Steering Telco Operations: A Strategic Perspective - Introducing an eTOM-based telco operations scorecard

Detecon Executive Briefing Steering Telco Operations: A Strategic Perspective Introducing an eTOM-based telco operations scorecard Telco operations are expected to simultaneously fulfill two core strategic requirements: (1) Supporting revenue stab- ilization and growth through high customer orientation as well as (2) ensuring efficiency through optimized process performance and asset utilization. Aligning these requirements and steering telco operations according to strategic goals is an ongoing challenge. This is further complicated by constantly increasing competitive and technological dynamics. Conventional approaches to steering telco operations are insufficient for the mastering of this challenge due to high levels of detail and a primary focus on technological aspects. In this executive briefing, we propose an eTOM-based operations scorecard for telco operators, enabling COOs to effectively link operations with strategy and to steer them accordingly. We make ICT strategies work Detecon Executive Briefing Taking a Broader View on Telco Operations Telco operators are facing enormous challenges: Stagnating or even declining revenues, high pressure on margins, significantly growing capital expenditure, fast product commoditization and cut-throat competition from new players are all putting massive pressure on a once flourishing industry. Operators are typically responding by adopting a dual approach: (1) Driving efficiency and automation to achieve cost reduction and (2) differentiating service offerings for the sake of revenue stabilization and growth. In the light of limited organizational resources, this simultaneous exploitation of existing capabilities and exploration of new opportunities calls for a well-considered steering approach. What does this mean for the operational sphere as the core value-generating entity? On the one hand, telco operations are expected to be the source of the major share of efficiency improvements. On the other hand, they are supposed to enable flexible product adaptation and high customer orientation. Conventional approaches to steering telco operations are falling short of reflecting these strategic requirements: They are simply too technology- centric or all too focused on internal processes. Consequently, we propose to broaden the view on telco operations by adopting the scope of operations as defined by TM Forum’s enhanced Telecom Operations Map (eTOM). As the de-facto standard for business processes in the telecommunications industry, eTOM does not only reflect the operational telco value chain but also the different functional layers, including customer and supplier management as well as technology management. Thus, it provides an excellent basis for a holistic and strategic perspective on telco operations. Customers Operations Operations Fulfillment Assurance Billing & Support & Revenue Readiness Mgmt. Market, Product & Customer Strategy, Infrastructure & Product Service Resource (Application, Computing & Network) Supplier/Partner Suppliers/Partners Enterprise Management Figure 1: Scope of Operations according to eTOM Detecon International GmbH  05/2011 2 www.detecon.com Detecon Executive Briefing An eTOM-based Telco Operations Scorecard: Linking Operations with Strategy A clear link between corporate strategy and operations is at the core of our eTOM-based telco operations scorecard. In order to reflect how operations contribute to the major strategic goals of exploitation and exploration, we have explicitly integrated an Exploitation Perspective and an Exploration Perspective into the scorecard. Furthermore, we propose to include a Financial Perspective, indicating important operational financial measures, as well as an Enabling Perspective, which reveals people and project performance. These four perspectives are then measured across all functional layers of the operations domain within eTOM. Together, they will give COOs a crystal-clear view of operational performance. The Exploitation Perspective mirrors how an operator performs in terms of optimization of existing processes, assets and capabilities. We suggest differentiating between efficiency and sustainability: While efficiency covers measures related to process performance as well as automation and asset utilization, sustainability is about measures related to the ecological footprint of all operational activities.  Typical efficiency measures: Average process execution time, degree of process automation, process cost as % of Opex, degree of network resource utilization etc.  Typical sustainability measures: Total energy cost, average energy cost per process, total CO2 emissions, average CO2 emissions per process, recyclability of used materials etc. SUPPLIER/PARTNER VIEW RESOURCE VIEW SERVICE VIEW MARKET, PRODUCT & CUSTOMER VIEW AGGREGATE VIEW Financial Perspective Cost & Margin Risk Exploitation Perspective Exploration Perspective Operations Strategy Customer Efficiency Orientation Sustain- Flexibility ability Enabling Perspective People Projects Figure 2: eTOM-based Telco Operations Scorecard Detecon International GmbH  05/2011 3 www.detecon.com Detecon Executive Briefing The Exploration Perspective reflects how effectively an operator adapts operations to emerging opportunities and changing customer or business demands. In practice, we recommend breaking down this perspective to customer orientation and flexibility: While customer orientation refers to measures capturing the degree of customer centricity of all operational activities, flexibility is about measures that show the degree to which operations are anticipating future technological or operational change.  Typical customer orientation measures: Customer satisfaction with operational performance, number of customer self-service applications per process, involvement of customer feedback in operational enhancement, order modification frequency etc.  Typical flexibility measures: Process performance sensitivity, technology performance sensitivity, process modularity and reusability, speed of process change etc. The Enabling Perspective provides a basis for measuring and steering important enablers of both explorative and exploitative activities: People and projects. While the people aspect covers measures related to managing human resources in the operations area, the project view relates to the performance of major strategic projects aimed at enhancing operations.  Typical people measures: Employee satisfaction, retention of high performance staff, employee qualification, employee productivity, workforce availability, fluctuation etc.  Typical project measures: Project completion, adherence to schedules, project cost vs. project budget, project risks etc. Finally, the Financial Perspective shows how the operational activities are performing from a financial point of view. We suggest differentiating between cost & margin on the one hand and risk on the other hand: While cost & margin measures signal the degree of financial health, risk measures are intended to closely monitor all operational risks.  Typical cost & margin measures: Operations-related Opex, operations-related Capex, adjusted contribution margin, working capital ratio, ROCE, realized cost reduction etc.  Typical risk measures: Technology risk, supply chain risk, security risk, fulfillment risk, assurance risk, billing risk etc. Balancing Operational Exploitation and Exploration Both executives and academics agree that exploitation and exploration need to be balanced in order to achieve sustainable competitive advantage.