Light Reading
The Spanish giant has reorganized and given its Digital operation a more prominent, central role, but now it has a very fine balancing act to make sure it doesn't destroy its digital heritage.

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
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
A select group of industry executives has gathered in Iceland to discuss the future of networks, services, skills, strategies and the role of service provider IT.
Hong Kong-based billionaire Li Ka-Shing is getting ready to start a mobile networks bidding war with BT, according to reports.
BT is talking to potential mobile M&A prey, and in my view EE makes more sense than O2 as a takeover target.
For decades, OSS has been a back-office issue; now it's at the heart of telco transformation strategies.
A threshold has been reached as the telcos commit to SDN and NFV – and that will be good news for some vendors and not such good news for others.
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Interviews
CenturyLink: Building the Case for NFV

12|19|14   |   02:14   |   (0) comments


At the 2020 Vision Executive Summit, James Feger, VP, Network Strategy & Development at CenturyLink, talks about how the US operator is approaching virtual network functions from an operational and business case perspective.
LRTV Interviews
Liberty Global Sees Business Goldmine

12|18|14   |     |   (0) comments


Steen Sorensen, VP of business services for Liberty Global, explains where the giant international MSO sees growth potential.
LRTV Documentaries
EE: The Road to 5G

12|16|14   |   16:02   |   (1) comment


Andy Sutton, the principal network architect at UK mobile operator EE, explains how his company is using Wembley stadium as a wireless test bed and how that's helping EE to plan the evolution to 5G.
LRTV Huawei Video Resource Center
Highlights of Huawei's NFV Open Cloud Forum 2014

12|16|14   |     |   (0) comments


Huawei hosted its inaugural NFV Open Cloud Forum during the SDN & OpenFlow World Congress 2014 in Düsseldorf, Germany. The Forum brought together technology thought leaders, senior executives and telecom professionals from global carriers, industry associations, as well as other partner companies in the ecosystem, to exchange views on and collectively explore how ...
LRTV Custom TV
Realizing Operators' Digital Vision

12|16|14   |   5:23   |   (0) comments


Leveraging technology is fundamental to digital transformation but understanding customers and serving them really well is at the heart of digital businesses. TM Forum lists the following as the strategic pillars of the digital business: business agility and rapid innovation, operational agility and effectiveness, IT and data centricity, plus customer centricity. ...
LRTV Documentaries
US Cellular Injects Analytics Into LTE

12|16|14   |   2:57   |   (1) comment


US Cellular's Mario Vela explains how the operator uses analytics for network planning and what comes next as the carrier looks to eke more value out of its metrics.
LRTV Interviews
How Cox Biz Plans to Keep Growing

12|15|14   |     |   (2) comments


Steve Rowley, SVP of Cox Business, details how the third-biggest US MSO intends to boost its revenues to $2 billion and beyond over the rest of the decade
LRTV Huawei Video Resource Center
Interview With Bill Zhang, Director of SoftCOM Product Management, Huawei

12|15|14   |   2:50   |   (0) comments


Bill Zhang elaborated on Huawei's open philosophy in NFV solution development and network architecture design at the SDN & OpenFlow World Congress 2014.
LRTV Huawei Video Resource Center
Event Highlights: Huawei at SDN & OpenFlow World Congress 2014

12|15|14   |   3:43   |   (0) comments


Huawei joined the 2014 SDN & OpenFlow Congress as one of the key sponsors and contributors. At the event, Huawei reinforced the openness and flexibility of its network infrastructure strategies, and provided updates on its SDN and NVF innovations. Through participations at the exhibitions, forums and speeches, Huawei encouraged the industry to "think bigger and ...
LRTV Interviews
How Cable Biz Services Hit $10B Mark

12|12|14   |     |   (1) comment


Cable operators reached $10 billion in annual business services revenues by delving deeper into their vertical markets and expanding beyond the smallest firms.
LRTV Documentaries
Mediacom Aims to Test Connected Tractors

12|11|14   |   05:07   |   (3) comments


Cable business service provider is taking its services to the 'agribusiness' sector in partnership with farm equipment specialist John Deere and is getting involved in Gigabit Cities developments.
LRTV Interviews
TWC Business Looks Beyond $3B

12|10|14   |     |   (0) comments


TWC Business Services chief Phil Meeks explains how his unit has reached $3 billion in annual revenues and what its plans are for next year.
Upcoming Live Events
February 10, 2015, The Westin Peachtree Plaza, Atlanta, GA
March 17, 2015, The Cable Center, Denver, CO
April 14, 2015, The Westin Times Square, New York City, NY
May 6, 2015, McCormick Convention Center, Chicago, IL
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Hot Topics
T-Mobile, BlackBerry Flirt With Reuniting
Sarah Reedy, Senior Editor, 12/17/2014
1-Gig: Coming to a Small Town Near You
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 12/17/2014
Comcast Launches 4K Streaming Service
Alan Breznick, Cable/Video Practice Leader, 12/18/2014
US Carriers, You're Going to Cuba!
Mitch Wagner, West Coast Bureau Chief, Light Reading, 12/18/2014
T-Mobile Lights Up 27 Wideband LTE Cities
Sarah Reedy, Senior Editor, 12/15/2014
Like Us on Facebook
Twitter Feed
Webinar Archive