In the past, telecommunications industry’s main source of revenue came from connection, but in the ongoing 5G and the AIoT (artificial intelligence-of-things) era, telecoms operators around the world are facing a decline in profit. How should Taiwan’s telecoms companies shake off the “dumb pipe” image and explore new growth momentum?
Joseph Yang, the chief executive of Taiwan Renaissance Platform, hosted a discussion on Chunghwa Telecom’s innovation strategies for the 5G era, which featured Chih-Mao Hsieh, president of Chunghwa Telecom; Yuan-Kai Chen, associate director of the investment business division; and Ju-Kun Lee, director of the strategic transformation office.
Two positionings and four strategies – the transformation has to start from scratch
Chunghwa Telecom officially launched a three-year transformation plan in 2019, and president Chih-Mao Hsieh said that the company will take up a customer-centric approach in the future, aiming to become a “leader in smart living and an enabler of digital economy” and provide a variety of innovative services.
Above: Joseph Yang, Chih-Mao Hsieh
In five to 10 years, half of Chunghwa Telecom’s employees will retire, which will pose certain challenges to business operations but will also usher in new opportunities for consumers and enterprises, such as 5G, artificial intelligence (AI), 4K and 8K resolution, augmented and virtual reality (AR/VR) video streaming. In this regard, Hsieh stated Chunghwa Telecom’s transformation will focus on four main axes: optimising experience in its core business, expanding revenue from the emerging business, optimising strategy on cost efficiency and enhancing comprehensive foundation capabilities.
In addition, he pointed out that the key to a successful transformation is to “start from scratch”. It involves two types of “heads”: the head of an individual, which means changing people’s mindset; and the other is the “head” of the organisation, which means the top management and senior executives of the organisation must reach a consensus so that the largest transformation plan in the history of Chunghwa Telecom can advance more smoothly.
“Finding the pearl through contact” is the key to both internal and external transformation
Hsieh said that Chunghwa Telecom has an intrapreneurial mechanism to encourage employees to put forward various ideas, and the ideas approved by a panel of judges will be given one year of incubation period and funding. Teams that are assessed as meeting the conditions for business operation are more likely to open up as independent companies – success stories include Chunghwa Precision Test Tech in 1995, Chunghwa Leading Photonics Tech in 2016 and the recently established CHT Security in 2017.
Externally, Chunghwa Telecom will adhere to the broad alliance strategy, using the “ABC Principles” – acquisition, business development and collaboration – to actively seek out strategic partners in each field that can leverage cooperation synergies and extend core capabilities.
Apart from participating in international 5G organisations, hiring external consultants and collaborating with universities and other academic institutions, Chunghwa Telecom has also been working with the most influential startup communities in Taiwan such as the Asia America Multi-Technology Association’s Taipei Cradle Programme, National Chiao Tung University’s Gloria-Semicon scheme, National Taiwan University’s Taidah Entrepreneurship Centre, CDIB Capital Innovation Accelerator, CHT-PCH Fund I, co-owned by Chunghwa Telecom and e-commerce group PChome Online, Taiwanese-state backed Taiwania Capital, as well as Plug and Play. Furthermore, the company formed Chunghwa Telecom 5G Accelerator in 2018 in a bid to actively identify forward-looking trends and outstanding partners in various fields. 5G, AI, big data, gaming, smart healthcare, smart mobility, smart manufacturing, smart agriculture and enterprise private network are all within the scope of Chunghwa Telecom’s strategic radar.
“The most important attribute we value in a startup team is enthusiasm,” said Hsieh. A 20-member investment committee from Chunghwa Telecom works with experts from the company and Chunghwa Telecom Laboratories to carefully evaluate the future growth and tech maturity of the proposed startup company.
As for how much budget will be planned for the annual investment, Chen added there is no clear budget limit for the current plan, and Chunghwa Telecom will remain open-minded in evaluating any good opportunities in line with the company’s strategic blueprint.
Mature companies join forces with startups to challenge the world together
“Our goal is not to be an entrepreneurial coach, but to put innovative service into practice,” said Hsieh.
Chunghwa Telecom, which also operates a startup accelerator, has learned a lot about working with startup teams. Hsieh observed that many startups tend to focus on services or technologies, but what customers need is a complete solution. Chunghwa Telecom can help startup teams with proof-of-concept, proof-of-business application scenarios, information security, cloud services or infrastructure, and combine the strengths of both parties and provide better innovative services to customers.
Above: Yuan-Kai Chen, Chih-Mao Hsieh, Ju-Kun Lee, Cynthia Chen of Taiwan Renaissance Platform, Joseph Yang
Besides business cooperation and customer referrals, Chunghwa Telecom will also evaluate and invest in suitable teams, as well as inject resources from the group, so that both the startup and the group can integrate and communicate in the areas of customer engagement, product development, organisation and talent, to achieve a win-win-win situation – providing customers with complete services, helping the startup to do great business and extending Chunghwa Telecom’s core competitiveness.
In addition to aggressively entering the Taiwan market, Chunghwa Telecom will also invite its portfolio companies to participate in the global telecommunications industry events, such as the Mobile World Congress in Barcelona, Spain, to export Taiwan’s solutions to customers from around the world and to gather forces to tackle challenges together.
Government helps corporates invest in startups to accelerate the transformation
In the post-covid-19 era, digital transformation will become a pressing need for companies. Although mergers and acquisitions are one of the fastest ways to transform, the failure rate is also quite high. Hsieh suggested that the government can provide incentives such as investment tax credits and subsidies for business development, or provide an open data platform to encourage enterprises to boldly make use of external innovation to quickly realise the transformation and upgrading Taiwan’s industries.
Hsieh said that as the revenue proportion of personal customers declines, the proportion of enterprise customers will also increase, and it is estimated that the optimal intersection will be reached in five years. In response to this, Chunghwa Telecom will also introduce AR remote contact services, AI image analysis, cloud network services, drones and other application services as appropriate to help enterprise customers predict failures, optimise operational processes and help companies save manpower and costs.
“For you, we are always at the forefront,” pledges Chunghwa Telecom’s slogan. In the 5G era, the company will continue to lead Taiwan into the future.
Spun off from Taiwan’s Ministry of Transportation and Communications’ Directorate General of Telecommunications in 1996, Chunghwa Telecom is Taiwan’s largest integrated telecoms operator. The company employs about 32,000 people and its annual revenue reached NT$207.52bn ($7.1bn) in 2019.
Translated by Liwen-Edison Fu.