How to become a lean telco that moves at startup speed

In telecom, we are in a race to revenue and growth. Telcos understand how to execute iterative improvements with meticulous planning and operational precision. But the same strengths that help minimize risk also limit disruptive innovation.   

Our guest author today is industry analyst and consultant Patrick Lopez who recounts his success applying a lean startup mentality to large telcos, including during his time leading new business discovery at Telefónica, where he served as Global Vice President of Networks Innovation and implemented its Lean Elephant framework. Most recently, Patrick led product management for Open RAN, packet core, cloud and automation for NEC and today is an independent telco and cloud industry analyst and strategy consultant.   

Patrick notes that mobile’s value lies not in infrastructure but the services it enables. Success isn’t built off of assumptions about customers but insights gleaned from real customer interaction and iterative experimentation. Gradual funding stages and adoption of agile, experiment-driven processes that set objectives, test hypotheses and continuously adjust based on feedback allows the discovery of value, while reducing uncertainty. It is a similar theme Glyn Povah of Telefónica Tech emphasized in a previous Zero-Touch Telecom newsletter post.   

In this edited excerpt of a post Patrick shared to his {Core Analysis} blog, he details his experiment tweaking and implementing the Lean Startup methodology to foster rapid telco decision-making, empower innovators and ensure resources are invested in projects with proven potential.   

Value is a subjective topic but in a telco context, I have focused on creating sustainable growth strategies. Very simply, sustainable growth comes from sustainable differentiation, which stems from the creation and evolution of technological, commercial and operational characteristics that become difficult, expensive and time consuming to emulate from your competition.  

Every telco is extremely skilled at managing technological and operational risk, through iterative, waterfall evaluation and tests, resulting in deployment of high availability and capacity networks. This methodology has also led to lengthy evaluation periods and deployments. Most vendors will recognize that the sales cycles in telecom are over two years long and that making any change in a commercial network takes several million dollars or euros. This has led to an oligopoly where only a handful of specialized vendors are able to sustain economically these drastic processes.  

While open API and open RAN projects have shown progress, real value discovery and associated cost reduction and effectiveness comes from a change in methodology and processes to take advantage of more nimble vendor offerings.  

Introducing the Lean Telco Methodology   

I propose a Lean Telco methodological framework for identifying, evaluating, testing, sourcing and deploying telco products and services that will provide sustainable differentiation with drastically different cost structures than the incumbent versions. 

Once you have successfully changed the cost structure of evaluating, buying, deploying and managing telco infrastructure and capacity, you can survive as a high capacity, low overhead provider of connectivity. But if you want to strive and grow, you need to attack the revenue part of the equation. Actually, one could argue you should start with growth as an objective and look at cost structure as an optimization challenge. Growing revenue sustainably in a telco environment comes from either having more people use your existing services or use more of them, connecting new people or creating new services. I have prototyped, tested and launched projects in each of these categories in my role at Telefónica.  

1. More people use existing products. This is difficult for telcos because those products (e.g., residential and enterprise mobility, internet, telephony, TV, etc.) are poorly differentiated given that they rely on the same technology from the same vendors. As a result, most telcos end up trying to deploy first (e.g., 5G, SDWAN, etc.) or claim a performance advantage, usually derived from a superior spectrum or infrastructure investment. The only real differentiation ends up being pricing, which is expensive and not sustainable. 
2. Customers use more of your services. This does not necessarily lead to more revenue as bundles and unlimited plans are periodically rolled out to counter internet hyperscaler offerings that rely on a different cost structure and revenue model. Again, since these services are mostly the same from one operator to another, differentiation comes from bundling and pricing. This is not sustainable. 
3. Connecting new people and clients. While a worthy endeavor, the last unconnected live mostly in rural, low density areas and selling services to new corporate clients usually means competing against public cloud offerings that are more cost effective and flexible than what most telcos can offer. There is a possibility for growth here but it requires breaking out from the current telco technological framework and a willingness to assemble new value chains. 
4. Creating new services. This is where the most value lies if we look at the growth of telephony over internet, video streaming services, social media and social messaging, SDWAN and cloud security. It is also the area with the most uncertainty and risk. 

“Telcos are not well equipped to manage the risk and uncertainty inherent in the discovery and creation of new services. The methodologies, organization and processes they rely on are based on delivering with absolute certainty a product or utility with zero default to a mass market without variation. This model works well for mature, disciplined technology and vendors but not at all for exploration and innovation.” 

Too often, telcos build an extremely detailed plan with contingencies. They budget it, staff it and resource it to execute it within a given timeframe only to discover that the client didn't really want, need or value what was proposed (e.g., push-to-talk, IMS/VoLTE, RCS, 5G NSA).  

Just like in Lean Startup, the methodology I propose to overcome inherent limitations supports the progressive liberation of resources and funds as commercial uncertainty is shed by direct client interaction, testing and feedback. In a typical telco environment, the client interaction is at the very end of the process. Here, we are going to intersperse it throughout the development process to allow pivots or early termination if the hypotheses are not met. Trained, mentored and helped by many, I have adapted several methodologies to help telcos identify, validate and deploy new services in an agile and cost-effective fashion.

Creating a lean telco 

Wardley Maps help establish situational awareness and a topographical representation of the current environment, such as telco network virtualization (NFV), orchestration (MANO), cloud native distribution and orchestration (K8, micro service), and hybrid cloud/edge computing (e.g., telco private stacks, AWS Outpost, Microsoft Azure Edge and Google Distributed Cloud).   

This is not a map until we apply the level of maturity (e.g., genesis or handmade, custom or solution, product, utility, etc.) to each of them, as well as their direction and barriers on the horizontal axis. On the vertical axis, instead of using Wardley's traditional visibility method, I use technology stacks such as access, transport, core network, OSS /BSS and orchestration. The purpose of the map is not to be precise or even right, but to share and compare comprehension of the environment, the players, their direction, velocity and the barriers. This visualization enables a level of shared understanding necessary to strategic discussions and gameplay around permutations and “what if” scenarios. Once priorities and areas of risk and opportunities are identified, I use the Lean UX framework and Lean Startup methodology to systematically identify potential current problems that need solving, unmet customer needs, unsatisfactory experiences and potential new products and services that customer wouldn't even know or have an opinion about.   

A series of workshops is usually best to crystalize the ideas. Once identified, they need to be refined into customer centric objectives. Contrary to popular belief, customer centricity is not necessarily going to prospective customers and asking them what they think. Most wouldn't have any idea about what to do with 5G, augmented reality or a private network if you asked them. This is where lean UX and empathetic composite models are useful. Each idea is reviewed by a jury and graded, with the jury defining which ideas should graduate to the next stage. The ideas are shaped and staffed as independent projects with dedicated resources, budget and time box. Each project lead has the overall responsibility for moving the project to the next phase and to deliver the results of the current phase to justify additional resource and budget for the next.  At a high level, the phases are:   

• Ideation ($5K—$10K | 1—3 months). The idea is shaped into a project with central opportunities, areas of innovation, right to play for the company, sustainable differentiating factor, commercial high-level opportunity, and cost and timing for the next phase. 

• Prototyping ($20K—$50K | 2—6 months). A prototype is built that may or may not incorporate development or use of technology for the target invention. The idea is to emulate the resolution of the problem and put it into customer hands as early as possible to identify whether the objectives and assumptions are framed properly and whether the client would value the resolution. 

• Beta ($300K—$600K | 3—6 months). Once the central problems are identified and we know the client values the resolution, it is time to create a minimum viable product to prove that it is technically, commercially and organizationally possible to solve that problem and that the value created exceeds the costs. 

• Product ($1M—$3M | 3—6 months). Once it is proven that the solution is possible, it is necessary to prove that the solution will scale and be deployable with a mature operational and commercial model. 

• Growth (TBD). The project must become commercially and economically sustainable. 

Each phase requires client interactions in the form of actual tests in conditions as close as possible to a commercial network. In each phase, we break down the project into customer centric objectives, each with a hypothesis supported by a series of experiments that will validate or invalidate the hypothesis. It helps to set clear expectations and success criteria for each of these. 

Wardley Maps helps again here, framing which tasks and experiments are more suited for pioneers, settlers or town planners and whether the project lead can adopt the required mental posture in this phase or whether someone else needs to take the lead. The result is a portfolio of new revenue-generating projects that are systematically validated by customer feedback, capacity and propensity to pay. Together, with a robust operational and commercial model, periodically reviewing and grading each project before they graduate to the next phase and resource investments supports a nimble, measured, progressive investment plan, as risks and uncertainty decrease throughout the life of the project.  

It is time to become a lean telco and swiftly pursue telecom’s next phase of necessary growth.   

Mention Patrick Lopez in the comments to start a conversation.