- Forrester Councils
- Councils Overview
- log in
Posted by Dan Bieler on July 16, 2012
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 as the transformation engine remains closely integrated into Telefonica group. Digital pursues an experimental and innovation-focused strategy. For instance, management compensation mostly centers on product innovation and brand building rather than financial KPIs. Also, Digital’s revenue target of €5 billion against group revenues of €63 billion (2011) looks not terribly ambitious. Digital plans to double its revenue base of currently €2.4 billion to €5 billion by 2015.
Overall, Telefonica compares reasonably well to its direct telco peers in terms of strategic positioning and innovation management. However, Telefonica is not miles ahead of its peers and certainly misses tackling some of the most pressing issues, most notably focusing on the empowerment of business processes and moving towards network agnostic solution provisioning.
In order to be successful going forward, carriers need to embrace a much more end-customer-driven strategy. With some important exceptions, Telefonica still is pursuing a strategy that relies too much on developing products in the hope that customers will buy them as opposed to develop solutions that reflect very specific requirements. Consumers look for solutions that allow them to access communication, collaboration, and entertainment in a siloed fashion such as WhatsApp, Facebook, Dropbox, or Skype irrespective of device and network provider. Business is looking for solutions that support particular business processes beyond plain communications. Telefonica did not clearly demonstrate how its products and solutions support specific business processes.
Digital is a sensible move as it aims to address important challenges facing the traditional telco business model. The general direction of Digital is right, but the speed of transformation might still be too slow.
Save Money On Your Next Software Negotiation
Work with our software negotiation experts to save 10–20% on your next contract »
Lead BT Transformation
Develop customer-obsessed strategies to drive growth »
Forrester's CX Index
Predict how actions to improve CX will affect revenue performance.
Measure the customer experiences that matter most »