Giving Gen Z customers what they want: A conversation with by.U

Two top executives at Telkomsel, Southeast Asia’s largest wireless provider, explain how the company supported a new venture and freed it to succeed on its own terms.

In this episode of The Venture, we share a conversation with Edward Ying, former director of planning and transformation at Indonesian telco Telkomsel, and Trio Lumbantoruan, vice president of by.U, the carrier’s fully digital start-up. Telkomsel is Southeast Asia’s largest wireless provider, with more than 170 million subscribers and a 66 percent market share. In 2019, it launched by.U to win new customers in the Gen Z market and develop a brand with digital natives. Ying and Lumbantoruan sat down with McKinsey’s Andrew Roth to discuss the thinking behind the start-up, the adoption of continuous innovation in the mothership, and the transformative impact the by.U team has had across its corporate parent.

An edited transcript of the podcast follows. Note that some text has been added to provide context to the story, including McKinsey’s involvement, and is noted in italics. For more conversations on venture building, subscribe to the series on Apple Podcasts or Spotify.

Podcast transcript

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The Venture
Giving Gen Z customers what they want: A conversation with by.U

Andrew Roth: From Leap by McKinsey, our business-building practice, I’m Andrew Roth, and welcome to The Venture, a series featuring conversations with legendary venture builders in Asia about how to design, launch, and scale new businesses. In each episode, we cut through the noise to bring practical advice on how leaders can build successful businesses from scratch.

By 2024, if all goes according to plan, a pair of submarine cables will connect the United States with Indonesia. This will boost the data capacity to Indonesia, which is already Southeast Asia’s largest economy and home to the fastest-growing population of smartphone users in the world. Poised to unlock the potential value in Indonesia’s $32 billion online economy is Telkomsel, an Indonesian telco with a 26-year history of innovation. Edward Ying, Telkomsel’s former director of planning and transformation, and Trio Lumbantoruan, vice president of Telkomsel’s start-up by.U, join me on this episode to discuss how they created and launched this new venture. If you would like to read more about how Telkomsel reinvented itself with McKinsey’s help, see the impact story “How Telkomsel transformed to reach digital-first consumers,” on McKinsey.com.

Edward and Trio, welcome to the show. I’ve been looking forward to this conversation. Edward, take us back to when you first started thinking about launching a digital telco like by.U. What was the origin story to get something like this approved in an organization such as Telkomsel?

Edward Ying: Telkomsel is the largest mobile operator in Indonesia, with more than 170 million subscribers, so for us, attracting new customers and generating growth are really quite a struggle. We’ve been in business for more than 18 years, but we felt we had underserved segments where we weren’t gaining market share.

Andrew Roth: I would like to jump in here to point out that the creation of by.U was an important element of Telkomsel’s larger digital transformation. The transformation was based on three pillars: first, to build a new data analytics platform to better understand customers and increase personalization; second, to create and launch new businesses, like by.U, to reach underserved customer segments; and third, to launch new digital channels. Now that we’ve established the context, let’s get back to the interview.

Edward Ying: So we hired a consultant to identify the groups we should target and what to offer them. We discovered that the youth segment was underserved, meaning we had less market share and slower growth than the competition. Because we’re an established brand, our newer competitors were probably savvier at attracting younger customers, so we decided this was the market segment we wanted to capture.

This meant that we had to figure out how best to serve and motivate them to become Telkomsel customers. Indonesia has a very young, digitally savvy population, where everybody buys things online. So we wanted to create a brand that would fully serve them digitally end to end with zero touch, where you can go online, create an account, and choose your number and plan without speaking to anyone.

Andrew Roth: So by.U is more than just Telkomsel launching a new brand; it’s a whole new business in itself, a completely different customer journey. Trio, what else makes by.U different? What’s the unique value proposition, if you had to distill it down?

Trio Lumbantoruan: Our main target is the Gen Z youth segment, which can be difficult to manage and quite critical of whatever you provide them, so this was a real challenge for us. But we believed that if we offered them a service that solved their pain problem, they would stay with us.

Our unique selling proposition is reflected in our brand: by.U means our service is designed “by you,” the customer. What we learned from the youth is that they don’t want to be controlled—they want to choose for themselves. That’s why we offer them a full, end-to-end digital journey that gives them the freedom to choose what they want. Everything is in one app, end to end. The only thing that’s physical in the transaction is the SIM card.

Our offering solves another problem for Gen Z consumers, which is hidden fees, terms, and conditions. We offer a fully transparent solution. What you see is what you get, so the price you see on the app is the price you pay. Instead of playing price-war games, we believe this kind of transparent and honest offering creates some differentiation from our competitors, especially with the youth.

Also, we have an advantage because we’re supported by Telkomsel, the best and biggest mobile-phone network in Indonesia. So that’s our unique selling proposition: we offer a fully digital experience, freedom to choose, transparency and honesty, and the best network.

Andrew Roth: Was there anything different you did during the customer-research process to get to these points on transparency, honesty, the strength of the network, the freedom to choose, and the digital experience?

Trio Lumbantoruan: Everyone talks about listening to customers. But the most important thing is not just listening. It’s listening and then delivering. We do a lot of research, and we operate in an agile way, so every sprint we do involves customer validation. We never go to the next step, regardless of the proposition, without customer validation. If we cannot solve their pain problem, then our product won’t be acceptable to our customers.

Customer research plays a key role. Even if we’re debating a proposition among ourselves, everything is decided by the customer. It’s not what we say. It’s what the customers say. Then we have our whole tech team deliver to solve the pain problem—not to change the requirements but to provide the best possible solution to our customers.

Andrew Roth: Trio is perhaps too modest to say this, but it’s worth highlighting that by.U was built incredibly quickly. The team created a series of social-media tests to observe click-through rates on certain features. This enabled them to develop and tune the MVP [minimum viable product] quickly. They had 30,000 customers join the wait list when they beta launched. By.U reached its one-year customer-acquisition goal in six months, and just 15 months after launch, they had nearly two million subscribers and a market-leading customer satisfaction score.

Let’s take a quick step back to the boardroom when deciding to greenlight by.U. A lot of incumbents at the beginning of their start-up journey sometimes face massive challenges, whether it’s red tape or internal processes. Edward, how did you break through and get that buy-in?

Edward Ying: When it was time to propose this disruptive, fully digital service, I knew some of the board members would complain, “This is going to cannibalize my business.” So we focused on what sets by.U apart from Telkomsel’s main business and asked ourselves how we were going to make this new company different, serve our customers differently, and capture a new audience.

I also knew I needed to get buy-in from the CFO and CEO and make sure they understood that money needed to be invested—we had to hire people and invest in brand value. I was lucky, because at that point in time, we really needed new growth and new revenue to keep Telkomsel flying. I got it through—after numerous attempts.

Andrew Roth: A part of that was bringing Trio in, right? You went outside of Telkomsel and brought him in externally, to help jump-start by.U?

Edward Ying: Yes. We asked ourselves, “If we want to serve by.U customers well, what kind of people should we have on the team?” We knew that to serve this young market, our people had to be tech savvy. They must think differently. Doing the “same old, same old” would not work in the by.U environment.

For example, in agile working, all blocks must be cleared in two days, or nothing can move forward. That takes a different mindset. I recruited about 12 people personally, most of them Telkomsel staff. These were people who already had a mindset of challenging the norms and wanting to doing things differently. They were all very young and tech savvy and had been at Telkomsel three to five years, during which time they had seen the company doing the same thing: postpaid, prepaid, and digital services. But by.U was something different, the first digital brand in Indonesia, and they were keen on that.

Andrew Roth: Trio, when you launched by.U, you did something other organizations don’t do, which is basically making everyone reply to all inbound customer-support requests, from the developers to the marketing team. What was that like?

Trio Lumbantoruan: One thing the team really believes is that customer care and happiness are really the new way of marketing. Instead of spending marketing dollars, you can change perceptions with how you manage your existing customers. We launched a beta version one month before the final launch, which was an exercise not only for the care team but also for the tech team, for the product team, and for the whole team. That’s how we got real feedback from real customers.

We are a fairly limited team and launched with only 20 people, and just two in customer care. So if something went wrong in the beta version, these two people couldn’t handle everything. That’s why I had all teams reply to customer feedback. The first objective was to speed up customer problem solving. But the second reason was to make our whole team understand the customers by listening directly to them.

Because if other team members listen only to the care team, they don’t get a real feel for what the customer actually says. But if, for example, the technical team handles the customer calls directly, then they learn the real pain points they need to solve. This helps instill the mindset that whatever they do is not just to solve a technical issue but to make the customer happy.

Andrew Roth: A lot of organizations talk about creating a great culture. And you were able to build a culture of independence and speed within by.U. Can you share a little bit about how you did that?

Trio Lumbantoruan: Everyone on the team came from a different background, such as technical, sales, or marketing. They all had their own expertise and experiences, which sometimes led to some tough discussions, especially when we talked about our value proposition. So we needed a common objective, which was whatever we offer has to solve a customer pain problem. That’s the basic principle.

The second thing is having an open mindset and listening to other people, whether they have 20 years of experience or one year of experience. I try to remind the team that everyone is an expert, and I give everyone empowerment and trust. This is quite important, but also not easy. This is learning by doing. And there will be arguments and debates. But, as we always say, it’s not about us but about what our customers want.

And when we give them empowerment and trust, they learn fast, which creates huge capability improvements in the team.

Andrew Roth: It might sound like an obvious thing to do, and start-ups behave like this naturally, but for corporates to give that trust and empower people to make decisions without lots of analysis and meetings to gain approvals is a big thing. And I can see how that’s helped drive the growth of by.U.

Trio Lumbantoruan: Yes, and it starts from the leadership. Without the leadership’s decision to empower and trust the by.U team, we would not be where we are right now.

Andrew Roth: Edward, do you want to speak to how the board reacted to this?

Edward Ying: There must be an understanding between me and my other board members that we share a common goal. And if we are going to achieve this goal, we need to give this team an opportunity, to trust them, let them execute, and don’t second-guess them. We keep the board’s concerns away from our team, so they can run the business the way they need to. My advice for corporate builders is to get support from the top management so your people are protected and can focus on really doing a good job.

Andrew Roth: I think that’s so critical at all levels. So Trio is with the team on a day-to-day basis, while Edward protects them during board meetings, providing that flexibility and speed of execution. Now, let’s switch to growth, because it’s been a few years since you launched by.U. Trio, anything you want to share on how you were able to gain initial traction and then a higher velocity of subscriber growth?

Trio Lumbantoruan: Indonesia is a fairly big country, so focus is quite important. The second thing is how we communicate, because we’re targeting the youth. We’re creating different and innovative ways to communicate, using our Instagram page for care engagement and as a marketing channel. After only one year, we have the second-highest amount of Instagram followers among Indonesian telcos, and we have the highest level of engagement.

We reached our 12-month subscriber target in just seven months, and 15 months after launch had nearly two million subscribers. And just six months after we launched, COVID-19 hit, so our modern channel became critical. In just two weeks, we launched a partnership with one of the largest modem channels in Indonesia, which accounted for 50 percent of our subscriber acquisition.

In the future, we want to expand our application beyond the telco environment. We’ve already developed a lot of services beyond the basic telco experience of purchasing minutes, and we want to give customers more engagement and experience.

Andrew Roth: It seems like everyone’s obsessed with digital marketing and performance marketing, but the market’s forgotten about branding and awareness marketing, because you can’t measure the performance as naturally as you can in digital. Anything you want to share on lessons learned on the split between awareness and acquisition?

Trio Lumbantoruan: I believe there should be a balance, at least for now, because without brand awareness, the purchase intention for potential customers will remain low. And we’re not playing only in the digital space, because in Indonesia, a lot of people still shop in person as well. So we try to maintain our own on-ground activities, because people don’t always buy online, and they need a physical presence. And sometimes, when they see us both digitally and physically, their willingness to buy increases.

Andrew Roth: Not everything can just be online.

Trio Lumbantoruan: Yes. Especially in Indonesia.

Andrew Roth: Edward, a lot of audience members are thinking more and more about launching new businesses within their organizations as corporate entrepreneurs. Any advice you would give to a corporate entrepreneur who’s thinking of embarking on a business build?

Edward Ying: First, all organizations need to grow. So you must know the parts of the growth engine where you have strength and which are untapped markets. And then you must have a dream and share this dream with your colleagues and the senior leadership team, because without it, you won’t be able to grow and beat your competition.

And once you’ve done that, you need buy-in from the leadership team and management team. In the corporate world, there’s a lot of noise, so you must be able to manage this noise and empower your team to deliver the service without hindrance.

Finally, although this team should be separate from the core team, there should be a lot of cross-functional activities, meetings, and collaboration. That way, everyone in the organization is aware of this team’s journey and can support it when necessary.

Andrew Roth: I think that’s a great point. You can’t just pretend to do everything alone, or else you won’t get support from the mothership, which gives corporate start-ups a competitive edge. Edward, reflecting on the experience, what are some of the key learnings you might share?

Edward Ying: I’ve never seen such an energized group in my ten years with Telkomsel, this team of new and old employees. Some have been here for 20 years and some for only a month. It’s had a very positive effect on the whole organization, and all the top management, including the chairman and CEO, thinks this team is actually a new wave sweeping across the company.

This was something we needed, a new team that was highly enthusiastic, digital savvy, and more agile with greater capabilities. They do things differently, with a different mindset. They don’t talk about themselves; they talk about what customers demand of them. So all of the staff now responds to what the customer wants, and responds quickly.

Andrew Roth: Trio and Edward, thanks so much for sharing. Wishing you both continued success with by.U.

You’ve been listening to The Venture with me, Andrew Roth. If you like what you’ve heard, subscribe to our show on Apple Podcasts, Spotify, or wherever you listen.

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