Light Reading

Telefónica Walks the Digital Tightrope

Ray Le Maistre
3/10/2014
50%
50%

Amid the noise and excitement of this year's Mobile World Congress in Barcelona, Telefónica stuck with its financial calendar and announced its fourth-quarter and full-year earnings report. (See Telefónica Reports 2013 Profit Growth and Euronews: Telefónica Plans Capex Rise.)

Nothing strange there -- this isn’t the first time Telefónica SA has unveiled its financials while much of the industry's attention is focused on the wireless party happening in the Spanish carrier's own back yard. (See Light Reading’s Mobile World Congress coverage.)

This year, though, the operator had another important announcement to make as it revealed its financial performance -- a corporate restructuring that had a significant impact on its most recent offspring, Telefónica Digital.

That division was created, complete with its own management team and operational agenda, in September 2011 as a hothouse for new digital services, and charged with developing new business plans and opportunities that might otherwise not be conceived within the regular management structure of a traditional telco. (See Telefonica Restructures, Creates New Units and Telefonica Holds Key to Digital Model.)

Telefónica Digital's activities have been tracked closely by Light Reading during the past two years and have often provided inspiration for the types of activities that could (and should) be pursued by telcos that need to adapt to the challenges and opportunities of what some describe as an "information society." (See Telefónica: A New Breed of Telco, Telefónica: Digital Dreamer?, Inside Telefonica's Startup Incubator, and Why Gonzalo Martin-Villa Is Kissing Frogs.)

Now, though, as part of the carrier's new organizational structure, Telefónica Digital will cease to exist as an independent operation following a board decision to centralize a number of operations, "bringing them closer to the corporate decision-making centre, simplifying the global structure... to improve flexibility and agility in decision making," the operator noted.

The move, though, isn't a case of shutting down an unsuccessful experiment: Instead it seems to be designed to move from a fledgling digital operation to one that is more grown up. The operator notes that Telefónica Digital, under the presidency of Matthew Key, "duplicated its value" during the past two-plus years and "achieved incremental revenues to reach a growth of nearly 20%. In this way, it has become the seed for the Telefónica of the future."

To grow that seed, Telefónica has appointed a Chief Commercial Digital Officer, who will be "responsible for fostering revenue growth" based on digital services developments (advertising, cloud, security, M2M, digital content distribution, e-health, and financial services) fostered at Telefónica Digital. But that officer is not Matthew Key: Instead the role goes to former head of strategy and alliances Eduardo Navarro.

So if Digital was growing and doing well, why not let it continue as it was? It seems one of its key strengths -- its independence within the Telefónica group -- was also its main problem. As well as being based in London, and so not on the doorstep of the Spanish operator's Madrid headquarters, the unit was not represented at the executive management team level: To feed its ideas and developments to the operating units in Europe and Latin America, it was working through multiple layers of middle management, a process that was holding up the introduction of new applications and services.

Now, under the new structure, it does have top-level representation and is at the very heart of Telefónica’s growth engine -- at the cost, however, of the unit's independent identity and without Matthew Key, who slips back into a director’s role at Telefónica UK. (We can expect to see Key moving on soon, then...).

The reorganization comes at a critical juncture for Telefónica, as the operator is also embarking on a radical evolution of its network infrastructure with the introduction of NFV and, ultimately, SDN capabilities. (See Telefónica Unveils Aggressive NFV Plans and Defining SDN & NFV.)

So that's a global operational revamp and a challenging new networks strategy -- a lot of change within a large global organization (about 130,000 staff and 323 million revenue-generating connections).

Such upheaval does not come without teething pains. The danger is that by centralizing the management of its digital services developments, Telefónica might actually suppress the exuberance and innovation that characterized the Digital unit. That would also impact staff morale, something Navarro must avoid if the flow of new ideas and developments is to be maintained.

Any such negative impact would be a major step back for a company very focused on moving forward -- Telefónica, and Navarro in particular, needs to make sure that the gains made during the past few years are not wasted. And that's going to be a tough management challenge for the new Chief Commercial Digital Officer.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

(11)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 2   >   >>
MordyK
50%
50%
MordyK,
User Rank: Light Sabre
3/10/2014 | 6:43:52 PM
Re: Right direction -- don't stall....
I think only time will tell, as this can be a reaction for both extreme success or extreme failure, so reading into it will just send you in circles. My hope is that its a reaction to success and other tier-1's will follow suit.
Gabriel Brown
50%
50%
Gabriel Brown,
User Rank: Light Sabre
3/10/2014 | 1:59:07 PM
Re: Right direction -- don't stall....
I struggled to see what the point was. Digital is a pretty broad category and it seemed like TEF Digital had a bunch of initiatives and businesses you wouldn't neccesarily put in the same company. For example, M2M, media, advertising, over-the-top messaging (TuMe), and Firefox Phone, are all notionally digital, but why would they be in the same business unit? Perhaps integration back into Telefonica proper does make sense.

For what it's worth, gossip was that financial analysts didn't like the TEF Digital concept very much at all. That's not a reason to not do something, of course, but maybe TEF could see that after two years the division wasn't close to target and closed it down? Isn't "fail fast" meant to be part of the progressive, Silicon Valley ethos Telefonica was/is trying to engender?

Wayra is interesting. I think it was moved out of Digital some time ago. Obviously, the nature of a start-up incubator is that it takes time to know if investments will be succesful.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
3/10/2014 | 12:10:22 PM
Re: Right direction -- don't stall....
You're right, and I definitely wouldn't say they accomplished nothing. In fact, I forgot about a few of the advancements you named. Maybe the lesson is to start independent to get a real start then come back in to take to the next level. That said, it does seem a little carefully worded. It'll be something to watch closely.
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
3/10/2014 | 11:19:17 AM
Re: Right direction -- don't stall....
So the Telefonica Digital initiative was cut short by almost a full year, based on the information from 2012. This would imply that something in the performance or in the corporate suite triggered this change in direction. It's harder to see this as an effort to address an internal bottleneck.
Ray@LR
50%
50%
Ray@LR,
User Rank: Blogger
3/10/2014 | 11:03:03 AM
Re: Right direction -- don't stall....
I don't think it's right to say that Digital didn't achieve anything - quite the opposite, I would say. I think it gave Telefonica a real view of what could be achieved and enabled it to accelerate certain develpoments eg the development of mobile advertising, html5 handsets, cloud services, etc

I think TEF Digital made some very interesting and innovative moves eg the formation of Wayra.

But the independence ended up making it one step removed from the main decision-making processes within Telefonica. 

Was there another way to address that issue without bringing Digital into the mainstream carrier management cycle? Maybe. It's hard to know how much of this is about best practices and how much corporate maneuvering.

Classic corporate dilemma...
Ray@LR
50%
50%
Ray@LR,
User Rank: Blogger
3/10/2014 | 10:58:39 AM
Re: Right direction -- don't stall....
well it had medium-term goals to build up its digitals ervics and develop new ones - see

Telefónica: Digital Dreamer?


 http://www.lightreading.com/services-apps/telefand-243nica-digital-dreamer/d/d-id/697803

 

What it didn't foresee was how difficult  it would be to take Digital's developments and roll them out across its own organization - that's the bottleneck it seems to be trying to address.

 
Carol Wilson
50%
50%
Carol Wilson,
User Rank: Blogger
3/10/2014 | 10:47:57 AM
Re: Right direction -- don't stall....
Telefonica Digital got a lot of positive attention from the media and analysts -- you have to wonder if, at some point, those within the mother company didn't want that all that sunshine pointed in their direction. 

Ultimately, the innovations created by the separate unit would have to be incorporated into Telefonica to achieve their full benefit, but pulling the plug on the innovation engine in a mere two years seems to signal that this approach was maybe too successful in the short run. 
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
3/10/2014 | 10:14:29 AM
Re: Right direction -- don't stall....
Although I will say that this seems to mirror Orange's path and what Giles Corbett told me about Libon. It started out as independent so that it could prove itself, then Orange brought it in house when it did. So, now it operates sort of one-foot-in, one-foot-out.

Both seem a little suspect, but it's good to see the operators trying new ways of doing business and innovating at least. We probably need longer to see if they pay off.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
3/10/2014 | 10:12:52 AM
Re: Right direction -- don't stall....
It just seems curious to me that they said they had to build an independent unit because they couldn't innovate within an operator and now they're going within the operator because they can't get anything done outside of it...Was this really all part of the plan, or is this integration more of a polite way of saying it didn't work out?
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
3/10/2014 | 9:25:55 AM
Re: Right direction -- don't stall....
Ray -- Did Telefonica ever say what its long-term expectations were for Digital? Was there a five-year plan? Two years seems a very narrow window for an initiative like this one, assuming TEF was serious about it and not launching it for other reasons.
Page 1 / 2   >   >>
More Blogs from Shades of Ray
Reports suggest Ericsson might respond to the acquisition of Alcatel-Lucent by Nokia with a major deal of its own – but would that make sense?
Now more than ever, the industry needs to come together to ask and answer the big questions facing the communications networking industry -- and that's going to happen at the upcoming Big Telecom Event (BTE) in Chicago.
This is the big question facing all operators – SDN and NFV look like they could be very beneficial in many ways but can a massive transformation be justified?
If anyone now asks me why consumers would ever need a Gigabit broadband connection, I have a few suggestions thanks to the team at Orange GigaStudio.
The shortlists (some of them not so short) are out for this year's Leading Lights awards program and it's an incredible mix of runners and riders…
Flash Poll
From The Founder
Last week I dropped in on "Hotlanta," Georgia to moderate Light Reading's inaugural DroneComm conference – a unique colloquium investigating the potential for drone communications to disrupt the world's telecom ecosystem. As you will see, it was a day of exploration and epiphany...
Between the CEOs
Affirmed Networks CEO: Digging Into NFV

5|28|15   |   40:26   |   (2) comments


Hassan Ahmed, CEO of Affirmed Networks, is making some big claims for his NFV startup. I sat down with him at the Light Reading HQ in New York City to get the skinny on what this Acton, Mass.-based startup is up to.
LRTV Documentaries
Cable Eyeing SDN for Headend, Home Uses

5|26|15   |   05:57   |   (1) comment


CableLabs is looking at virtualizing CMTS and CCAP devices in the headend, as well as in-home devices, says CableLabs' Karthik Sundaresan.
LRTV Documentaries
Verizon's Emmons: SDN Key to Cost-Effective Scaling

5|22|15   |   03:53   |   (0) comments


For Verizon and other network operators to ramp up available bandwidth cost effectively, they need to move to SDN and agree on how to do that.
LRTV Documentaries
Lack of Universal SDN a Challenge

5|21|15   |   04:51   |   (3) comments


Heavy Reading Analyst Sterling Perrin talks about how uncertainty about SDN standards and approaches may be slowing deployment.
LRTV Custom TV
Steve Vogelsang Interview: Carrier SDN

5|20|15   |   05:02   |   (0) comments


Sterling Perrin speaks to Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, about the new Carrier SDN-enabling Network Services Platform and the operator challenges it solves.
LRTV Custom TV
Carrier SDN: On-Demand Networks for an On-Demand World

5|20|15   |   20:52   |   (0) comments


Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, talks about requirements and benefits of Carrier SDN during the keynote address at the Light Reading Carrier SDN event May 2015.
LRTV Documentaries
The Security Challenge of SDN

5|19|15   |   02:52   |   (0) comments


CenturyLink VP James Feger discusses concerns that virtualization could create new vulnerabilities unless network operators build in safeguards.
LRTV Custom TV
NFV Elasticity – Highly Available VNF Scale-Out Architectures for the Mobile Edge

5|18|15   |   5:50   |   (0) comments


Peter Marek and Paul Stevens from Advantech Networks and Communications Group talk about their NFV Elasticity initiative and the company's latest platforms for deploying virtual network functions at the edge of the network. Packetarium XL and the new Versatile Server Module: 'designed to reach parts of the network that other servers cannot reach.'
LRTV Huawei Video Resource Center
Bay Area Spark Meetup 2015

5|14|15   |   3:54   |   (0) comments


Developed in 2009, Apache Spark is a powerful open source processing engine built around speed, ease of use and sophisticated analytics. This spring, Huawei hosted a meetup for Spark developers and data scientists in Santa Clara, California. Light Reading spoke with organizers and attendees about Huawei's code contributions and long-term commitment to Spark.
LRTV Custom TV
The Transport SDN Buzz

5|12|15   |   06:01   |   (1) comment


Sterling Perrin, senior analyst at Heavy Reading, speaks with Peter Ashwood-Smith of Huawei and Guru Parulkar of ON.Lab about the evolution of transport SDN and the integration of technologies.
LRTV Custom TV
Next-Generation CCAP: Cisco cBR-8 Evolved CCAP

5|5|15   |   04:49   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explained the innovation design of Cisco's cBR-8, the industry's first Evolved CCAP, including DOCSIS 3.1 design from ground-up, distributed CCAP with Remote PHY and path to virtualization. Cisco's cBR-8 Evolved CCAP is the platform that will last through the transitions.
LRTV Custom TV
Meeting the Demands of Bandwidth & Service Group Growth

5|1|15   |   5:35   |   (0) comments


Jorge Salinger, Comcast's Vice President of Access Architecture, explains how DOCSIS 3.1 and multi-service CCAP can meet the demands of the bandwidth and service group growth.
Upcoming Live Events
June 8, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, The Westin Peachtree Plaza, Atlanta, GA
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
Procera has gathered facts, stats and customer experience feedback from a survey of 540 users from across the globe.
Hot Topics
Charter Seals Deals for TWC, Bright House
Mari Silbey, Senior Editor, Cable/Video, 5/26/2015
Eurobites: Alcatel-Lucent Trials 400G in Czech Republic
Paul Rainford, Assistant Editor, Europe, 5/26/2015
Will Carriers Follow Facebook's Networking Lead?
Mitch Wagner, West Coast Bureau Chief, Light Reading, 5/28/2015
Charter Plans Business Services, Wireless Push
Alan Breznick, Cable/Video Practice Leader, 5/27/2015
Facebook Reinvents Data Center Networking
Mitch Wagner, West Coast Bureau Chief, Light Reading, 5/26/2015
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
On May 29th 1 PM ET, Steve Saunders, founder and CEO of Light Reading, will be drilling into the "pains and gains" of NFV with Saar Gillai, SVP & GM for NFV at Hewlett-Packard Co. (NYSE: HPQ) (HP). He has defined a four-step NFV model describing a sequence of technology innovation. It's a must-read doc for any network architect looking to get to grips with their NFV migration strategy. Join us for the interview, and the chance to ask Saar your NFV questions directly!
Hassan Ahmed, CEO of Affirmed Networks, is making some big claims for his NFV startup. I sat down with him at the Light Reading HQ in New York City to get the skinny on what this Acton, Mass.-based startup is up to.
Cats with Phones