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 - – increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, technology disruption, supply chains are disrupted by pandemic , increasing transportation and logistics costs, geopolitical disruptions,
customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
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.
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.
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.
Operational resilience
– The operational resilience strategy in the Telefonica: A Lean Elephant Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Telefonica: A Lean Elephant firm has clearly differentiated products in the market place. This has enabled Lean Telefonica to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Lean Telefonica to invest into research and development (R&D) and innovation.
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.
Diverse revenue streams
– Lean Telefonica is present in almost all the verticals within the industry. This has provided firm in Telefonica: A Lean Elephant case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
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.
Strong track record of project management
– Lean Telefonica is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Lean Telefonica are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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 -
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.
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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Lean Telefonica supply chain. Even after few cautionary changes mentioned in the HBR case study - Telefonica: A Lean Elephant, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lean Telefonica vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Lean Telefonica has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Telefonica: A Lean Elephant has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lean Telefonica 's lucrative customers.
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.
Need for greater diversity
– Lean Telefonica has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High bargaining power of channel partners
– Because of the regulatory requirements, Henry W. Chesbrough, Susana Jurado Apruzzese, Maria de Olano Mata suggests that, Lean Telefonica is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Telefonica: A Lean Elephant HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Lean Telefonica has relatively successful track record of launching new products.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lean Telefonica in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lean Telefonica can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Telefonica: A Lean Elephant, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lean Telefonica in the consumer business. Now Lean Telefonica can target international markets with far fewer capital restrictions requirements than the existing system.
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 -
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.
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.
Stagnating economy with rate increase
– Lean Telefonica can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology acceleration in Forth Industrial Revolution
– Lean Telefonica has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Lean Telefonica needs to keep up with the evolution of technology in the Innovation & Entrepreneurship sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Lean Telefonica.
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.
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.
Shortening product life cycle
– it is one of the major threat that Lean Telefonica is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
Increasing wage structure of Lean Telefonica
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Lean Telefonica.
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.
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.
