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Leaner and Keener Telecom Operators: Eliminating Waste Boosts the Bottom Line


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In mature telecom markets, declining prices, near saturation and fierce competition for new products and applications have squeezed margins. A lean approach to restructuring the business can bring a quick payback by eliminating waste and create a robust platform for maintaining future margins.

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Leaner and Keener Telecom Operators: Eliminating Waste Boosts the Bottom Line

  1. 1. Perspective Andreas Späne Dr. Florian Gröne Olaf Acker Roman FriedrichLeaner and KeenerTelecom OperatorsEliminating WasteBoosts the Bottom Line
  2. 2. Contact InformationBerlin Hong Kong ParisDr. Florian Gröne Edward Tse Pierre PéladeauSenior Associate Senior Partner Partner+49-30-88705-844 +852-3650-6100 pierre.peladeau@booz.comDelhi Houston São PauloSuvojoy Sengupta Kenny Kurtzman Ivan De SouzaPartner Partner Senior Partner+44-20-7393-3314 +1-713-650-4175 ivan.desouza@booz.comDubai London SydneyKarim Sabbagh Michael Knott Simon GilliesPartner Partner Partner+971-4-390-0260 +44-20-7393-3527 simon.gillies@booz.comDüsseldorf Madrid TokyoRoman Friedrich José F. Arias Shigeo KizakiPartner Partner Partner+49-211-3890-165 +34-91-411-5121 shigeo.kizaki@booz.comFrankfurt MilanAndreas Späne Luigi PugliesePartner Partner+49-69-97167-408 luigi.pugliese@booz.comOlaf Acker MoscowPrincipal Dr. Steffen Leistner+49-69-97167-453 +7-985-368-7888 Booz & Company
  3. 3. EXECUTIVE In mature telecom markets, declining prices, near saturation, and fierce competition for new products and applicationsSUMMARY have squeezed margins. Despite all their efforts to drive process excellence and increase cost efficiency, telecommuni- cations companies are running just to stand still. This need not be. Telecom operators still waste more than 30 percent of process-related operations expenditures, though they may not realize where. A lean approach can bring a quick payback by eliminating waste and creating a robust platform for main- taining future margins. The key is understanding, streamlin- ing, and controlling the complexity of processes and products that are threatening to choke telecom companies as they strive to satisfy customer demands using legacy processes, proce- dures, and systems (or parts of them) and at the same time introduce technology-rich new products. In European and North American handovers, communication touch telecom markets where prices are points, and product and pricing under pressure and revenue per user is options that do not create value for falling, companies have stripped down the business and its customers. It operations to optimize cost efficiency means viewing telecom companies where they can. These makeovers through the lens of factory-style usually result in savings on a function- automation in what has become, or is by-function basis. Missing is an end- fast becoming, a commodity business. to-end view that identifies the various flashpoints in one silo that contribute Telecom operators in mature markets to waste and increase costs in another. will have to undergo this kind of lean transformation if they are to maintain This transformation requires an a competitive edge. This Perspective evaluation of each process that feeds shows operators how to cut waste to into the bottom line in order to increase profitability while improving eliminate all process steps, activity operations and customer service.Booz & Company 1
  4. 4. BEYOND remove any kind of process waste: a from easy. The complexity that has lean transformation. overtaken the telecom business hasSATURATION resulted in organizations with technol- The best analogy for this comes from ogy frameworks, tariff structures, the world of process manufacturing. and product catalogs that if plotted Telecom operators need to see all on a chart would resemble a Jackson parts of their operations as assembly Pollock painting. One European oper-The drive to maintain margins in lines that produce only what their cus- ator found that it was offering 20,000the saturated telecom market has tomers want and/or are willing to pay different tariffs to 15 million custom-triggered cost cutting and efficiency for. Each process must add value to ers in one country; after it analyzedefforts. But if these exercises are the end product, be it fulfillment, bill- its processes and customer needs,focused on individual functions within ing, or customer service. Companies the number of tariffs was reduced tothe organization—billing, customer have to be ruthless about what 8,000 (see Exhibit 1).service, product development, market- products and processes they decide toing, personnel—companies will not keep, what they can automate, and But lean transformation is not just arealize the savings of 30 percent or what has to go. matter of cutting operations expen-more in operations expenditures that ditures; it is a matter of survival. Inare possible. Achieving that savings In an industry burdened by legacy today’s market, a telecom companyrequires a holistic analysis of all systems in both technology and sales will find pricing pressures unsustain-operations and corporate culture to cultures, this kind of change is far able if it cannot slash expenditures.Exhibit 1One Operator Significantly Reduced Complexity with a Lean Transformation BEFORE AFTER IMPACT Process Steps 2,400 2,000 -17% Product & 20,000 8,000 -60% Tariff Options Organizational 45 35 -22% Handover Interfaces Systems & 650 450 -31% Applications Process Cash Out 100% 70% -30%Source: Booz & Company2 Booz & Company
  5. 5. THE LEANER Complexity is a fact of life for tele- com operators, but it is also a cost work and complexity in service fulfill- ment. They make effective customerAND KEENER driver. Legacy systems are maintained care more difficult and can force theTOOL KIT: alongside next-generation networks. Short product life cycles and over- creation of manual “workarounds” in billing operations and IT because bill-TAMING heated marketing are overwhelming ing platforms cannot be economicallyCOMPLEXITY the operators, which resort to ad hoc solutions that appear to offer custom- customized to automate every tweak that sales and marketing puts in place. ers what they want, but in fact mask Process complexity ends up costing additional costs. These costs, however, more than the incremental business may not show up until further down brought in by sales. In addition to the service delivery chain in other inflating costs, this hurts corporate areas of the business, where their reputations as operators cannot root cause may be understood but always deliver on sales promises. cannot be addressed across functional boundaries. Only when there is end-to-end cost transparency will it be possible to This is particularly true in sales and stop a salesperson, whose paycheck marketing. Huge product offerings, is tied to commissions, from closing a pricing bundles, and individually tai- deal that he or she knows may create lored discount schemes result in extra costs in other departments. If the sales Costs may not show up until further down the service delivery chain in other areas of the business.Booz & Company 3
  6. 6. commission includes a way to factor front-line employees to improvise • Systems: Identify missing inter-in order processing costs, there will be or reinvent how they do things. faces, duplication in data entryan incentive to drive down complexity screens, lack of automation in dataand reduce costs. • Organizational structure: Assess validation, and issues in process over-fragmentation, duplication execution.There are four key dimensions in of responsibilities, or gaps inwhich waste can be eliminated: pro- process oversight. For example, Once this assessment is complete, thecesses, organizational structure, prod- there may be too many handovers leaner and keener tool kit applies bestucts, and systems. The lean approach between teams and departments practices from the world of automatedexamines end-to-end operations, irre- to complete one process activity, mass-customized production in manu-spective of departmental boundaries, or it may be unclear who has facturing to increasingly complexbeginning with an assessment across responsibility for overseeing a service industries, such as telecom-each dimension. process from end to end. munications (see Exhibit 2). The goal is to use standard components, similar• Processes: Identify if process steps • Products: Assess the incremental to the automotive industry’s use of are redundant or unclear and value and/or sales volume associ- standard chassis, to build a product whether they create bottlenecks or ated with products, prices, and offering that looks custom-made to unnecessary delays. For example, tariff options—and eliminate the customer, but isn’t. A holistic, processes may differ across loca- options with no or low value cross-functional analysis and subse- tions, creating friction, or may added. quent lean transformation based on not be formalized at all, causing this principle can reduce expenditures The lean approach examines end-to-end operations, irrespective of departmental boundaries.4 Booz & Company
  7. 7. Africa Exhibit 2 The Leaner and Keener Tool Kita Lean Transformation To ensure broad organizational Transform & buy-in & deliver fast & Embed enduring results (continuous improvement) Business Process Six Sigma Redesign Tools Redesign & To ensure consequent Measure To ensure industry-specific, customer focus & strategy-based process measurable performance based redesign on key performance indicators Telecom Industry IT Industry Reference Custom Framework Reference Framework Framework (e.g., eTOM) (e.g., ITIL) To match organization-specific Assess & To ensure full coverage To complement eTOM & language to ensure Standardize of industry standards to build foundation buy-in & avoid (processes, systems) for potential certification misunderstandings Source: Booz & Company Booz & Company 5
  8. 8. by as much as a third and provide People on the front lines know how product portfolios that confuse thecustomers with better solutions and and where process failures lead to sales staff, service representatives,services—while significantly reduc- headaches in daily operations. Give and customers alike. There are aing the level of frustration within the them a safe workshop environment in number of effective tools to use in thisorganization. which to speak openly, clear assess- exercise, including process visual- ment guidelines, and fair moderation ization, waste walks, and customerShow Me Where It Hurts: to ensure a constructive, forward- value stream mapping; the goal isAssess and Standardize looking discussion, and they will to understand how people carry outEvery end-to-end process requires a identify the root causes of bottlenecks process transactions in reality, notbaseline analysis of points of waste. and breakdowns, and suggest solu- just on a theoretical or conceptualFor telecom operators, it helps to tions. These workshops must include level. Putting senior managers in frontuse an industry-standard process all functions to ensure an end-to-end of the six different screens requiredframework such as eTOM or ITIL overview, and have clear support to enter an order for a convergentas an assessment structure in order from the division directors or senior product bundle, or having them spendto ensure that all relevant processes management across the departments a morning with a service engineer whoare covered. The common, neutral involved. The causes of waste are not is juggling dozens of technical incidentlanguage used by these standard isolated in one department. tickets in parallel, can be an eye-frameworks also helps to facilitate an opening experience.honest assessment that goes beyond The first step is mapping these points“shop think” of the ad hoc solutions of waste—be they inconsistencies The result of this mapping operationthat have become sacred cows within in order taking across channels that will be a points-of-waste inventory. Indepartments but need to be analyzed add layers of needless complexity to one example, the exercise uncoveredfor potential savings. the fulfillment process, or overlaps in more than 600 points of waste across People on the front lines know how and where process failures lead to headaches in daily operations.6 Booz & Company
  9. 9. 15 top-level process domains from focused set of key performance system, not only management butsales-lead management all the way to indicators is clearly defined. Redesign also the broader workforce needsbill collections. may not achieve optimal efficiency to be empowered to make lean the first time around. A lean improvements on an ongoing basis.Design the Lean Future: transformation requires flexibility and This requires access to informationRedesign and Measure the ability to measure and improve in on process performance to determineThe redesign of operations to an iterative way. the effects of potential improvementeliminate waste should focus on measures, decision rights that make itthe areas of highest impact. These Make the Change Happen: easy to execute improvements withoutmust be prioritized, based on what Transform and Embed excessive approval layers, and clearlyis feasible in the short, medium, Short-term benefits from quick- defined incentives to encourage peopleand long terms. Depending on the fix cost savings will emerge as across all functions to contributeroot cause, redesign may focus on soon as the top-priority points of cost-saving ideas, as well as trainingprocess procedures, organizational waste are identified and addressed. and skills development to bring thestructures, IT automation, or product Long-term transformation that right level of lean know-how, tools,portfolio streamlining—or any produces sustained and continuous and methodology to all levels of thecombination of the above—using improvement comes from embedding process redesign tools and the lean transformation capability intoSix Sigma principles. Companies must the corporate DNA. This may require To succeed, this lean transformationcontinually keep in mind the mantra significant management changes to cannot be a static, one-off event.that if it doesn’t serve the customer or introduce the practical components of Telecom companies in mature marketsthe customer is not willing to pay for the leaner and keener tool kit. These need to reengineer their operationsit, it gets the ax. include, for example, a clearly defined when and as the market dictates process governance framework—a and be constantly mindful of whereThe end-to-end approach requires systematic lean process audit and best- waste can undermine efficiency andfirst that someone is identified as practice management capability—to jeopardize profits.responsible for processes from measure process performance andstart to finish, and second that a identify areas for change. In this newBooz & Company 7
  10. 10. CONCLUSION We know that taming complexity and streamlining operations can reduce The good news for telecom companies faced with stalled revenue growth is operational costs by a third and that there are ways to significantly provide customers with better service. reduce expenditures. Operators that The up-front savings achievable in the do not undergo this lean transforma- short term—six to 12 months—will tion, however, will find themselves cover the costs of the initial assess- unable to compete. The decision to ment that identifies how and where adopt a lean and keen approach needs to implement a lean transformation. to be made now.8 Booz & Company
  11. 11. Resource“Evolution or Revolution? Strategies for Telecom Billing Transfor-mation.” the AuthorsRoman Friedrich is a Olaf Acker is aBooz & Company partner Booz & Company principalbased in Düsseldorf and based in Frankfurt. He focusesStockholm. He leads the firm’s on technology strategy forcommunications, media, communications, media, andand technology practice in technology companies.Europe, and specializes inthe strategic transformation Dr. Florian Gröne is aof fixed-line and mobile senior associate withcommunications, technology- Booz & Company in Berlin. Hebased transformation, and supports telecommunicationssales and marketing in the companies and informationcommunications, media, and and communication technologytechnology industries. service providers in developing their market positioningAndreas Späne is a partner strategies and improving ITwith Booz & Company in operations efficiency. He alsoFrankfurt. He focuses primarily works on customer relationshipon telecommunications management strategy andcompanies and specializes architecture across strategic restructuringand efficiency improvementprograms, as well asin development andimplementation managementof complex IT/technologystrategies.Booz & Company 9
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