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