Tag: change

The state of telco transformation

There are two possible interpretations of the phrase “the state of transformation”:

  1. How is transformation going at telcos, i.e. where are telcos on the path to transformation
  2. The condition of transformation, i.e. what does it mean to be in the process of transforming.

Over the summer of 2022, STL Partners carried out nine in-depth interviews with telco employees that were involved in influencing, coordinating, or implementing large change projects at their organisations. These change makers came from various disciplines: Strategy, HR, Transformation project management, Networks, Technology, as well as Research. Our first intention was to illuminate the first interpretation (where are telcos on the path to
transformation), but our findings suggest that transformation paths (and indeed end states) are unique to each operator, making it difficult to compare progress between telcos.

No one path – overlapping changes in multiple areas

Source: STL Partners

We have mainly come away with findings on the latter point – identifying the types of change initiatives underway and the challenges that change-makers are encountering on their journeys.

This report brings together insights from our interviews, contextualised with further information from secondary sources and ongoing conversations with operators, to give a sense of what telcos mean when they talk about transformation and what their challenges are in becoming more adaptable as organisations to find growth.

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Why is Transformation important to telcos

Far from being an irrelevant or out-dated concept, telcos continue to transform internally. Transformation is understood as a deep change initiative that might involve a shift in foundational technology or a broad-based change in the way an organisation does things, i.e. the culture, processes and the people required – or both.

Most commonly, transformation involves the integration of digital technologies/tools (e.g. cloud, automation, data analytics) into organisational processes to improve business outcomes – with an impact on ways of working (“digital transformation”).

Some telcos talk about transformation in terms of functional initiatives (e.g. IT modernisation), ostensibly affecting a subset of the business, while others talk about transformation from an organisation-wide perspective (e.g. a change in culture like Lean Six Sigma).

The common feature between telco narratives about transformation is that they are motivated by
trying to improve the organisation’s ability to achieve their future vision. This could involve:

  • Making the business more efficient,
  • Creating new value/finding new revenues,
  • Improving outcomes for customers.

Transformations are also undertaken when the vision changes (e.g. when a new leader takes the helm). STL observes that interview respondents described technology-led transformations as aligned to efficiency benefits in the first instance, while organisation-led change was more aligned to responsiveness, particularly in relation to customer needs (improving outcomes). Respondents tended to describe combined technology- and organisation-led change initiatives when there was an ambition to do new things/create new value for customers.

The meaning of transformation – activities cited in interviews

Source: STL Partners

Respondents also mentioned:

  • Transformation in the context of the industry, particularly the possibility that new technologies may change the shape of an industry (e.g. tech companies may find it easier to enter telecoms with their technology capabilities, while telcos may find it difficult to extend services up the technology value chain).
  • The enterprise opportunity represented by digital transformation services.

These were not topics for further exploration in our interviews. Industry transformation is a topic for STL’s Executive Briefing Service – however the threat of industry disruption can and should be an inspiration for corporate transformation. Digital transformation services are covered in our Enterprise stream.

Table of contents

  • Executive Summary
  • Introduction
  • Why is Transformation important to telcos
    • Different change trajectories
  • The condition of transformation – being in the process of it
    • Where do telcos have transformation efforts underway
    • How are transformation projects approached at telcos?
    • Who is responsible for transformation?
  • Barriers to transformation
    • Change leadership issues
    • People challenges
    • Execution difficulties
  • What is holding telcos back from being future-ready organisations?
    • Out with the old…
    • …In with the new
  • Conclusion
    • Recommendations

Related Research

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Five telcos changing culture: Lessons from neuroscience

Introduction: The role of skills and culture in telco transformation

Skills and culture are the biggest barriers to transformation

It is generally accepted that the telecoms industry is currently undergoing a major process of transformation. In very general terms, telcos are engaged in a transition from being primarily operators of physical infrastructure and networks designed for the efficient delivery of analogue voice and packet data services, to being providers of cloud-based (distributed software, IT and virtualised) infrastructure, platforms and digital services (including communications).

STL Partners has documented this sea change in numerous previous reports focusing on different aspects of the transformation: technology, processes, business models, organisation and culture. This report focuses more closely on two interrelated aspects: skills and culture.

A recent STL Partners ‘summit’ workshop of leading SE Asian operators found that skills and culture are presently seen as the greatest barriers to transformation:

Figure 1: Benefits of and obstacles to transformation

Source: STL Partners

The above chart, reporting the results of a snap survey of attendees of the SE Asia summit, could be interpreted as implying that skills and culture change are of very little direct benefit to telcos, given that only two respondents indicated that it had “the greatest value” to their organisation. But at the same time, telcos are clearly focused on addressing the skills and culture issue, as this was overwhelmingly the most salient transformation challenge that the senior operator executives picked out. And the results of this small but high-quality survey are entirely consistent with STL Partners’ findings in other parts of the world, including research conducted for this report (see Sections 2 and 3 below).

There is a chronic shortage of essential software and IT skills in the industry

Precisely why have skills and culture emerged as such a critical challenge at this time? The skills issue is easier to analyse. The new business and technology model to which operators are transforming places a much greater emphasis on software and IT skills than traditional telco operations: skills such as software development and coding; digital product development and operations (DevOps), and marketing; cloud and IT infrastructure deployment, maintenance and support; etc. There is a chronic shortage of highly-skilled people in these areas, which varies country by country but could rightly be described as a global shortage owing to the international character of the telecoms industry. It is the top talent that is needed right now given the complexity of the technological and IT challenges that are involved in the migration from the legacy Telco 1.0 to the telco-cloud service provider (Telco 2.0).

Telcos have adopted a variety of methods to try to close the skills gap. These are discussed in more detail in Sections 2 and 3 below in the context of conversations on skills and culture we have had with five operators from different parts of the world. On skills, these operators have adopted three broad approaches:

  • Aim to fulfil the skills requirements of the business from existing staff as much as possible by giving every employee the opportunity to up- and reskill (AT&T)
  • Try to meet the skills needs of the business through a combination of selective hires and retraining; but accept that a given percentage of positions in the company after the transformation phase can only be filled by new hires, and that existing staff whose functions have become redundant or who cannot adapt will need to be let go (Telkom Indonesia, Middle Eastern operator (MEO), and international enterprise networking provider (EO))
  • Accept that the business needs to transform radically and rapidly, and a relatively high percentage of people without the requisite skills or whose roles have become redundant must be let go (former developed-market incumbent (DMI))

Content:

  • Executive Summary
  • 1. Introduction: The role of skills and culture in telco transformation
  • 2. AT&T: A textbook exercise in re-skilling and culture change
  • 3. Two other models of skills development and culture change
  • 4. Conclusion: Skills are necessary but not sufficient, without culture

Figures:

  • Figure 1: Benefits of and obstacles to transformation
  • Figure 2: Old and new telco cultures and business model
  • Figure 3: MRI scans showing parts of the brain activated by social rejection and physical pain