Point of View April 2004
Achieving higher performance at mobile operators:
A CEO’s challenge
By Tom Barry and Tunc Yorulmaz
Is it time for mobile operator CEOs to tear up
their existing operating model? Most of the current
generation of CEOs have initially decided the
answer is no. Faced with a powerful, established
middle management, internal tensions and the
slow take up of new data products, they quickly
realized that sweeping restructuring would not be
easy. So a majority of mobile operators settled for
tactical optimization while waiting to see if a major
threat would emerge to justify stronger action.
However, according to Accenture, this approach is
rapidly passing its sell-by date. A top-line analysis
of Europe’s mobile operators shows that, unless an
operator is number one or two in its market, its
earnings before interest, tax, depreciation and
amortization (EBITDA) are already at depressed
utility company levels. Regulators will strive to
keep four players in each market, giving the CEOs
of the followers no option but to cut costs
defensively to remain an attractive acquisition
target. Meanwhile, the number one and two
mobile operators have the option to change gear
to a more offensive mode by shifting their
revenues towards new data services.
Both approaches can work. In either case,
Accenture believes speed to reorganize will be the
main differentiator in terms of achieving higher
performance and total return to shareholders—
and the reorganization will be a painful,
challenging and complicated task.
Mapping the way forward
So, what solution should the CEO pursue—and
how? Whatever the decision, it is likely to be less
painful to drive change through now, while voice
revenues are strong, than later, when the
pressures have intensified. Accenture sees that the
common attributes required for success and
achieving high performance are now becoming
clear: flexibility, agility, lean technology, low costs
and a readiness to outsource where appropriate.
A further key question is where to start.
Accenture research shows that CEOs prefer to
concentrate initially on one side of the business—
either the revenue-oriented and customer-facing
side or the cost-driven and service-delivery side—
rather than tackling the whole business at once.
This staged approach enables companies to get
early wins faster and more efficiently.
Against this background, the approach adopted will
differ for each company. But Accenture research
and experience indicate a set of fundamental
principles that should underpin companies’
restructuring and performance goals on both
sides on the business. Most CEOs in our survey
decided to start with cost cutting in the service-
delivery area, aiming to put their house in order
before targeting revenue enhancement initiatives.
Principles for achieving higher service-
delivery performance
Changes to the service delivery tend to be
prioritized by the third and fourth place players in
each market because of the potential to impact
the bottom line directly. For changes targeted at
service delivery, Accenture summarizes the main
principles as:
1. Make change the main item on the corporate agenda: At
most operators, service delivery is dominated by the
technology organization, which generally controls most of
the budget. Bringing change to a technology organization
agenda is not easy—and most CEOs prefer to leave this
discussion until later.
2. Get clear ideas on where to start: According to another
recent Accenture research study, almost 55 percent of an
operator’s processes are non-core—meaning they do not
bring competitive advantage and could be better handled by
a third-party specialist. This type of insight means CEOs can
discuss the prioritization of cost cutting initiatives in a much
more direct and constructive way.
3. Don’t ignore internal turf wars: The biggest challenge is
managing turf wars between the two sides of the technology
organization (tech development versus tech operations), and
overcoming resistance to major change. Also, there is an
ongoing battle for the upper hand between the IT side and
network operations. Most CEOs prefer to stay out of this
fight until a major need for change becomes unavoidable.
However, this attitude may prevent CEOs from seeing the
potential value creation opportunities at the heart of
their organization.
4. Establish end-to-end delivery processes: CEOs have limited
visibility on the performance of their end-to-end delivery
processes, either because the necessary key performance
indicators are not tracked or because these processes do not
exist at all. By ensuring that all critical processes—such as
new product development, internal demand management
and service operations—are established and tracked, the CEO
can send a very strong message to the rest of the organization.
5. Manage service delivery by service level agreements: The
best way to evaluate how well a service delivery organization
performs is to check how satisfied internal customers (in
customer-facing functions) are. Though most of these
organizations describe their dissatisfaction, such complaints
rarely are heard or acted upon by top management.
Establishing a service level agreement-orientated culture will
allow CEOs to cut through this conspiracy of silence.
Principles for achieving higher revenue-driven
performance
Accenture analysis has shown that market leaders tend to
prioritize revenue-enhancing strategies into five categories:
1. Align organization around segments: The number one and
number two players in each market are more likely to
concentrate on changing customer-facing operating models.
The main task is to identify what are the client segment
needs, how to meet these needs by delivering value and how
to find the best channel to interact with customers.
2. Give clear profit responsibility: Each customer-facing
organization should be an independent profit center with
clear segment targets. This requires alignment of all revenue-
generating capabilities, which means allocating clear control
of product development and demand generation to the
leaders of the profit centers.
3. Enable segment management with adequate control: Each
customer-facing entity should be managed and operated
independently throughout its own marketing, sales and
support. To support this structure, communication and
cooperation between product development, demand
generation and fulfillment must be as close as possible.
4. Assure internal alignment: A good way of checking
whether an organization’s customer-facing side is working
properly is to evaluate its product development and
customer insight processes. This means asking how well
development is integrated with marketing, how closely
customer insight works with sales and how effectively sales
deliver against targets.
5. Don’t forget the culture: The biggest challenge in this
transformation is getting the management to adopt a
customer-focused mindset. Unfortunately, restructuring
initiatives at several operators that were driven by sales
teams ended up creating gigantic sales organizations without
clear alignment to customer understanding and delivery.
Renewing the operating model
So far, European operators have been able to ride on margins
that are higher than other companies in the technology,
media and telecommunications sector. But with competition
becoming more intense and tariffs eroding, this is not likely
to last.
This scenario presents several choices, but inaction is not one
of them. The real underlying decision is either to change the
operating model or to stick with voice services. In Accenture’s
view, this is really no choice at all. The current platform may
not appear to be burning, but it is—and it soon will be impos-
sible for mobile operator CEOs to ignore the need to renew
their operating models in order to achieve high performance.
This Outlook Point of View is one of three related articles examining the
state of executive leadership in the European mobile industry. The other
articles in the series are “The first half is up: Evaluating leadership styles and
performance in the European mobile industry” and “Will it be evolutionary
or revolutionary? Making change happen at mobile operators.”
Tom Barry, managing partner-Accenture Wireless industry
group, Europe and Latin America, can be reached at
tom.barry@accenture.com.
Tunc Yorulmaz, senior manager-Accenture Wireless industry
group, can be reached at tunc.yorulmaz@accenture.com.
Accenture’s Wireless Industry Group teams with many of the world’s leading
mobile telecommunications companies helping them achieve high
performance. Accenture is a leader in serving the mobile telecom-
munications sector with a robust combination of industry expertise, business
solutions, technology acumen and outsourcing capabilities. Accenture uses
its pioneering solutions to help mobile telecommunications companies
achieve high performance by maximizing revenue opportunities, controlling
costs, optimizing asset use and capitalizing on emerging industry trends.
Accenture is a global management consulting, technology services and
outsourcing company. Committed to delivering innovation, Accenture
collaborates with its clients to help them become high-performance
businesses and governments. With deep industry and business process
expertise, broad global resources and a proven track record, Accenture can
mobilize the right people, skills and technologies to help clients improve
their performance. With approximately 90,000 people in 48 countries, the
company generated net revenues of US$11.8 billion for the fiscal year ended
August 31, 2003. Its home page is www.accenture.com.
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The views and opinions expressed in this article are meant to stimulate
thought and discussion. As each business has unique requirements and
objectives, these ideas should not be viewed as professional advice with
respect to your business.
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