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Stakeholders have a critical bearing on the success or failure of telco growth plans. What are the key groups, what’s needed to optimise chances of success, and how does the Coordination Age help?
Introduction: The stakeholder model
Telecoms operators’ attempts to build new sources of revenue have been a core focus of STL Partners’ research activities over the years. We’ve looked at many telecoms case studies, adjacent market examples, new business models and technologies and other routes to explore how operators might succeed. We believe the STL stakeholder model usefully and holistically describes telcos’ main stakeholder groups and the ideal relationships that telcos need to establish with each group to achieve valuable growth. It should be used in conjunction with other elements of STL’s portfolio which examine strategies needed within specific markets and industries (e.g., healthcare) and telcos’ operational areas (e.g., telco cloud, edge, leadership and culture).
This report outlines the stakeholder model at a high level, identifying seven groups and three factors within each group that summarise the ideal relationship. These stakeholder and influencer groups include:
- Management
- People
- Customer propositions
- Partner and technology ecosystems
- Investors
- Government and regulators
- Society
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1. Management
Growth may not always start at the top of an organisation, but to be successful, top management will be championing growth, have the capabilities to lead it, and aligning and protecting the resources needed to foster it. This is true in any organisation but especially so in those where there is a strong established business already in place, such as telecoms. The critical balance to be maintained is that the existing business must continue to succeed, and the new growth businesses be given the space, time, skills and support they need to grow. It sounds straightforward, but there are many challenges and pitfalls to making it work in practice.
For example, a minor wobble in the performance of a multi-billion-dollar business can easily eclipse the total value of a new business, so it is often tempting to switch resources back to the existing business and starve the fledgling growth. Equally, perceptions of how current businesses need to be run can wrongly influence what should happen in the new ones. Unsuitable choices of existing channels to market, familiar but ill-fitting technologies, or other business model prejudices are classic bias-led errors (see Telco innovation: Why it’s broken and how to fix it).
To be successful, we believe that management needs to exhibit three broad behaviours and capabilities.
- Stable and committed long term vision for growth aligned with the Coordination Age.
- Suitable knowledge, experience and openness.
- Effective two-way engagement with stakeholders. (N.B. We cover the board and most senior management in this group. Other management is covered in the People stakeholder group.)
Management: Key management enablers of growth
Source: STL Partners
Stable and committed long-term vision for growth
The companies that STL has seen making more successful growth plays typically exhibit a long-term commitment to growth and importantly, learning too.
Two examples we have studied closely are TELUS and Elisa. In both cases, the CEO has held tenure in the long-term, and the company has demonstrated a clear and well managed commitment to growth.
In TELUS’s case, the primary area of growth targeted has been healthcare, and the company now generates somewhere close to 10% of its revenue from the new areas (it does not publish a number). It has been working in healthcare for over 10 years, and Darren Entwistle, its CEO, has championed this cause with all stakeholders throughout.
In Elisa’s case, the innovation has been developed in a number of areas. For example, how it couples all you can use data plans and a flat sales/capex ratio; a new network automation business selling to other telcos; and an industrial IoT automation business.
Again, CEO Veli-Matti Mattila has a long tenure, and has championed the principle of Elisa’s competitive advantage being in its ability to learn and leverage its existing IP.
…aligned with the Coordination Age
STL argues that the future growth for telcos will come by addressing the needs of the Coordination Age, and this in turn is being accelerated by both the COVID-19 pandemic and growing realisation of climate change.
Why COVID-19 and Climate change are accelerating the Coordination Age
Source: STL Partners
The Coordination Age is based on the insight that most stakeholder needs are driven by a global need to make better use of resources, whether in distribution (delivery of resources when and where needed), efficiency (return on resources, e.g. productivity), and sustainability (conservation and protection of resources, e.g. climate change).
This need will be served through multi-party business models, which use new technologies (e.g. better connectivity, AI, and automation) to deliver outcomes to their customers and business ecosystems.
We argue that both TELUS and Elisa are early innovators and pathfinders within these trends.
Suitable knowledge, experience and openness
Having the right experience, character and composition in the leadership team is an area of constant development by companies and experts of many types.
The dynamics of the leadership team matter too. There needs to be leadership and direction setting, but the team must be able to properly challenge itself and particularly its leader’s strongest opinions in a healthy way. There will of course be times when a CEO of any business unit needs to take the helm, but if the CEO or one of the C-team is overly attached to an idea or course of action and will not hear or truly consider alternatives this can be extremely risky.
AT&T / Time Warner – a salutary tale?
AT&T’s much discussed venture into entertainment with its acquisitions of DirecTV and Time Warner is an interesting case in point here. One of the conclusions of our recent analysis of this multi-billion-dollar acquisition plan was that AT&T’s management appeared to take a very telco-centric view throughout. It saw the media businesses primarily as a way to add value to its telecoms business, rather than as valuable business assets that needed to be nurtured in their own right.
Regardless of media executives leaving and other expert commentary suggesting it should not neglect the development of its wider distribution strategy for the content powerhouse for example, AT&T ploughed on with an approach that limited the value of its new assets. Given the high stakes, and the personalised descriptions of how the deal arose through the CEOs of the companies at the time, it is hard to escape the conclusion that there was a significant bias in the management team. We were struck by the observation that it seemed like “AT&T knew best”.
To be clear, there can be little doubt that AT&T is a formidable telecoms operator. Many of its strategies and approaches are world leading, for example in change management and Telco Cloud, as we also highlight in this report.
However, at the time those deals were done AT&T’s board did not hold significant entertainment expertise, and whoever else they spoke with from that industry did not manage to carry them to a more balanced position. So it appears to us that a key contributing factor to the significant loss of momentum and market value that the media deals ultimately inflicted on AT&T was that they did not engineer the dynamics or character in their board to properly challenge and validate their strategy.
It is to the board’s credit that they have now recognised this and made plans for a change. Yet it is also notable that AT&T has not given any visible signal that it made a systemic error of judgement. Perhaps the huge amounts involved and highly litigious nature of the US market are behind this, and behind closed doors there is major change afoot. Yet the conveyed image is still that “AT&T knows best”. Hopefully, this external confidence is now balanced with more internal questioning and openness to external thoughts.
What capabilities should a management team possess?
In terms of telcos wishing to drive and nurture growth, STL believes there are criteria that are likely to signal that a company has a better chance of success. For example:
- Insight into the realistic and differentiating capabilities of new and relevant markets, fields, applications and technologies is a valuable asset. The useful insight may exist in the form of experience (e.g. tenure in a relevant adjacent industry such as healthcare, or delivery of automation initiatives, working in relevant geographies, etc.), qualification (e.g. education in a relevant specialism such as AI), or longer term insight (which may be indicated by engagement with Research and Development or academic activities)
[The full range of management capabilities can be viewed in the report…..]
2. People…
Table of Contents
- Executive Summary
- Introduction
- Management
- Stable and committed long-term vision for growth
- …aligned with the Coordination Age
- Suitable knowledge, experience and openness
- Two-way engagement with stakeholders
- People
- Does the company have a suitable culture to enable growth?
- Does the company have enough of the new skills and abilities needed?
- Is the company’s general management collaborative, close to customers, and diverse?
- Customer propositions
- Nature of the current customer relationship
- How far beyond telecoms the company has ventured
- Investment in new sectors and needs
- Partner and technology ecosystems
- Successful adoption of disruptive technologies and business models
- More resilient economics of scale in the core business
- Technology and partners as an enabler of change
- Investors
- The stability of the investor base
- Has the investor base been happy?
- Current and forecast returns
- Government and regulators
- The tone of the government and regulatory environment
- Current status of the regulatory situation
- The company’s approach to government and regulatory relationships
- Society
- Brand presence, engagement and image
- Company alignment with societal priorities
- Media portrayal
Related research
- Coordination Age: The next big strategic opportunity for telcos
- Telco innovation: Why it’s broken and how to fix it
- Five telcos changing culture: Lessons from neuroscience
- Creating a healthy culture
- Transformation Research Stream
- Sustainability research hub
