Tim Miles tells Bill Bennett how Spark's disruption experience can help its clients.
From the outside Telecom New Zealand's decision to change its name to Spark was seen as a rebranding exercise. Internally, it was part of something bigger: the transformation of a former state-owned telephone monopoly into a digital services company.
Spark Digital CEO Tim Miles says the first thing customers going through a similar digital transformation want to hear are stories about how Spark did it. Spark Digital, previously Gen-I, is Spark's information and communications technology division. It is the nation's largest supplier of technology services to business and government.
Miles says Spark Digital has a key advantage when talking to New Zealand companies. "We look like them. We're based in New Zealand. Decisions are made here. We don't report to headquarters in Australia, the US or the UK. And we face similar challenges.
"Most of our customers are in industries that are either already being visibly disrupted or where they can see it coming. I don't know of any industry or business that doesn't face the threat of digital disruption, although it can be as much of an opportunity as a challenge," he says.
Disruption is now the starting point for most high-level conversations in industry. Miles says he often reminds customers that meeting that disruption with a digital transformation isn't a one-off event. He says: "They know we've been through changes at Spark. We're already a couple of years in. We have made visible progress and we have learnt valuable lessons. But I also have to tell them that we are all still in the early stages."
Spark's digital transformation started when the company was still Telecom. At the time it was adjusting to life after the Chorus network operation was split-off to build the government's UFB fibre network. The company had a new CEO: Simon Moutter.
"The management team took a good, honest look at the business and then peered three or five years into the future," Miles says. "What they saw wasn't an appealing prospect; mainly thanks to a declining core telephone business disrupted by changes such as internet calling. We knew customers were moving from fixed voice services to internet protocol alternatives such as FaceTime and Skype."
The next step meant searching for a more positive alternative future. He says: "We looked three years out and wanted to know what would be a good outcome for us. We realised we could become victims of disruption or we could seize the opportunity. Only one of those options was realistic".
Deciding to change the business to meet the disruption head on was the easy part, implementing the changes was harder. Miles says the first step meant talking to staff, explaining the need to make fundamental changes. "Then we implemented organisation change to speed up the business and we centred our thinking about what we believed our customers would need."
All these building blocks were put in place well before the company changed its name in August last year. It wasn't just cosmetic, the company needed to shake of the deeply idea that it was still just a telephone company. Since then Spark has moved further into selling digital services with projects such as the LightBox streaming TV and a joint venture to deliver sports programming through the internet. There is also the Morepork home security businesses.
If anything there a more pronounced change of direction at Spark Digital. Miles says it decided to be on the winning side of disruption and that meant narrowing its focus and doubling down on its investment in cloud computing. This is the fastest-growing information technology sector as companies replace traditional in-house systems with managed infrastructure.
In 2013 Spark paid almost $100 million to acquire Revera, New Zealand's largest data centre specialist. This was followed in 2014 when Spark bought Appserv, a business cloud specialist that, among other things, offered desktop-as-a-service. Miles says the company sold a number of non-core assets to raise the funds for the purchases. "Now we are the disruptor. Cloud is on a rapid growth path and we're leading the way in New Zealand while the emphasis on managed infrastructure allows us to play to our strengths."
We can give them added value by investing more in having the right people work for us so they can manage customers' infrastructure leaving their in-house technology staff to deal with strategic matters such as creating the right apps.
To underline that rapid growth, Spark New Zealand's first half results for 2015 noted Revera revenues grew 42 per cent. Spark Digital's overall revenue declined by three per cent, in part because of unwinding legacy IT service contracts, but EBITDA climbed 5.7 per cent overall.
Miles says emphasising cloud was a direct result of focusing on what Spark Digital's customers wanted from their service provider. "We understand our customers are experts in their businesses.
"We can give them added value by investing more in having the right people work for us so they can manage customers' infrastructure leaving their in-house technology staff to deal with strategic matters such as creating the right apps."
Cloud plays a central role in most organisations' digital transformation. It gives companies the agility they need to respond quickly to rapidly changing circumstances. When companies grow fast they can add capacity in minutes, or reconfigure as needed following acquisitions and divestments.
Another aspect of the digital transformation wave sweeping through industry is the explosion in the amount of data being captured as companies do business.
Miles says the growth in data generated is so high that if you look at a graph of data use, the time up until now would be almost a flat horizontal line. From today on there's a steep upward curve.
This has led to Spark's other emerging digital service: big data and the advanced analytics needed to make sense of vast amounts of information. This is handled by the company's Qrious operation, for now still part of Spark Ventures, the company's in-house new business incubator.
Miles says Qrious is adding value to his customers by providing fresh insights that wouldn't be possible using everyday techniques.
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