Telefónica’s Lean Product Development Journey
Telefónica is one of the world’s leading telecommunication service providers, operating in 21 countries, employing around 120,000 people, and serving over 360 million customers around the globe. In 2011, the continuous and rapid changes in the telecommunications market led Telefónica to reinvent itself and transform into a digital telecommunications company.
The combination of traditional telco assets combined with digital ones, enable its customers to access and enjoy the latest technology. To achieve this, Telefónica defined its path towards success by applying three values: Discover, Disrupt, and Deliver.
The Lean Analytics Association (LAA) team carried out a Gemba Walk at Telefónica’s Headquarters in Madrid to document their lean product development journey and discover how lean thinking practices are impacting their innovation outcomes.
Telefónica is one of the largest telecommunication companies in the world in terms of market capitalization and number of customers. It offers a range of services in fixed, mobile and broadband networks, as well as an innovative range of digital services. Telefónica stands behind three of the most loved customer brands:
The Lean Analytics Association met Telefónica’s Research & Development team, responsible of coordinating the overall digital innovation strategy and the entire Group’s R&D to understand which practices enable their innovation process to be efficient. In particular, LAA team was interested to learn how Telefónica’s engineers and user experience designers develop many of the most strategic products Telefónica offers to its global customers.
These practices were identified and structured according to the four building blocks of the Lean Innovation Model. Below are just some of the best practices identified and described in the Telefónica chapter of the Lean Product Development Best Practices Book.
1) STRATEGY AND PERFORMANCE
Telefónica follows the Lean Startup approach in projects where the market is yet to be validated. In other words, when the innovation projects aim is to create products that offer new solutions to customers or to adapt new solutions for niches markets which are non-existent up to now. However, in the cases where the market knowledge already exists and a validated business strategy is in place, Telefónica follows the Product Life Cycle (PLC) approach. In these cases, new products are developed within the PLC framework.
2) SKILLED PEOPLE AND COLLABORATION
Lean Startup is a relatively new approach, which requires a new mindset and new way of working. To support, ease and speed-up the cultural change process, Telefónica developed a specialized training. This training focuses on upgrading the competencies of employees that have the predominantly technical background and enabling them to learn about and apply these new approaches and related methods. To provide further support and continuous development to its employees, Telefónica strategically allocates each project to an experienced sponsor, together with internal and external mentors, and a project leader who provides coaching towards a different mindset, moving from “achiever and performer”, to “pioneer and explorer”, i.e., interpreneurial.
3) EFFICIENT PRODUCT DEVELOPMENT PROCESS AND KNOWLEDGE BASED ENVIRONMENT
In 2006, Telefónica I+D introduced and transitioned to the use of the agile methodology for the development of their software programs. However, 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 approach and has achieved significant improvements in areas like development time, and quality, while reducing cost, and enhancing its learning culture. All these changes have led to a significant cultural transformation within the company.
The Lean Startup approach helped Telefónica to successfully launch several new innovation projects and set guidelines for emerging projects that are aligned with the company’s innovation strategy. Additionally, Telefónica actively involves its Branding Department and the Sales Force in the development and validation of projects’ core hypotheses.
4) CONTINUOUS IMPROVEMENT AND CHANGE
One of the best practices observed in Telefónica is its approach to open innovation, which involves working with others to blend internal and external knowledge and co-create new solutions. Large organizations typically find the concept of open innovation very difficult to digest, as their mindsets are pointed more towards IP and keeping the “know-how” in-house.
Telefónica also regularly encourages and rewards its best and most successful projects, teams and intrapreneurs. Additionally, innovation teams also have the opportunity to share their progress and result with top management as well as with their peers and the best projects and teams are awarded by Telefónica’s I+D CEO.
Consolidated best practices as identified in Telefónica, structured around LAA’s Lean Innovation Model
Applying lean approaches, in particular, Lean Startup, in a large corporation is complex and requires alignment to a new vision and mindset, but the benefits are worth the efforts. Telefónica has accelerated its innovation cycle 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% while shifting the project focus to the customer. This offers more opportunities to test a higher number of ideas with customers early in the project, and consequently, increase the possibilities of having a greater impact on its business by creating products that customers need.
Telefónica’s Best Practices are presented and described on more than 25 pages in the Lean Product Development Best Practices book. Telefónica’s chapter is only one out of the 10 chapters presenting the real-world application of lean product development in multinational companies.
The hard copy of the book with the 10 cases is available for only 74.99 EUR.
Telefónica’s Lean Product Development case is available digitally free of charge to our members.
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About the Authors
Lean Analytics Association
Matic has over 5 years of experience in working with global organizations from various industrial sectors, either leading or supporting the development and introduction of bespoke lean innovation and new product development solutions. Over the past years, Matic has co-developed a framework to enable better, faster and more integrated innovation across the entire value chain, enabling companies to maximize their innovation capability and deliver truly customer-centric products and services, while minimizing the risk of market failure.
Matic is a certified Service Design Thinking Facilitator, and the creator of the Set-Based Integrated Innovation Business Game co-developed with a multinational Swiss company. He completed his Master’s degree in Global Product Development and Management at Cranfield University in 2012.
Matic is a co-author of the Lean Product Development Best Practices book, and several journal and conference publications. He regularly appears as a speaker and workshop holder at various lean, product development and innovation conferences
Susana is currently the Head of Innovation Portfolio at Product Innovation in Telefónica. After fourteen years working on different areas at Telefónica, in the last five years her career has focused on innovation and strategy. She has been also a member of the core team that defined the current innovation model at Telefónica I+D. In her current role she drives the innovation process, the key tool for managing innovation projects funnel; and runs the innovation calls, where employees submit their ideas (these calls are thus the main source of projects for the innovation funnel). She has co-authored the Lean Elephants report, describing the experience and learnings of applying Lean Startup to innovation projects at Telefónica since 2012.
Susana holds a M. Eng. in Telecommunication Engineering and an Executive MBA from IE Business School. And is also currently Associate Professor of Lean Enterprise at the IE Business School.
MARÍA ELENA ORDÓÑEZ Y REVUELTA
Lean Analytics Association
Dr. Ordóñez is responsible of the Research Center for Family-Work Balance (CONFyE) leading strategic projects integrated to the strategy of the IAE Business School from the Universidad Austral in Argentina. She joined at Lean Analytics Association (LAA) in 2015 as a Sr Researcher investigating how companies implement lean thinking in the innovation process. She collaborated with Airbus and Telefonica in Spain to discover their practices and document their cases. She also supported the organization of the Lean Innovation Forum which took place in Lausanne, Switzerland.
She has over 15 years of experience working in different organizations and her research interests are: Innovation, Change Management, Corporate Social Responsibility and Work-Life Balance.
Maria Elena obtained her PhD in Business Administration from University of Navarra in 2014 (Spain) an MBA from IAE Business School in 2004 and Bachelor’s Degree as a Public Accountant from the National University of Córdoba (Argentina).
Lean Analytics Association
Dr. Flores has over 20 years of experience collaborating as internal or external consultant in different manufacturing and services organizations, leading several initiatives related to Lean Thinking, Business Process improvement, Six Sigma, Supply Chain, Change Management, Open Innovation, Digital Transformation and Human Centered Service Design; providing also training and coaching.
She is co-founder and president of the Lean Analytics Association (LAA) and visiting scholar at the College of Management of the Ecole Polytechnique Fédérale de Lausanne (EPFL) in Switzerland.
She carried out her Post-doc at EPFL collaborating at the Lean Product and Process (LeanPPD) FP7 European project from 2009 to 2013. She completed her PhD in 2006 at the Politecnico di Milano studying Open Innovation Models to enable Industry-University collaboration for innovation. She obtained her Master’s Degree in Manufacturing Systems in 1999 and a Bachelor’s Degree in Mechanical Engineering from Monterrey Tec (ITESM) in 1996.