Managing change in telecom industry from network centric to customer-centric

EMBA#7 Managing Change in Organizations Salim SAYOURI
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ENPC EXECUTIVE MBA
Module: Managing Change in Organizations
Professor: Pr. Holger Sommerfeldt
Assignment:
Professor Assignment Evaluation Grid:
Criterion Very Good Good Satisfactory Unsatisfactory N/A
Comprehension of key issues
Analysis
Conclusions & recommendations
Structure & presentation
References & citation
Other:
Professor comments:
Grade: /20
Declaration of Authorship
“I (We) hereby declare that I (we) have neither given nor received unauthorized help on this assignment,
that all work is my (our) own unless otherwise stated, and that all sources used in the preparation of this
assignment have been properly cited.”
Name of participant/participants:
1. Salim SAYOURI
2.
3.
4.
5.

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Executive Summary
The last 10 years were eventful for the Telecommunications industry; managing rapid change is not
only essential but vital to remain competitive in the market. The telecom industry is very mature in
practically all markets. The growth is almost sought through merger and acquisition as markets don’t
offer a lot of potential for organic growth. This statement applies for both: Telecom Operators,
Telecom vendors and Value Added Service (VAS) Providers.
The Value Added Service Telecom Segment is facing a fierce competition; the irruption of some IT
companies in the value chain has reshaped the segment, traditionally dominated by a plentiful of SMEs
Telecom providers working in partnerships with Large Telecom Equipment Manufacturers or directly
with Telecoms Operators. The new entrants to this segment, essentially Over-The-Top (OTT) Content
Provider alike Apple and Google, have moved the service value to outside the legacy Operators
network.
From the Value Added Service (VAS) Telco providers’ perspectives, the value provided to end users is
more about service rather than manufacturing product, there are less tangible goods. Competition
with pure IT Companies in this sector tends to be very tough as they already have proven track record
experience in the IT service industry. Consumer preferences and demand is constantly shifting forcing
Telco’s providers to churn their content and application portfolio repeatedly.
The rivalry looming on the horizon between Telecom Providers and Over-The-Top (OTT) firms is
unpromising for Telecom Providers unless radical change is undertaken to provide superior and more
customized value than IT Companies.
Last but not least, Cut throat competition in this industry dictates rapid solutions deployment with the
fastest ROI and lowest Total Cost of Ownership.
On the basis of the above fact, the need to shift the Services Delivered Platform (SDPs) in Telecom
Operators from a merely enabling value-added services for subscribers to a “Service Innovation
Enabler”, with a neutral network and technology service delivery system that allows third-party
developers to automatically create, deploy and manage new innovative services.
Service innovation is occurring outside telecoms domain, and by incorporating this change the new
SDPs will be a key business enabler as the focus shifts toward new business models that entail third-
party participation, revenue generation and improvements to customer experience.
To tap into these new business models for connected media services and remain relevant for their
customers, Telecom Operators need to expose their network and IT capabilities and manage partner
relationships better with the ecosystem of third-party developers and content and application
providers.
The need for a new Service Developer ecosystem in the Telecom
Operator business
The Telecom Operator players were for long recognized simple providers for telephony and data
services and used to operate a well-built telecommunication infrastructure. The emergence of

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smartphone or phone web-connected has permanently disrupted the classical business model of Telco
Operators.
For instance, to retain existing customers and attract new ones, Telco Operators must deliver a
superior collection of new products, services and applications. They also must provide a web-interface
user experience to accommodate users more and more connecting on the web, and the most
important, make content available and usable compliant to an increasing mix of Operating Systems
(OS) and devices. Telco Operators also have to leverage internal resources and assets in sophisticated
ways to offset the decline in traditional revenue streams and margins due to the fierce competition
from Voice-Over-IP Providers.
The new requirements for Telco’s players to face the digital challenge and in the same time cope with
the revenue decline and the shift of the business are:
 Leverage the IT structure to be more customer-centric
 Enable multiple flexible business model where culture of customer focus and risk-tolerant
entrepreneurial attitude prevails.
 Create an open ecosystem where third developers can innovate, mash-up and make
improvements of existing Telco’s services;
 Define and expose a standard set of management functions;
 Provide structured capability to expose service across many developer communities.
Telco’s Operators have to provide more flexibility, facilitate faster service creation and enable the
combination of many services features (Low CAPEX/OPEX).
To fulfill these requirements, seize the digital era opportunity and meet sustainable growth, we will
apply the congruence model of change.
Step 1: Identify the Unit’s Crucial Performance or Opportunity Gaps
The performance gap facing the Telco’s operators can be summarized in tow points:
1- The erosion of voice and message revenues as well as a little re-use of existing technologies;
2- Difficulty or even impossibility to monetize the excess capabilities in network resources to
generate new revenue channels.
While the opportunity gap is characterized by the failure to seize the innovation occurring on the web
and which is bypassing the Telco’s operators. In today Internet-connected world where Time to
market is becoming a critical differentiator within the value added service industry, internal innovation
inside the Telco’s Operators is costly and very slow.
To face the falling revenue from legacy services, many Telco’s Operators are actively considering
development of customer-oriented digital services, such as machine-to-machine (M2M), rich media,
Mobile Payment, cloud, contextual and analytical services, billing services, among others. However,
most of these new digital services relay profoundly on IT skills for development, support and
maintenance. Hence the challenge for many of Telco’ Operators that lack the skills required to excel
in this new role. They used to be network-centric and settled risk-averse attitude while in the new
business of customer-oriented digital services, content and mobile application development skills
are needed as well as risk-tolerance.

pg. 4
In the light of this actual fact, IT department in Telco business has to change their roles from a merely
IT support, which endeavor to maintain legacy systems and support the internal IT system, to a real
IT business enabler with considerable IT budget and business objectives.
Step 2: Critical tasks and Work process description
The new vision of Telco’s Operators is to be the fundamental key in the new digital economy. With
the objectives of getting the most out of it in term of sustainable growth, new revenue channels
generation and the best customer experiences ever.
Among the Critical aspects of improvement that Telco’s Operators should undertake to achieve these
objectives. We have the transformation of the existing Telco’s service delivery platform from a too API
Telco’s centric with few and rigid business models, to web-oriented API that exposes more and richer
capabilities from the Network with structured capability and a quick enabler for new business models.
The fundamental goal of such change is to create a lucrative ecosystem for independent service
providers to build, market and deliver services within or external the operator subscribers base; it
aims also to wholesale the excess capacity in billing systems, location engines, CRM systems, content
management and user profiling to generate new revenue channels.
To succeed in this transformation, Telco’s Operators need to unify their OT (Operational Technology)
with their IT (Information Technology) businesses.IT was traditionally associated with back-office
business systems such as accounting, billing and customer relationship management. OT was more
associated with operating the network infrastructure to enhance the service value by controlling
quality of service and Policy Management.
Typically OT business was the critical process in the traditional business model of Telco’s Operators. It
was not only the visible part of the iceberg and the part on which the competition was the most
intense but also the leverage to exploit new opportunities, improve the quality of service and
introduce new features to differentiate from other zebras.
In contrary to OT employees, IT employees aren't oriented towards a 24x7 and always-on mentality.
They also don't have the culture or the pay structure to support round-the-clock operations.
Step 3: Check for Organizational congruence
The IT transformation of the traditional in-house IT organization into a group capable of providing
innovative, customer-oriented digital services will be recognized successful only when:
1. The Operator’s IT brand will play a fundamental role in the establishment of a digital ecosystem
fostering the creation and innovation of new services with sustainable added value;
2. The contribution to the organization business value in terms of revenue growth and sustainable
competitive advantage;
3. Sufficient flexibility to be able to adapt when needed with managed cost and well-controlled
risk.
An efficient formal organization is doubtlessly relevant for the IT organization change; an alignment of
the three organizational building blocks, formal organization, People and Culture, is vital for the
sustainability of the new business model.

pg. 5
Formal organization alignment:
Telco’s firms have been traditionally organized on formal structure partitioned around by specialties (OT
engineering & operation, Customer Care, Marketing, Finance, IT, legal and regulatory, etc…). Over time,
each department has developed and promoted unique management values and processes. A future
success in the digital services will depend on the effective processes coordination within the different
department as well as the convergence between OT and IT services. Such actions will result in deeper
integration of development and operations processes.
IT department headers have to build strong IT structure that deliver high added value framework to end
users and partners and at the same time setting a strong two-way cooperation mechanisms between
technology and the business.
Such transformation of the IT department couldn’t fit into the new strategy without a cross-functional
structure made up of people from different functional eras within the company (Figure 1): Business
Risk, Engineering, Operations, Sales, Marketing, Human Resources, Finance and Customer Care.The new
IT business unit will aim to unify development and data management processes drawing on the expertise
of the others departments.
Figure 1: Example of change required on Telco’ Operators IT structure
For such structure transformation, tools and processes alone do not create collaboration, therefore the
new teams will need to improve their collaboration, both internally within the different contributors and
externally with marketing and business partners.

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Human Resource Alignment, execution, not only design:
A clear value proposition that contributes to the success of the business and support the organization
in carrying out its strategy. HR activities including recruitment, selection, training and rewarding are
done by keeping in view the firm’s goals and objectives, and also the optimization of the value
delivered to the customer. Furthermore HR culture should be settled in the intention to foster the
business strategy and improve the new strategic directions required by the change.
To succeed in the IT Transformation, a challenging program to hire adequate talents should be
established with a strong balance between internal and external recruitment. The ultimate goal is to
have the right person for the right place at the right moment. To achieve this goal, human resource
have to ensure optimum use of existing HR assets to forecast future talents requirements and
introducing new blood with different views and fresh ideas.
Adequate leading KPIs and metrics have to be formalized to build a deep business awareness as
Percentage of sales made to new customers; Percentage of new products introduced; Evolution of
Profit Margin / customers; percentage of new products in the funnel.
These indicators will help in the performance evaluation process, which is a key factor to enhance
employee motivation, commitment and productivity. Coupling this with an effective pay structure
based on lead strategy that accents on performance and skills, it will undeniably attract and keep high
performance employees with established track records. Such approach will absolutely remove pay as
a leading reason to leave the new structure.
In addition, the board manager should frequently communicate with Human Resource about new KPI
and Performance Indicators that are relevant to the competition market, not only in the Telecom
Industry but also in the digital market.
A smart designed HR approach is indispensable but not sufficient to get an efficient HR strategy. Well-
executed HR strategy is fundamental not only to organization long term success, but to its survival and
the outline of the firm’s competitive advantage.
Culture Alignment
Apparently the most difficult task by its absolute abstract aspect, ensuring the congruence between
the new business unit‘s culture with the required critical tasks is the most challenging. The trend to
shift from an internal in-home support, risk-averse mindset to a customer-oriented digital services
and risk-tolerant of change and innovation may seem far too simple.
In one sentence, Telco’ IT department have to move from a business support-oriented to a client-
centric business. Two approaches could be used:
 Build from scratch a new digital IT business unit that is totally decorrelated from the in-house
IT structure. The new digital business unit will be empowered by the innovation and creativity;
 Second option, is shifting the existing in-house IT culture. It’s more challenging than the first
one, but in principle, it can be achieved by keeping motivated persons and train them to adopt
the innovation and creativity thinking where all aspects of value chain are focused on
customer needs.
 Third option, is a mismatch of the previous one. Leveraging the skills of staffs already in IT
using intensive development and training to improve on critical business skills on the new IT
organization and in the same time, bringing individuals and consultancies from outside to help
forging the culture of innovation, creation, leadership and igniting creative thinking.

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Step 4: develop solution and take corrective actions
The earliest steps to implement the change are:
1- Create the IT brand and associate it with the business value. In the digital business, IT is seen
as innovation trigger and on opportunity for new customer-centric digital services;
2- Develop more flexibility and agility in the engineering process. Traditional Telco’s are more
conservative and risk-averse with all focus on quality and reliability. The digital shifting
requires a differential approach accepting change when needed at managed cost and
managed risk.
3- Develop and hire adequate skills and talents to cultivate the adaptive and reuse attitudes with
special focus on data and content analysis.
4- Instigate the culture of customer focus, risk-tolerant entrepreneurial and go to market
mindset;
5- Highlight the collaborative management and cross-functional structure to design, develop,
operate and support customer-centric digital services.
6- Improve the process workflow inside the organization to stimulate and optimize the
processing of complex tasks. Promote decentralized policy with local empowerment.
Figure 2 Establishing new congruencies for Telco’s Operators
Development environments too domain specific;
Cost and complexity of establishing business
relationships;
Few and rigid business models
digital IT business unit empowered
by the innovation and creativity;
Cost and complexity of establishing
digital business relationships;
culture of customer focus, risk-
tolerant entrepreneurial;
Flexible business model.
Motivate & Develop talents;
Foster the mainstreaming of
responsible business practices.
Cross-functional structure;
New Digital IT business unit empowered by
the innovation and creativity;
Cost and complexity of establishing business
relationships;
Few and rigid business models
Strategy
Enable multiple flexible business models
Provide digital ecosystem where 3rd party
can innovate and build new Telco services;
Provide structured capability to monetize
extra-capacity in network resources.
Vision:
Be a key factor in the Digital Service
Transformation
Critical Tasks
Culture
Formal
Organization
People

pg. 8
Step 5: Observe the response and learn from the consequences
Those actions presented in step 4 and depicting the actions priorities and the degree of the required
changes. It’s certainly that these actions will not fix all performance and opportunity gaps and even
more the implementation of these actions will reveal and even create other challenges that should be
tackled as they arise. The aim of this method is that managers and decision makers have to learn from
the outcomes and reinitiate the process. It is a continual improvement in terms of outcomes analysis
and readjustment of the internal congruence of the unit.
Conclusion
Before mobile phones got smart, Telco Operators controlled the user experience (Voice Calls,
SMS/MMS, few basic games/services, ringtones and ring back tones, etc…). Now that mobile devises
have evolved to Web-Connected computers, user experience has increased with the million
applications stored in the different Market Store.
Today Operators are facing ‘Revenue Erosion’ due to OTT value shifting but other challenges is looming
in the near future, most of them is related to the big data trend which is driving the traffic tornado to
a new level of intensity. Customers value access to data more than they do voice and Telco’s Operators
are not making any extra income off of the extra bandwidth that customers are demanding.
This is just to say that Telco Marketplace is moving fast and Telco operators must remain responsive
in order to sustain.
Reference
[M. Tushman and C. O'Reilly, 2002]: Winning through Innovation: A Practical Guide to Leading
Organizational Change and Renewal, Harvard Business School Press, June 2002
[N. Osmond, A. Rowsell-Jones, 2013]: Seven Organizational Implications for CSPs Embarking on
Digital Service Transformation, Gartner 2013

Managing change in telecom industry from network centric to customer-centric

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