I can’t get no

Posted on Friday, December 07, 2018

Telefonica’s José María Álvarez-Pallete says he is not satisfied with the results of the company’s previous strategic plan, known by the tag line “We choose it all”. Apparently, he did not get it all or at least all that he wanted. My comments are not so much about Telefonica but about strategic planning and motivating a team.

Announced to the company’s management at an event last week, the press release quotes Álvarez-Pallete as saying the previous program “made us stronger” and pointed to growth in revenue, EBITDA, and customers as evidence.

But, he said, “it is not enough, and we are not satisfied”.

The new program is called “Reconnect” and it has five principles:

  1. Growth in relevance for customers through an excellent digital experience based on the simplicity and personalization of the offer, through the company’s technological platforms and the application of Artificial Intelligence.
  2. Revenue growth with a focus on monetizing an attractive value proposal which includes both Telefónica’s products and services, as well as those of third parties, under an “open ecosystem of partners” model which drives Telefónica as one of the main “technology distributors” capable of satisfying each customer in a personalized way.
  3. Growth in returns thanks to the growth of revenues, the efficiencies generated by digitalization, simplification and management based on the return on invested capital (ROCE).
  4. All of the above while strengthening the company’s commitment to responsible and sustainable growth with the societies in which the company operates, increasing Telefónica’s proactive role in regulatory issues and ensuring digital inclusion and respect for the digital rights of citizens.
  5. And finally, the motivation of the team of Telefónica professionals as a key element capable of increasing growth,

Too many ‘strategic plans’ are merely press releases, designed to keep mostly employees – but also clients and shareholders – believing that the company has a mission and direction.  My criteria for distinguishing between a strategic plan and a press release is to ask if the opposite of any of the ‘strategy statements’ is a legitimate strategy. If not, the statement is just motherhood and apple pie (Serve customers! Be good to employees!) and so something written by the communications department, and only to make the company look good.

In Telefonica’s statement there are a number of principles that you can imagine could be reversed or negated or not said and yet would still constitute a legitimate approach for a telecom company.

The emphasis on Artificial Intelligence for example. True, just about every corporate statement, no matter what the industry, mentions Artificial Intelligence. I have not checked but plumbing supplier American Standard no doubt has told its shareholders it plans to have the most intelligent bathroom fixtures known to mankind.

But the statement connects Artificial Intelligence to an “excellent digital experience” for their customers and that is sufficiently specific (for this level of strategy statement) that it will encourage certain initiatives and discourage others. Álvarez-Pallete and his team can ask managers “How does this investment improve the customers’ digital experience using AI?” If it does not, then it should go down the capital priority list.

“An ‘open ecosystem of partners’ model which drives Telefónica as one of the main ‘technology distributors’” is also a different statement, at least compared to some past TEF strategies where it often seemed that the company was trying to do it all by itself.

A former colleague of mine, Phil Marshall, used to say (usually privately) that the operators were merely distributors of products and services developed by the vendors. Management asked him not to say that out loud, believing that operators would be offended. At the time, that was probably true, they would have been offended and maybe some still would. But here is a top ten carrier saying its is a “technology distributor”.

To my point about the reverse or the negation of a proper strategy statement being a legitimate strategy, I doubt AT&T would characterize itself as a “technology distributor”. It thinks of itself as a technology leader not a distributor. I think Phil’s right and so is Telefonica but others are entitled to their own opinions.

This one is a bit commonplace, but I like “Growth in returns” because it is different from the usual Silicon Valley-inspired ‘Growth in revenues’ or ‘Growth in customers’ that some operators mistakenly think they can imitate. Top-line-focused growth makes sense for companies that are not capital intensive but telecom operators have to be attentive to the bottom-line or they will soon not have Capex for growth. (We will see how long Reliance Jio survives.)

He also explicitly alludes to ‘digitalization’ which is a bridge to the previous plan and a broader concept than just ‘virtualization’ because it goes beyond the network to all aspects of the business.

Only the last two principles show evidence of ‘corporate communications speak’.

Would you really build a strategy around unsustainable growth? Or demotivated professionals?

It is certainly not wrong to put them in the press release. In both cases, key stakeholders – especially employees – would ask where they were if they had been absent.

My only real quibble is that I do not believe ‘digital inclusion’ should be a corporate priority. A company can support the public goal of ‘digital inclusion’ but the tradeoffs required to achieve that goal should be decided by society not companies. The latter have to be stewards of their shareholders’ investment, within a public policy framework determined by society and government.

However, I am very much in favor of a strong statement that companies must respect “the digital rights of citizens”. This principle would be easy to dismiss as ‘motherhood’ except that it has been painfully obvious recently that a number of members of the broader industry have made the opposite choice, to the detriment of their customers, society and their shareholders.

Finally, I like the fact that Telefonica’s CEO is not satisfied and the way he handled that (at least in the press release).

We can get into a larger philosophical argument about whether any human being should ever be satisfied, if what makes us human is our ambition to constantly improve, to – in fact – never be satisfied with where we are.

But in the narrower (and less lofty) sense of corporate governance, if the CEO ever expresses ultimate satisfaction he or she might as well retire.

“Well folks, that was well done. We hit all the objectives. Please do that again every year from now until forever. I plan to play golf more frequently while you get on with the job.”

The result would almost certainly be that the objectives would not be hit next year nor the year after that. Look at successful sports coaches: they win a championship and immediately start tinkering with the players or strategy or something because winning a championship does not mean there is not more that can be improved.

As the press release does, leaders have to acknowledge the accomplishments and thank the team for their sacrifices to achieve them.

But then they must go on to set higher goals, to push the team further, if only because the competition will also be ‘upping their game’. After all, the competition has even more motivation: they lost.

Winners have to acknowledge their success but still ‘get no satisfaction’ from stopping there.

Title Reference: ‘I can’t get no / satisfaction’ is another line that probably needs no explanation but I’ll put in the links so that you can enjoy one of the classic Stones’ hits from 1965. This was probably the song that convinced everyone that whatever the Rolling Stones were, they were not trying to imitate the Beatles.

 

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