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 - – geopolitical disruptions, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China,
there is backlash against globalization, increasing commodity prices, 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 -
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.
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.
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.
Ability to lead change in Innovation & Entrepreneurship field
– Lean Telefonica is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Lean Telefonica in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Telefonica: A Lean Elephant, in the dynamic environment Lean Telefonica has struggled to respond to the nimble upstart competition. Lean Telefonica has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Lean Telefonica products
– To increase the profitability and margins on the products, Lean Telefonica needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lean Telefonica is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Telefonica: A Lean Elephant can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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.
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.
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.
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.
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.
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.
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 -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lean Telefonica can use these opportunities to build new business models that can help the communities that Lean Telefonica operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
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.
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.
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.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Lean Telefonica can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Using analytics as competitive advantage
– Lean Telefonica has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Telefonica: A Lean Elephant - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lean Telefonica to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
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 -
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.
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.
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.
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.
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 .
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.
Environmental challenges
– Lean Telefonica needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Lean Telefonica can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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.
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.
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.
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.
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.
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.
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.