Leaner and Keener Telecom Operators

Perspective Andreas Späne Dr. Florian Gröne Olaf Acker Dr. Roman Friedrich Leaner and Keener Telecom Operators Eliminating Waste Boosts the Bottom Line Contact Information Berlin Hong Kong Paris Dr. Florian Gröne Edward Tse Pierre Péladeau Senior Associate Senior Partner Partner +49-30-88705-844 +852-3650-6100 +33-1-44-34-3074 florian.groene@booz.com edward.tse@booz.com pierre.peladeau@booz.com Delhi Houston São Paulo Suvojoy Sengupta Kenny Kurtzman Ivan De Souza Partner Partner Senior Partner +44-20-7393-3314 +1-713-650-4175 +55-11-5501-6368 suvojoy.sengupta@booz.com kenny.kurtzman@booz.com ivan.desouza@booz.com Dubai London Sydney Karim Sabbagh Michael Knott Simon Gillies Partner Partner Partner +971-4-390-0260 +44-20-7393-3527 +61-3-9221-1903 karim.sabbagh@booz.com michael.knott@booz.com simon.gillies@booz.com Düsseldorf Madrid Tokyo Dr. Roman Friedrich José F. Arias Shigeo Kizaki Partner Partner Partner +49-211-3890-165 +34-91-411-5121 +81-3-3436-8647 roman.friedrich@booz.com jose.arias@booz.com shigeo.kizaki@booz.com Frankfurt Milan Andreas Späne Luigi Pugliese Partner Partner +49-69-97167-408 +39-02-72-50-93-03 andreas.spaene@booz.com luigi.pugliese@booz.com Olaf Acker Moscow Principal Dr. Steffen Leistner +49-69-97167-453 Partner olaf.acker@booz.com +7-985-368-7888 steffen.leistner@booz.com Booz & Company EXECUTIVE In mature telecom markets, declining prices, near saturation, and fierce competition for new products and applications SUMMARY 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 BEYOND remove any kind of process waste: a from easy. The complexity that has lean transformation. overtaken the telecom business has SATURATION 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 20,000 the 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 analyzed efforts. 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 to the organization—billing, customer have to be ruthless about what 8,000 (see Exhibit 1). service, product development, market- products and processes they decide to ing, personnel—companies will not keep, what they can automate, and But lean transformation is not just a realize 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. In are possible. Achieving that savings In an industry burdened by legacy today’s market, a telecom company requires 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 1 A Typical Operator Can Significantly Reduce Complexity with a Lean Transformation ILLUSTRATIVE 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 & Company 2 Booz & Company 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 customer AND KEENER driver. Legacy systems are maintained care more difficult and can force the TOOL 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 economically COMPLEXITY 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.