Case Study Description of Telefonica: A Lean Elephant
This case shows Telefonica, a large and sophisticated technology company in Spain, try to transform its innovation process. To do so, it is employing Lean Startup techniques. The case provides a detailed look at the company's efforts in this regard, showcasing not only some of the successful outcomes that were realized, but also some of the organizational challenges that have been encountered along the way. As Lean Startup becomes more widespread in the entrepreneurial community, it is spilling over into the corporate world as well. But as this case demonstrates, there are important contextual differences in employing Lean Startup techniques inside a much larger company.
Authors :: Henry W. Chesbrough, Susana Jurado Apruzzese, Maria de Olano Mata
Swot Analysis of "Telefonica: A Lean Elephant" written by Henry W. Chesbrough, Susana Jurado Apruzzese, Maria de Olano Mata includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lean Telefonica facing as an external strategic factors. Some of the topics covered in Telefonica: A Lean Elephant case study are - Strategic Management Strategies, Entrepreneurship, Innovation, Technology and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Telefonica: A Lean Elephant casestudy better are - – supply chains are disrupted by pandemic , increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, geopolitical disruptions, increasing transportation and logistics costs,
talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Telefonica: A Lean Elephant
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Telefonica: A Lean Elephant case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lean Telefonica, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lean Telefonica operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Telefonica: A Lean Elephant can be done for the following purposes –
1. Strategic planning using facts provided in Telefonica: A Lean Elephant case study
2. Improving business portfolio management of Lean Telefonica
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lean Telefonica
Strengths Telefonica: A Lean Elephant | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lean Telefonica in Telefonica: A Lean Elephant Harvard Business Review case study are -
Effective Research and Development (R&D)
– Lean Telefonica has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Telefonica: A Lean Elephant - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Lean Telefonica has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Telefonica: A Lean Elephant Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Organizational Resilience of Lean Telefonica
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lean Telefonica does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Lean Telefonica has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lean Telefonica to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Lean Telefonica is one of the most innovative firm in sector. Manager in Telefonica: A Lean Elephant Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Lean Telefonica is one of the leading recruiters in the industry. Managers in the Telefonica: A Lean Elephant are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Lean Telefonica has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Telefonica: A Lean Elephant HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Lean Telefonica is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Lean Telefonica is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Telefonica: A Lean Elephant Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Lean Telefonica in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Lean Telefonica in the sector have low bargaining power. Telefonica: A Lean Elephant has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lean Telefonica to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Lean Telefonica digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lean Telefonica has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Lean Telefonica has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lean Telefonica has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Telefonica: A Lean Elephant | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Telefonica: A Lean Elephant are -
Aligning sales with marketing
– It come across in the case study Telefonica: A Lean Elephant that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Telefonica: A Lean Elephant can leverage the sales team experience to cultivate customer relationships as Lean Telefonica is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Lean Telefonica needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Telefonica: A Lean Elephant, it seems that the employees of Lean Telefonica don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow to strategic competitive environment developments
– As Telefonica: A Lean Elephant HBR case study mentions - Lean Telefonica takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Increasing silos among functional specialists
– The organizational structure of Lean Telefonica is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Lean Telefonica needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lean Telefonica to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Lean Telefonica has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Telefonica: A Lean Elephant should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Telefonica: A Lean Elephant, is just above the industry average. Lean Telefonica needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Skills based hiring
– The stress on hiring functional specialists at Lean Telefonica has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Telefonica: A Lean Elephant, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High cash cycle compare to competitors
Lean Telefonica has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow decision making process
– As mentioned earlier in the report, Lean Telefonica has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Lean Telefonica even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Opportunities Telefonica: A Lean Elephant | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Telefonica: A Lean Elephant are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Lean Telefonica can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Developing new processes and practices
– Lean Telefonica can develop new processes and procedures in Innovation & Entrepreneurship industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lean Telefonica can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Lean Telefonica can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lean Telefonica is facing challenges because of the dominance of functional experts in the organization. Telefonica: A Lean Elephant case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Lean Telefonica to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Learning at scale
– Online learning technologies has now opened space for Lean Telefonica to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Creating value in data economy
– The success of analytics program of Lean Telefonica has opened avenues for new revenue streams for the organization in the industry. This can help Lean Telefonica to build a more holistic ecosystem as suggested in the Telefonica: A Lean Elephant case study. Lean Telefonica can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Lean Telefonica can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lean Telefonica to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Lean Telefonica to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Lean Telefonica to increase its market reach. Lean Telefonica will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Loyalty marketing
– Lean Telefonica has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Buying journey improvements
– Lean Telefonica can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Telefonica: A Lean Elephant suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Building a culture of innovation
– managers at Lean Telefonica can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Innovation & Entrepreneurship segment.
Threats Telefonica: A Lean Elephant External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Telefonica: A Lean Elephant are -
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Lean Telefonica needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Lean Telefonica high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lean Telefonica in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Lean Telefonica in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lean Telefonica with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Lean Telefonica demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lean Telefonica can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Lean Telefonica will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lean Telefonica can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Telefonica: A Lean Elephant .
Regulatory challenges
– Lean Telefonica needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Innovation & Entrepreneurship industry regulations.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Lean Telefonica business can come under increasing regulations regarding data privacy, data security, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Weighted SWOT Analysis of Telefonica: A Lean Elephant Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Telefonica: A Lean Elephant needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Telefonica: A Lean Elephant is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Telefonica: A Lean Elephant is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Telefonica: A Lean Elephant is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Lean Telefonica needs to make to build a sustainable competitive advantage.