“One of the pictures we use is the Most Wanted posters famed in Western movies to now being most wanted,” Global CIO of Telefónica Phil Jordan says of how his team has moved from a negative perception to a positive image within the Spanish global telecommunications provider. He has been with the company since September 2011, and in the past four years has overseen one of the largest transformations in a global business during a time when the Spanish economy has not been a clement climate.
“IT has become so much more relevant, with networks being shared and more commoditised, so for Telefónica, it is about data-driven product personalisation and digital customer experiences,” Jordan explains of how his team is helping the organisation adapt to the disruptions in their sector.
“We are now adding Big Data to lots of experience on how to optimise the network for our customers and that is exciting,” he says of how technology teams can best support customers, and therefore the business, to realise value with data.
“In the past, telcos viewed the network as the core differentiator and typically spent four to five times as much on the network as they do on information and technology. The digital and data revolution is changing the focus, and IT and data now sits right at the core of our business as one of the sustainable differentiators,” the CIO says of how he has shifted the focus of his team and their role.
“For the first two years, we had a struggle to get the organisation to see IT as more than a system of record,” he reveals. After four years of transformational ‘heavy lifting’, and still more to do, Jordan now finds himself in a position where 65% of IT capex is being spent on business transformation, a major shift away from investment in thousands of small, incremental legacy projects that was the case when he arrived.
“Allowing complexity and legacy investment to grow will strangle the business. In our global transformation, we are replacing the entire customer facing IT stack in 16 different countries in parallel with strong benefits and proof points of transformation already in countries such as Mexico and Argentina. IT will emerge as a different function that will be customer- and data-centric. It is the ‘I’ in IT we need to focus on,” Jordan says of the role out of a new vision across the markets Telefónica operates in.
Information is one of the three pillars to Jordan’s strategy at the company. He dubs it ‘3I’ and recently spoke to CIO UK about it:
“I1 is integration – the ability to create and manage an ecosystem of services and players, and provide value to Telefónica customers. Our I3 organisation of the future will be expert at integrating services in a far more agile and faster way, based on our standardised and commoditised core. This is key to our future opportunities as a platform company in the digital world and a partner of choice.
“I2 is innovation. We will use the outside-in and customer focus to recapture our innovation origins. This was lost a little in the industry a few years ago when other people started innovating in our core product areas. WhatsApp and Viber – and even Apple and Google – came after telcos. We were all in a weak position because of the closed nature of our ecosystem; and these new, infrastructure light and digital native companies could innovate faster than we could in our core.
“So now we are rediscovering that innovation DNA. Once again, if you standardise and commoditise the core, and move the focus away from the IT function into something that is closer to the customer, you force yourself to not only be more innovative, but to be more innovative in a way that’s closer to the customer. In addition, our open platform focus will have the effect of making us far more accessible to fostering innovation in the future. That innovation will come from a broad ecosystem, and not from the traditional sources for a telco.
“I3 is information. The traditional focus of IT and systems of record is moving to I3, and with it a much greater focus on customer engagement, interaction and how customers live their digital lives. We will use our privileged position of standing next to customers as they live their digital lives, and turn it into real value to the customer (and consequently, to ourselves) through a trusted relationship where we always agree on the value and privacy exchange with the customer.”
“The role changes dramatically when you are managing multiple countries. As you go from one country to multiple countries, you become less of a leader of IT and much more of a business leader. Global visibility gives you endless challenges and opportunities to make a difference in different environments, cultures, in mature and immature markets, and even where we vary between incumbent and a challenger brand.
“I spend so much of my time managing the process of change and it becomes less about the technology. I see myself as someone that knows a bit about technology rather than the other way round. You spend more time talking with the CEOs of the business units. It completely bewildered me to begin with. When you come to the centre and look out, it is very different,” he admits of moving into a global role. “So I have, as a result, become someone who understands the whole business, and its rhythms and the heartbeat of the business.
“The Latins don’t debate, they want you to prove it. As a Brit, the first year I thought I’d made a sound and rational strategy, then realised that you have to prove it,” he says with a smile of the culture difference he has had to learn and now enjoys.
“CIO is a lonely job that is magnified when you do it on a global role,” Jordan says. As every CIO knows, the impact of their role has is not only the business and teams they run, but those nearest us. Jordan moved his young family to Madrid to lead the transformation at Telefónica and they enjoyed their Iberian adventure, but the CIO and I meet in the Cotswolds, the tumbling hills of England that had been the family home before the Telefónica role called him, and he’s moved the family home to support their education and needs.
“The CEO backed me to move back and we have a regional hub for Telefónica in London,” and his global remit means Jordan is at the operating centres a large amount of time.
South America remains key to the Telefónica business. Although the BRIC countries don’t have the economic lustre they did when the banking sector brought Europe to its knees, they will be brought sharply into focus next summer with the Rio Olympics. London 2012 was a significant games, not just for our beloved Team GB, but also for its impact on mobile as social media communications reached a new zenith. Rio will in all likelihood accelerate the demand on mobile.
“As one of the biggest Brazilian businesses, we care about making the games a success. Brazil is entering a difficult cycle of political instability and recession. Planning has been going on for a few years,” Jordan says of how Telefónica is preparing for the starter’s gun.
Latin America and Spain remain the cornerstones of Telefónica, mobile operator O2, which the Spanish giant acquired in 2005, has been its main presence in the UK, but in March of this year, it was announced that Hutchison Whampoa will acquire O2 for £10.25 billion.
Jordan explains that O2 in the UK left Telefónica as a wireless-only operator in a rapidly converging market. BT, once owners of O2 when it was known as Cellnet, acquired EE a month before the O2 and Hutchinson deal was announced and had been rumoured to be considering buying back O2. The convergence of connectivity services, mobile, fixed and media means operators will continue to consolidate, the CIO says. Jordan began his Telefónica career with O2 as CIO for the brand in the UK and across Europe, having joined from rivals Vodafone. He says O2 brought a dynamic understanding of the customer and marketing to the Telefónica group, and personally he’ll miss it from the Spanish firm’s portfolio. But then, as BT shows, you can always buy these organisations back.
“The UK is one of the most progressive and digital markets around. O2 is a very exciting business and will be missed. One of the sad things about potentially selling O2 in the UK is we lose presence in a mature and highly Digital Market,” Jordan says. Despite only operating in Latin countries, the CIO is clear that this does not mean you have a homogenised strategy for 14 markets.
“The South American markets are all very different, it’s easy to group them together, but not accurate,” he says.
“We are starting to see parts of the Internet of Things opportunity really emerge and as a connectivity business that can offer managed services in many sectors as digitisation takes hold, we are excited about the future.
“Internet of Things is low volume, low latency and it requires a managed service,” he says. This juxtaposes with the high speed, high demand of providing a network and service to customers.
“The consumer aspect of roaming, for example, is expensive, as networks are expensive to run and it erodes the margins. Billions and billions are invested in networks, and we also have to make sure that we keep enriching the experience. With LTE, we’ll see the ability to differentiate for quality of service and people will pay for that,” he reveals.
“We will need to understand vertical markets better,” Jordan says of the Internet of Things opportunity for a network operator.
“The networks are here and perfect for IoT exploitation” Jordan also expects network providers to begin playing an increased role in security as vertical markets embrace the Internet of Things.
Telefónica startup incubator Wayra operates in most markets, including the UK, and the CIO says it is really helping the organisation see the opportunities for its network.
“It looks across the markets at all sorts from ideas, office space, technology frameworks, it’s a great energy for the business. With the Internet of Things there will be a number of interconnected platforms. Telefónica’s future is entirely as a platform company.”