Telefonica Digital: Only A First Step Towards Transforming The Telco Business Model

I recently attended an event in London where Telefonica shed more light on its Digital division. Digital is the central division driving innovation at Telefonica group and was formed in September 2011. However, Telefonica, despite the creation of Digital, still is somewhat in the old telco mold of inside-out innovation.

Digitization is undoubtedly a major theme affecting both society and the economy, bringing huge implications for communication, collaboration, consumption, and production. The big focus areas for Digital are e-health, digital content distribution, security, cloud, M2M, OTT comms, financial services, and advertising. In this respect, Digital is the right answer. My main observations from the event are:

  • Digital’s product development process is not end-user-focused enough. Digital does not seem to involve the actual end users as much as other solution providers, like for instance Colt (http://goo.gl/oBCO0). What was missing during most presentations was a better demand-analysis of its customer base. Digitization has big implications for company cultures, modes of operation, and ways of life. Businesses require significant assistance in preparing for these challenges such as change management. Digital did not explain how it plans to address these either through internal capabilities or through partnerships with business consulting firms like Deloitte. This means that Telefonica risks developing solutions that do not meet demand. Moreover, detailed customer case studies were not discussed, although Digital did present its portfolio development approach.
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