Disrupting Telefónica in a Small Way

As head of Communications Services and Product Innovation, Ian Small is inventing the future at Telefónica.

Michelle Donegan, Contributing Editor, Light Reading

February 10, 2015

9 Min Read
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Ian Small, CEO of Communications Services and Product Innovation at Telefónica, is not a telco guy.

But in his role at one of the world's largest telcos, which has about 320 million customers and employs about 120,000 people globally, being an outsider is an advantage.

Small, who was previously CEO of the WebRTC-based video communications startup TokBox, which Telefónica SA (NYSE: TEF) acquired in October 2012, describes himself as an "innovation guy." (See Telefónica Digital Acquires TokBox.)

And he brings a Silicon Valley attitude to the Spanish giant, which he characterizes as, "if I was going to make trouble here, take an established line of business and disrupt it, how would I do that?"

His group comprises various new communications services including: calling application TU Go on O2's network in the UK; the Spanish MVNO and social network Tuenti; the WebRTC subsidiary TokBox; and a unit called Future Communications, which recently hatched the WebRTC-based Firefox Hello video chat feature. In addition, he is also responsible for product innovation across all digital services in Telefónica's I+D research and development division. (See Telefónica: Tu Me Has Got To Go and What WebRTC Means for Telcos.)

In other words, he's responsible for creating the kinds of disruptive services and applications that typical telcos would view as threats to their traditional revenues. But with Small's Communications Services and Product Innovation group of 1,000 people developing such services either in-house or through partnerships, Telefónica does not appear to be typical in that way.

"When you're in an environment that is changing at the speed that the communications space is changing at, there are always going to be people, especially inside an entrenched competitor, who just want it to stay the way it is," says Small. "But it's not and there's a complete, clear-eyed understanding of that at the very highest levels of Telefónica."

He adds: "That's why we're trying to disrupt and why they have me doing this job, because, honestly, I don't know that much about telcos. I've just worked at one for the past year and a half. I'm not even the guy who's been attacking the telco industry from the outside for the last 20 years."

Figure 1: Telefonica's Ian Small: 'Technology is what you focus on when you're not paying attention to end users.' Telefónica's Ian Small: "Technology is what you focus on when
you're not paying attention to end users."

Small's unit is one of many that falls under the digital services remit of Chief Commercial Digital Officer Eduardo Navarro since the operator restructured its business in March last year to bring its formerly independent Telefónica Digital business in-house. While Navarro's group comprises a wide variety of digital activities, such as video services, big data, machine-to-machine (M2M), security, health and financial services, the Communications Services group is focused on core communications -- that is, voice, text and video. (See Telefónica Walks the Digital Tightrope.)

According to Small, all of the new communications services developed in his group involve significant innovation from within Telefónica. "Everything we're doing on the communications side is focused on innovating and creating customer value through creative use of technology to create new capabilities and the ability to access your communications services in new and different places," he says.

Next page: Where failure is not a bad word

Where failure is not a bad word
To foster the development of new services, Small has established an "innovation environment" in his group during the past year that is more risk-oriented and more aggressive in taking things to market than other parts of Telefónica, and where failure is not a bad word.

This way of working has been so successful that Telefónica is now looking to extend the capability to other digital services across Navarro's group.

To show how the innovation environment is different for the big telco, Small points to a recent, large, internal company meeting, where his group presented a project for a new service that they decided to stop because it did not make sense in the market. Following the meeting, the people who worked on the project were congratulated for their success in getting to the point of deciding not to move forward, he explains. (Small didn't divulge which project was halted, however.)

"This is not typical inside a telco, because things that you stop are things that you think, well, there was something wrong," he says. "But in an innovation environment, failing, exploring things that don't work out and learning from them are core parts of being able to maintain pace of innovation. That's not necessarily something that large, entrenched companies do very well."

Enter the lean elephant
But how can a telecom operator the size of Telefónica really innovate? The way to go about it, according to Small, is to create an environment where innovation can thrive and to take methodologies from the startup world and apply them inside the company.

So rather than attempting to refashion Telefónica into a "lean startup," he wants to make the global telecom operator a "lean elephant."

Small explains that "lean elephant is what happens when you apply [startup methodologies] inside a company the size of Telefónica. I strongly believe that if you're a company the size of Telefónica, you can't be better at being a startup than a startup can be. You just can't."

And he should know. After beginning his career at Apple, he's been working at technology startups for about 20 years and understands how they work.

But a big company like Telefónica has advantages that startups don't have. So the idea is to learn from what startups do while not giving up the advantages and assets that Telefónica has in order to innovate. "That's what lean elephant is all about," he says.

An example of this different approach is the variety of go-to-market strategies in the Communications Services group: Tu Go is a Telefónica O2 branded application, TokBox is an independent subsidiary, Tuenti operates as an independent brand in Spain and Latin America, and Firefox Hello is a partnership with Mozilla.

"The decisions about when to do something as Telefónica or as an independent entity or in partnership are actually ways of figuring out the best path for innovation," he says, adding that sometimes it's best to take advantage of being part of Telefónica, while other times it could be better not to. "We have freedom within Telefónica to take the path that makes the most sense for the project that we're working on," he says.

Next page: Don't mention technology

Don't mention technology
Amidst all the heady innovation going on in Small's unit, he is not interested in talking about the technologies that will drive disruption inside and outside Telefónica."I don't want to talk about technology because it is irrelevant to end users," he says. "Technology is what you focus on when you're not paying attention to end users."

Instead, he looks at how people communicate and sees communications fragmenting like never before. In his own experience, he uses about five to seven different communications services, whereas about 10 years ago he probably used just one.

"Communications reaches every device in my world, and, increasingly, it doesn't matter to me what network that device is connected to," he says. "I communicate when I'm connected. And so when I think about where a communications company like Telefónica sits in the middle of all that, I think about how we make sure that our services reach the customer on whatever device they're on, on whatever network they're on, in whatever mode makes sense for that device."

Of course, technology plays a role in making that happen, whether its voice-over-LTE (VoLTE), WebRTC or proprietary applications, he notes. But he maintains that that's not relevant.

What's more important to Small is how he can add value to voice, text and video services to make them more valuable to his customers.

Firefox Hello is the latest example of this. Developed in partnership with Mozilla, it's a free WebRTC-based video chat feature in the Firefox web browser.

"This is core communications delivered in a completely new way," he says. "What we're saying is, if the web browser is one of the most powerful content consumption devices on the planet, how do we wrap communications around content so that collaborating becomes incredibly easy?"

Inventing the future
It's difficult to measure in traditional ways how well Small is doing because specific business metrics for the Communications Services unit are not available and he was not willing to share details on anything related to revenues, subscriber numbers, application downloads or usage statistics for the services in his group.

But much of what the Canadian-born executive is working on at Telefónica is perhaps difficult to evaluate because it has more to do with changing culture and introducing new ways of working to blend the best of both the startup and telco worlds.

For example, one of the things he learned early in his career while at Apple is the importance of understanding users when working in tight innovation cycles. And that experience and insight is what he now brings to Telefónica, which he sums up as knowing "how to invent the future working in very tight cycles, validating and experimenting with users every step of the way … and you're not off in some corner building something for two years, launching it and hoping it's going to work."

That's the way Small understands how to create new services and products. And there are significant parts of Telefónica that want to embrace and absorb his experience.

"We're trying to do something that can be meaningful over the long haul to Telefónica," he says. "And there is excitement and support and understanding at the executive levels of Telefónica about why this isn't just relevant but essential to the future. And so I'm working as hard as I can to make that come true."

— Michelle Donegan, contributing editor, special to Light Reading

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About the Author

Michelle Donegan

Contributing Editor, Light Reading

Michelle Donegan is an independent technology writer who has covered the communications industry on both sides of the Pond for the past twenty years.

Her career began in Chicago in 1993 when Telephony magazine launched an international title, aptly named Global Telephony. Since then, she has upped sticks (as they say) to the UK and has written for various publications, including Communications Week International, Total Telecom, Light Reading, Telecom Titans and more.

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