Telefónica Digital Plays By Its Own Rules

Dr. Richard Benjamins, director of business intelligence at Telefónica Digital, has little tolerance of hype, but he has a high threshold for failure.

It's this attitude, in large part, that has made Telefónica successful in its decidedly unorthodox digital services endeavors.

But this wasn't always the case. Telefónica's Digital division was created in mid-2012 to push the boundaries of digital service innovation, something that wasn't possible within the broader confines of the traditional telco.

So the standalone operation, which has its own management team and modus operandi, was formed to innovate, let ideas grow, kill experiments or services when necessary (something it's currently doing with its Tu Me application) and form new partnerships away from its parent company. (See Telefónica: Tu Me Has Got To Go.)

And if any of those activities cannibalize revenues at Telefónica, then so be it.

"We use a lean startup methodology," Benjamins explained to Light Reading recently. "It's not about big products and rolling them out in two years. We put customers' needs at the heart, capture data, talk to them and understand what's working or not."

And, when it's not working, Benjamins pulls the plug on the project -- something that was near impossible to do within the operator. In its first 18 months of existence, Telefónica Digital has launched around 10 services, some machine-to-machine (M2M), some financial and, most visibly, its Tu Me and Tu Go communications apps. Each launched in beta to manage customers' expectations. (See Et Tu, Telefónica? and Tu Go Users Get Chatty.)

And the fact that the plug has already been pulled on Tu Me shows that the Digital business isn't just talking the talk.

Telefónica Digital isn't given a mandate of how many services to launch by its parent company, and it's empowered to work with partners as needed. Benjamins said it's been a challenge to work with startups as a big company, but "we're changing the company."

Part of that means keeping anything related to a new market separate from the parent company, even if that's a company Telefónica has acquired to target that new market.

"We've seen that you shouldn't try to integrate small companies -- you tend to kill them," the intelligence boss explained. "You buy them because you need them for some specific reason. If you try to impose telco processes, it doesn't work."

By being given the freedom to operate as a separate entity, Telefónica Digital is helping its parent company shed its telco image and also gain a greater understanding of how best to deliver what its customers want.

For example, it used to have its own music service, but now it partners (much more successfully) with Spotify.

And when its Big Data (or "big hype," as Benjamins called it) initiative to sell aggregated, anonymized data to retailers in Germany backfired, Telefónica Digital pulled the plug. Now it focuses on its Digital Confidence initiative to give consumers transparency and control over their data. (See Telefónica Creates 'Big Data' Unit.)

"We need to understand the customer and have a relationship with them," Benjamins said. That, too, isn't a traditional operator role, but Telefónica Digital is intent on proving there isn't much traditional about it.

— Sarah Reedy, Senior Editor, Light Reading

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MordyK 8/16/2013 | 5:58:40 PM
Re: The guiding light So True! In the boom times generosity abounds but as markets get tight priorities change, some of these commitments and high mindedness fall by the way side. There's a good history of this with previous innovation and/or investment arms.
MordyK 8/16/2013 | 5:54:42 PM
Re: The guiding light Carol, There's obviously a big difference between the new consultant driven hype terms and the reality :)
MordyK 8/16/2013 | 5:53:11 PM
Re: The guiding light The lab works well for projects around infrastructure that simply cannot work alone, but individual projects need to be separated as Telefonica has done or they'll be smothered.
Sarah Thomas 8/16/2013 | 3:14:27 PM
Re: The guiding light Mordy, seems to me a lot of other carriers have chosen to go the "Innovation Lab" route instead and/or pluck out partners and acquisition targets. Time will tell how successful those are, but in terms of being a fast mover, at least, it seems Telefonica has the right approach.
Carol Wilson 8/16/2013 | 3:10:50 PM
Re: The guiding light Actually, in Nice at Management World, I kept hearing the words "fast failure" mentioned as a goal for service providers, the idea being to have a flexible enough infrastructure and operations system to allow new services to be brought to market quickly and killed just as quickly if they aren't what users want. 
Sarah Thomas 8/16/2013 | 3:08:49 PM
Re: The guiding light Good point, mendyk. Orange had a similar set up wherein it created a spin-out to work on innovation, but was later brought back inside once it proved itself. Now I imagine it has stricter measures of success and a different, less accepting, boss to answer to.
Sarah Thomas 8/16/2013 | 3:07:21 PM
Re: The guiding light It's kind of amusing that because of how Telefonica has set up the Digital Division and talked about it, we think it's a good sign when they kill off a product. We might judge other carriers more harshly for doing so. But, that is what they set out to do -- introduce several apps, see what sticks, get rid of what doesn't -- and they're learning from it and evolving products as a result. That works for them in startup mode, but I agree that they'll really be judged when they have a big success that potentially cannabolizes traditional telephony.
mendyk 8/16/2013 | 9:34:10 AM
Re: The guiding light Along those lines, it also will be interesting to see how long said parent (and its shareholders) gives TEF Digital free rein to spend money without expecting a return.
MordyK 8/16/2013 | 9:14:47 AM
Re: The guiding light That would definitely be something to catch my attention.
Carol Wilson 8/16/2013 | 9:10:05 AM
Re: The guiding light The willingness to quickly kill a service is a strong proof point for Telefonica Digital.

Would the next proof point be what happens when a Telefonica Digital service succeeds enough to substantially threaten or cannibalize a competing offer from the parent company? 
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