In mature telecom markets, declining prices, near saturation and fierce competition for new products and applications have squeezed margins. A lean approach to restructuring the business can bring a quick payback by eliminating waste and create a robust platform for maintaining future margins.

1. Perspective Andreas Späne
Dr. Florian Gröne
Olaf Acker
Roman Friedrich
Leaner and Keener
Telecom Operators
Eliminating Waste
Boosts the Bottom Line

2. 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
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

3. 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.
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4. 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
One Operator Significantly Reduced Complexity with a Lean Transformation
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

5. 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. In addition to
the service delivery chain in other inflating costs, this hurts corporate
areas of the business, where their reputations as operators cannot
root cause may be understood but always deliver on sales promises.
cannot be addressed across functional
boundaries. Only when there is end-to-end cost
transparency will it be possible to
This is particularly true in sales and stop a salesperson, whose paycheck
marketing. Huge product offerings, is tied to commissions, from closing a
pricing bundles, and individually tai- deal that he or she knows may create
lored discount schemes result in extra costs in other departments. If the sales
Costs may not show up until further
down the service delivery chain in
other areas of the business.
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6. commission includes a way to factor front-line employees to improvise • Systems: Identify missing inter-
in order processing costs, there will be or reinvent how they do things. faces, duplication in data entry
an incentive to drive down complexity screens, lack of automation in data
and reduce costs. • Organizational structure: Assess validation, and issues in process
over-fragmentation, duplication execution.
There are four key dimensions in of responsibilities, or gaps in
which waste can be eliminated: pro- process oversight. For example, Once this assessment is complete, the
cesses, organizational structure, prod- there may be too many handovers leaner and keener tool kit applies best
ucts, and systems. The lean approach between teams and departments practices from the world of automated
examines end-to-end operations, irre- to complete one process activity, mass-customized production in manu-
spective of departmental boundaries, or it may be unclear who has facturing to increasingly complex
beginning with an assessment across responsibility for overseeing a service industries, such as telecom-
each dimension. process from end to end. munications (see Exhibit 2). The goal
is to use standard components, similar
• Processes: Identify if process steps • Products: Assess the incremental to the automotive industry’s use of
are redundant or unclear and value and/or sales volume associ- standard chassis, to build a product
whether they create bottlenecks or ated with products, prices, and offering that looks custom-made to
unnecessary delays. For example, tariff options—and eliminate the customer, but isn’t. A holistic,
processes may differ across loca- options with no or low value cross-functional analysis and subse-
tions, creating friction, or may added. quent lean transformation based on
not be formalized at all, causing this principle can reduce expenditures
The lean approach examines
end-to-end operations, irrespective
of departmental boundaries.
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7. Africa Exhibit 2
The Leaner and Keener Tool Kit
a
Lean Transformation
To ensure broad organizational
Transform & buy-in & deliver fast &
Embed enduring results
(continuous improvement)
Business Process Six Sigma
Redesign Tools
Redesign &
To ensure consequent
Measure
To ensure industry-specific, customer focus &
strategy-based process measurable performance based
redesign on key performance indicators
Telecom Industry IT Industry Reference Custom Framework
Reference Framework Framework
(e.g., eTOM) (e.g., ITIL) To match
organization-specific
Assess & To ensure full coverage To complement eTOM & language to ensure
Standardize of industry standards to build foundation buy-in & avoid
(processes, systems) for potential certification misunderstandings
Source: Booz & Company
Booz & Company 5

8. by as much as a third and provide People on the front lines know how product portfolios that confuse the
customers with better solutions and and where process failures lead to sales staff, service representatives,
services—while significantly reduc- headaches in daily operations. Give and customers alike. There are a
ing the level of frustration within the them a safe workshop environment in number of effective tools to use in this
organization. which to speak openly, clear assess- exercise, including process visual-
ment guidelines, and fair moderation ization, waste walks, and customer
Show Me Where It Hurts: to ensure a constructive, forward- value stream mapping; the goal is
Assess and Standardize looking discussion, and they will to understand how people carry out
Every end-to-end process requires a identify the root causes of bottlenecks process transactions in reality, not
baseline analysis of points of waste. and breakdowns, and suggest solu- just on a theoretical or conceptual
For telecom operators, it helps to tions. These workshops must include level. Putting senior managers in front
use an industry-standard process all functions to ensure an end-to-end of the six different screens required
framework such as eTOM or ITIL overview, and have clear support to enter an order for a convergent
as an assessment structure in order from the division directors or senior product bundle, or having them spend
to ensure that all relevant processes management across the departments a morning with a service engineer who
are covered. The common, neutral involved. The causes of waste are not is juggling dozens of technical incident
language used by these standard isolated in one department. tickets in parallel, can be an eye-
frameworks also helps to facilitate an opening experience.
honest assessment that goes beyond The first step is mapping these points
“shop think” of the ad hoc solutions of waste—be they inconsistencies The result of this mapping operation
that have become sacred cows within in order taking across channels that will be a points-of-waste inventory. In
departments but need to be analyzed add layers of needless complexity to one example, the exercise uncovered
for potential savings. the fulfillment process, or overlaps in more than 600 points of waste across
People on the front lines know how
and where process failures lead to
headaches in daily operations.
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9. 15 top-level process domains from focused set of key performance system, not only management but
sales-lead management all the way to indicators is clearly defined. Redesign also the broader workforce needs
bill collections. may not achieve optimal efficiency to be empowered to make lean
the first time around. A lean improvements on an ongoing basis.
Design the Lean Future: transformation requires flexibility and This requires access to information
Redesign and Measure the ability to measure and improve in on process performance to determine
The redesign of operations to an iterative way. the effects of potential improvement
eliminate waste should focus on measures, decision rights that make it
the areas of highest impact. These Make the Change Happen: easy to execute improvements without
must be prioritized, based on what Transform and Embed excessive approval layers, and clearly
is feasible in the short, medium, Short-term benefits from quick- defined incentives to encourage people
and long terms. Depending on the fix cost savings will emerge as across all functions to contribute
root cause, redesign may focus on soon as the top-priority points of cost-saving ideas, as well as training
process procedures, organizational waste are identified and addressed. and skills development to bring the
structures, IT automation, or product Long-term transformation that right level of lean know-how, tools,
portfolio streamlining—or any produces sustained and continuous and methodology to all levels of the
combination of the above—using improvement comes from embedding organization.
business process redesign tools and the lean transformation capability into
Six Sigma principles. Companies must the corporate DNA. This may require To succeed, this lean transformation
continually keep in mind the mantra significant management changes to cannot be a static, one-off event.
that if it doesn’t serve the customer or introduce the practical components of Telecom companies in mature markets
the customer is not willing to pay for the leaner and keener tool kit. These need to reengineer their operations
it, it gets the ax. include, for example, a clearly defined when and as the market dictates
process governance framework—a and be constantly mindful of where
The end-to-end approach requires systematic lean process audit and best- waste can undermine efficiency and
first that someone is identified as practice management capability—to jeopardize profits.
responsible for processes from measure process performance and
start to finish, and second that a identify areas for change. In this new
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10. CONCLUSION We know that taming complexity and
streamlining operations can reduce
The good news for telecom companies
faced with stalled revenue growth is
operational costs by a third and that there are ways to significantly
provide customers with better service. reduce expenditures. Operators that
The up-front savings achievable in the do not undergo this lean transforma-
short term—six to 12 months—will tion, however, will find themselves
cover the costs of the initial assess- unable to compete. The decision to
ment that identifies how and where adopt a lean and keen approach needs
to implement a lean transformation. to be made now.
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11. Resource
“Evolution or Revolution? Strategies for Telecom Billing Transfor-
mation.” booz.com/media/uploads/Evolution_or_Revolution.pdf
About the Authors
Roman Friedrich is a Olaf Acker is a
Booz & Company partner Booz & Company principal
based in Düsseldorf and based in Frankfurt. He focuses
Stockholm. He leads the firm’s on technology strategy for
communications, media, communications, media, and
and technology practice in technology companies.
Europe, and specializes in
the strategic transformation Dr. Florian Gröne is a
of fixed-line and mobile senior associate with
communications, technology- Booz & Company in Berlin. He
based transformation, and supports telecommunications
sales and marketing in the companies and information
communications, media, and and communication technology
technology industries. service providers in developing
their market positioning
Andreas Späne is a partner strategies and improving IT
with Booz & Company in operations efficiency. He also
Frankfurt. He focuses primarily works on customer relationship
on telecommunications management strategy and
companies and specializes architecture across industries.
in strategic restructuring
and efficiency improvement
programs, as well as
in development and
implementation management
of complex IT/technology
strategies.
Booz & Company 9

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