large and small — compete with Walmart in the retail space. By contrast, the most successful digital firms have carved out niches for themselves.
And how do they find and exploit these niches? By specializing and fine-tuning their knowledge to do things other companies can’t. In short, the best digital firms are skilled at managing complexity.
And remember how people used to call telecom a “dumb pipes” business? Well, the numbers above tell a different story: the combined profits of Verizon and AT&T actually surpassed those of Apple in 2017.
At this year’s ITW show in Chicago, I met HGC Global Communications. HGC is a leading Hong Kong and international fixed-line operator, who provides full-fledged telecom, data centre services, ICT solutions and broadband services for local, overseas, corporate and mass markets.
I spoke to both HGC’s Ravindran Mahalingam, SVP of International Business and Jacqueline Teo, Chief Digital Officer about the company’s plan to expand their business deeply into the emerging markets of Asia.
Dan Baker, Editor, Top Operator: Jacqueline, it sounds like you’re going through an exciting time at HGC. Can you give us a quick backgrounder on the business?
Jacqueline Teo: Sure Dan, many people don’t know this, but HGC is actually a highly diversified business.
We have a large international business reaching most continents, and practically all the major cities. We have an equally large domestic business based in Hong Kong in voice/data over fixed line covering all segments of the market: B2C, small-to-medium enterprise, large corporates. We also do business with wholesale carriers and OTTs.
So every telco acronym out there we’re familiar with: SDN, blockchain, you name it.
Ravindran Mahalingam: Throughout the years, HGC has established a leading position in the local and international fixed network industry. We position ourselves as the carrier’s carrier solution provider, and Corporate ICT solution provider.
Looking forward we plan to make those established geographic expansions deeper in-country. Asia is our primary focus, but it does not stop us from looking at other regions with business potential.
What’s HGC’s value proposition? What assets do you bring to the table?
HGC’s key asset is our integrated approach to the fixed network telecom business. Most international telecom organizations are siloed: the international ecosystem and the local network side don’t talk to each other very well.
And being an integrated company allows us to go after business others can’t. For instance, we’re known for our ability to deliver complex and customized solutions, like pulling fiber and solution into places that many operators regard as challenging and complicated.
Curiously, it’s these hard-to-do things we plan to replicate. Where other carriers say, “That business is too complex”, that’s where we tend to excel.
Hong Kong is an “ocean” economy, while its position in the region is strategic as a hub, its fortune for business is outside of Hong Kong using its location as the means to bring network and traffic within the region for telecoms services.
And as you look deeper, you see that HGC is in excellent strategic spot:
The Economist rates Hong Kong is the 4th best (behind New York, London, and Singapore) in its Global City Competitiveness Index. So HGC is a top operator in one of the biggest cities in the world where the capacity-demands, construction complexity, and regulatory constraints are very demanding. That background makes a big difference.
Hong Kong sits in the middle of a huge Asian emerging marketwhere digital products and services are exploding. South of Hong Kong is IndoChina and Southeast Asia. North of us is China.
When Chinese companies go international, they usually come to Hong Kong first. And HGC’s connections to China are substantial. For instance, HGC is working together with China Telecom on building a carrier-to-carrier fiber optic connection on the new Hong Kong-Zhuhai-Macau Bridge, one of the longest bridges in the world. This is HGC’s fifth cross-border route between mainland China and Hong Kong, and the new cable will carry up to 8 Tbits of traffic.
So when you combine all our capabilities — international carrier, integrated systems, complex telecom and digital delivery experience, and our closeness to emerging markets — you begin to understand why HGC is emerging quickly and differentiated from the competitive market.
Sounds great. But how exactly will you penetrate these emerging markets? You don’t own the local access facilities to build in Southeast Asia and IndoChina, right?
Ravi: So we are determined to take the good things from our experience in Hong Kong — our products and services — and take them outside into emerging markets. And the key is to repeat that cycle. We’ve got the learning curve and capability we can replicate.
What if we actually owned access network in major cities of these countries? That would change the game. We know how to build data centers in Hong Kong. Why not put that expertise to work in Indonesia?
Providing a seamless service level and support not only in Hong Kong but also across the region is the continuous target we are aiming for. As we progress in our expansion strategies, this vision becomes even more meaningful — and will set us apart.
Asia is vast. I remember my Navy days when I visited several Asian countries. There are many different cultures. And each country is in a different stage of economic and digital maturity.
Jacqueline: It’s true. Look at Indonesia for example. Geographically, it’s an archipelago of more than 17,000 islands with over 240 million people. Over 300 native languages are spoken in Indonesia. Serving that country is very challenging from a telecom viewpoint because you have to connect all those islands. And the country is not very advanced, mostly rural, but digital growth could be explosive.
Now the business climate in Vietnam is very different. They are wide open to investment and are eager to modernize. There are over 90 million peoplethere living on one solid piece of land — not a bunch of islands. Plus the internet uptake in Vietnam is far greater. Many companies that were once in China are now building factories in Vietnam.
Are you concerned about how quickly the digital experience will take off in some of these emerging countries?
Jacqueline: I actually think, particularly in Asia, the path to digital in emerging countries is going to be shorter than in took in the US, North America, and Europe. It’s because they can skip over the learning pains the advanced nations went through.
It’s like my nine-year-old daughter. She doesn’t need to learn the digital experience. She pretty much opens a device and she figures out how to use it from day one — no operating manual necessary. Never had to transit from an older model to a new one. She learned how to live in a digital world from day one.
One of the things that enabled China to grow so quickly is they were able to make the leap from zero to 1, 2 or 3 very quickly.
Ravi: I also think fast adoption is driven by the culture. You need to have a culture of curiosity. Sometimes it’s also driven by anti-culture — people wanting to escape from conformity.
Ask yourself: why is the penetration of the internet so high? It’s also part of the ideology to escape it. People want to feel they have the power to escape the structure, the environment. Even though it is not the case.
Take China as an example, the adoption of financial technology payments is far greater. It’s the reason WeChat Pay is doing so well. Apple Pay is another popular one.
And the drivers don’t trust the currency: they fear it could be counterfeit. But they do trust on-line payments.
When you’re talking about expanding across emerging Asia, is there equal demand on the data and voice side?
Jacqueline: It’s going to be a full mix, Dan. There’s great demand for data use, but there’s still a great need for voice, even wireline voice.
For sure, voice over the PSTN is declining, but VoIP options are expanding. You’ve got WeChat, WhatsApp, Viber, etc. All those types of apps and messaging services are multi-device compatible. They work on your laptop or your mobile phone.
And yet, even though messaging is widespread, people prefer talking. SMS doesn’t communicate heritage and culture as well as voice.
Plus, regardless of what the future may hold, most large companies still give employees a desk with a phone: they continue to use fixed voice lines.
At HGC we are looking at a lot of value added services to supplement our fixed line business, such as SMS running over the same technology. We are looking at the A2P market and unified communications too. We want to add more variety and diversity to the way people communicate by voice in an office or retail store setting.
Jacqueline, your job title as Chief Digital Officer is an interesting one. What’s that role entail at HGC?
Dan, when telecom people use the term “digital”, it generally falls under three main categories:
One aspect of it is digital marketing, which includes the websites, and digital front end to the business, the things that look and feel digital.
The second category is digital IT, which is about open architectures and opening up your systems; and,
The third is the digital network, which refers to SDN, the dexterity to flexibly control your network through software.
At HGC, digital is all these things, but also a broader capability. It’s about aligning our business toward a future where digital life styles and digital business culture will be more pervasive than they even are today.
So digital is your technology, it’s in your front end where your customers interact with you. It is definitely in your new product and services. It also about how data is going to help you understand your customer’s behaviors and perceptions about where to go next. And last but not least, it is also about enabling the network to be more software-defined, efficient, and flexible.
Now as Chief Digital Officer I actually sit across all business segments — not within the business reporting chain — but supporting and enabling the international businesses, our corporate business, and our residential fixed line B2C business.
So the term “digital” encompasses people, process, and technology at HGC. It goes across the board.
Digital is something we need to have and we want to create in all the markets. Is there such a thing as a completely digital native telco product? There absolutely is, and it’s something we can be offered in every one of our markets.
I see, Jacqueline. You’re an advocate for HGC’s digital future. Sounds like a great place to be, particularly since HGC is set to expand and do interesting things.
Thanks, Dan. It’s my job to look around and figure out what’s happening across the many digital fronts — front end, digital products, IT, SDN, customer analytics — and recommend future directions.
The division heads, as skillful as they are in managing their businesses, may have certain blind spots about the market and what’s possible in the digital age. And I might add that the role of chief digital officer is quite common today in industries like Finance and Retail.
The other challenge is focus. There’s so much happening in the technology and the telecom space, if you try to stay on top of every single thing, it’s going to be hard to leverage your natural skillsets and experience.
HGC knows what we’re good at — and it’s our ability to tackle the tough assignments, complex projects, international connectivity, and local voice/data delivery.
And we look forward to bringing that expertise to the places in Asia that need our considerable digital expertise.
This article was firstly published by Top Operator.
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