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How Telefónica implemented Lean Startup approach and built an intrapreneurial culture?

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MeleOKTelefónica, one of the world’s leading telecommunication services providers, is a pioneer in applying Lean Startup methodology to speed the innovation outputs as a large organization. In 2011, Telefónica began to position itself as a digital telecommunications company and started to build digital products. Since then, Telefónica has followed the Lean Startup methodology and has significantly reduced cycle times and development costs, while ensuring developers are continuously interacting with the end customers during the development. All these changes have led to a significant cultural transformation within the company which encourages customers’ integration from the early development stage and nurture their employees’ talent to become intrapreneurs.

Telefónica was one of the ten companies that joined in the “Lean Product Development Best Practices Discovery project 2015”. The LAA team visited Telefónica’s headquarters in Madrid to identify and document their best practices in lean product development, how they implemented them and the impact this had on the company`s processes.

 

Lean Product Development Journey in Telefónica I+D

Telefónica Research and Development (Telefónica I+D) started applying the Lean Startup methodology in 2011. Soon after (in 2012) they launched a new innovation model with Lean Startup at the cornerstone of the project execution phase. This new model was key to face the challenges of building new digital products and services with high uncertainty.

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“We thought that Lean Startup could help us dealing with uncertainty, it would also help us bring more agility to the way we build products. Moreover it could help us identify and empower entrepreneurs as well as increase the focus on customers.”

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To compete in such a rapidly changing market, Telefónica needed the capacity for continuous learning. This led the company to “boost” its employees’ talent and change the way they work, eventually encouraging employees to propose ideas and, at the same time, giving them the opportunity to also deploy them. Furthermore, it provided teams with autonomy so that individuals can take responsibility and lead their own projects. They became intrapreneurs which means they can propose, defend and implement innovation projects.

Telefónica, evidently not a startup, implemented the Lean Startup methodology by firstly applying it to only a couple of innovation projects and later, to an ideation program that was already in place. Based on the successful results, these experience generated the knowledge and confidence necessary to take the next step: applying the Lean Startup methodology across all innovation projects.

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When Telefónica applies Lean Startup? 

Lean Startup is applied in cases where the market needs to be validated. That is, when the aim is to create products that offer new solutions to customers or to adapt new solutions for niches with specific needs (non-existent up to now). On the contrary, where a market knowledge and a validated business strategy exists, Product Life Cycle (PLC) management is used (instead of Lean Startup) for new product development.

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Lean Startup “is a new approach for innovative product development, emphasizing rapid iterations and consumer understanding, while at the same time fostering an enormous vision and a great ambition”. Ideas need to be created, they need to grow, evolve and mature in an environment of high uncertainty and without a validated business plan.

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BENEFITS

  • Lean Startup practices encourage teams to be their own critics and thus, become decision-makers.
  • This allows them to validate their own hypotheses in the market and demonstrate their key aspects.
  • This methodology helps generate a culture of intrapreneurship: it allows an employee to clearly identify specific needs in an uncertain environment and to develop a strategy to increase success in a context of uncertainty.

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At the same time, the use of a framework like the PLC, helps innovative companies manage their inter-functional processes in order to develop products in a more efficient and successful way by coordinating the work of the different teams involved in the process. Moreover, PLC enables global organizations to work as unified teams to design, produce, support and launch products in the market. Likewise, it allows these organizations to collect both best practices and lessons learned.

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Innovation: A key to build intrapreneurial network

A Telefónica I+D project leader’s role is key to the entire innovation process. Leaders, rather than being “achievers and performers”, must be “pioneers and explorers”, i.e., intrapreneurs. While entrepreneurs and intrapreneurs share some common features, they are very different. Intrapreneurs are company employees and, as such, they must develop an entrepreneurial mindset to promote the product both on the market and within the company.

Implementing the Lean Startup methodology at Telefónica has helped discover and promote a culture of intrapreneurs within the company (not just in the R&D area). However, intrapreneurs need opportunities to emerge and make themselves visible, and so Telefónica implemented, what they call “Innovation Calls”. These are initiatives where canal employees are encouraged to submit proposals. In this way Telefónica gets higher number of innovative ideas and is able to pursue the most promising ones.

The application of the Lean Startup methodology has gradually permeated the organization with an intrapreneurship spirit. Team members work jointly, making decisions together and not as separate entities waiting for instructions. As a result, the work has become much more agile. In addition, Lean Startup promotes a culture of intellectual openness that encourages teams to be their own critics. People in the innovation teams value ownership and autonomy, so the empowerment to work on their own ideas is considered as a significant reward on its own.

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Telefónica’s Success Story

Telefónica has accelerated its innovation cycles by 2.6 times, thus reducing the time spent on each project and, therefore, decreasing the budget invested in each project by 48% on average.  At the same time, and even with a lower overall budget, the company launched, within the same time frame, more projects than before, increasing the number of innovation projects by 45% and focusing on the customer. 
This offers Telefónica more opportunities to test a greater number of ideas and, consequently, augment the possibilities of having a greater impact on its business by creating products that customers really need. As a result of the adoption of Lean Startup methodology, Telefónica is on the verge of launching new digital solutions. It is already carrying out commercial trials for some of the first projects developed with this methodology.

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María Elena Ordóñez y Revuelta
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