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Harvard Case - Deutsche Telekom 2020: Leading The Digital Transformation

"Deutsche Telekom 2020: Leading The Digital Transformation" Harvard business case study is written by Robert Burgelman, Margot Sutherland. It deals with the challenges in the field of Service Management. The case study is 31 page(s) long and it was first published on : Oct 27, 2020

At Fern Fort University, we recommend Deutsche Telekom to implement a comprehensive digital transformation strategy focused on customer-centricity, service innovation, and operational efficiency. This strategy should leverage technology to enhance customer experience, streamline internal processes, and foster a culture of innovation and agility.

2. Background

Deutsche Telekom, a leading telecommunications company, faced challenges in 2020. The rise of digital competitors, changing customer expectations, and the need to adapt to new technologies demanded a strategic shift. The case study highlights Deutsche Telekom's efforts to transform its business model, focusing on digitalization, customer-centricity, and operational excellence.

The main protagonists in the case study are:

  • Timotheus H'ttges: CEO of Deutsche Telekom, driving the company's digital transformation.
  • Claudia Nemat: Member of the Board of Management for Technology and Innovation, responsible for the company's technological strategy.
  • Dirk W'ssner: Member of the Board of Management for Human Resources, leading the company's talent development and employee engagement initiatives.

3. Analysis of the Case Study

Strategic Framework:

We will analyze Deutsche Telekom's case using the Porter's Five Forces Framework to understand the competitive landscape and the Value Chain Analysis to assess the company's internal strengths and weaknesses.

Porter's Five Forces:

  • Threat of New Entrants: High due to the low barriers to entry in the digital space and the emergence of new technologies.
  • Bargaining Power of Buyers: High as customers have numerous choices and are increasingly demanding personalized experiences.
  • Bargaining Power of Suppliers: Moderate as Deutsche Telekom relies on a diverse range of suppliers for technology and infrastructure.
  • Threat of Substitute Products: High due to the availability of alternative communication channels and services.
  • Competitive Rivalry: Intense, with established players like Vodafone and Telefonica, as well as new digital competitors like Google and Amazon.

Value Chain Analysis:

  • Inbound Logistics: Deutsche Telekom's network infrastructure and procurement processes are efficient, but they need to adapt to the demands of digital services.
  • Operations: The company's core operations are strong, but they need to become more agile and responsive to customer needs.
  • Outbound Logistics: Deutsche Telekom's distribution channels are extensive, but they need to be optimized for digital services and customer convenience.
  • Marketing and Sales: The company needs to adopt a more data-driven and personalized approach to marketing and sales.
  • Customer Service: Deutsche Telekom is investing in digital channels and self-service technologies but needs to further enhance customer experience.
  • Research and Development: The company is investing in innovation, but it needs to accelerate its pace of development and adoption of new technologies.

Key Findings:

  • Deutsche Telekom faces a competitive landscape characterized by intense rivalry and increasing pressure from digital competitors.
  • The company needs to become more customer-centric, agile, and innovative to thrive in the digital age.
  • Deutsche Telekom's existing strengths in infrastructure and operations provide a solid foundation for digital transformation.

4. Recommendations

1. Customer-Centric Digital Transformation:

  • Customer Experience Management: Implement a comprehensive customer experience management (CEM) program to understand customer needs, preferences, and pain points. Utilize customer journey mapping, service blueprinting, and the SERVQUAL model to identify areas for improvement.
  • Service Innovation: Invest in service innovation to create new value propositions and enhance customer experience. This includes exploring service-dominant logic, co-creation, and technology-enabled services.
  • Multichannel Service Delivery: Offer seamless and integrated service delivery across multiple channels, including online, mobile, and physical stores. Leverage self-service technologies and customer relationship management (CRM) systems to personalize customer interactions.
  • Customer Feedback Management: Establish robust customer feedback mechanisms to gather insights, identify areas for improvement, and measure customer satisfaction.

2. Operational Excellence:

  • Process Analysis and Optimization: Conduct thorough process analysis to identify inefficiencies and bottlenecks. Implement lean services principles to streamline operations and improve productivity.
  • Service Level Agreements (SLAs): Establish clear SLAs with customers to define service expectations and ensure accountability.
  • Service Portfolio Management: Optimize service portfolio based on customer demand and market trends. Explore service modularity and service outsourcing to enhance flexibility and efficiency.
  • Employee Empowerment: Empower employees to take ownership of customer service and problem resolution. Implement employee incentives and performance management systems that align with customer satisfaction goals.

3. Fostering Innovation and Agility:

  • Organizational Culture Change: Cultivate a culture of innovation, experimentation, and agility. Encourage employee empowerment, collaboration, and risk-taking.
  • Hiring and Recruitment: Attract and retain talent with digital skills and expertise. Implement diversity and inclusion initiatives to foster a diverse and inclusive workforce.
  • Management Styles: Encourage leadership styles that promote collaboration, communication, and innovation. Implement agile methodologies and project management tools to accelerate innovation cycles.
  • Strategic Partnerships: Explore strategic partnerships with technology companies and startups to access new technologies and expertise.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  • Core Competencies and Consistency with Mission: The recommendations align with Deutsche Telekom's mission to provide innovative and reliable communication services.
  • External Customers and Internal Clients: The recommendations focus on enhancing customer experience, streamlining internal processes, and improving employee engagement.
  • Competitors: The recommendations address the competitive landscape by emphasizing innovation, customer-centricity, and operational efficiency.
  • Attractiveness: The recommendations are expected to drive business growth, improve customer satisfaction, and enhance operational efficiency, leading to increased profitability.

6. Conclusion

Deutsche Telekom has a significant opportunity to lead the digital transformation in the telecommunications industry. By embracing a customer-centric approach, fostering innovation, and optimizing operations, the company can create a sustainable competitive advantage and achieve long-term success.

7. Discussion

Alternatives:

  • Focusing solely on cost reduction: This approach could lead to short-term gains but could compromise customer experience and innovation.
  • Acquiring digital competitors: This option could be costly and risky, and it might not address the company's internal challenges.

Risks:

  • Resistance to change: Employees may resist the cultural and operational changes required for digital transformation.
  • Technological disruption: New technologies could emerge and disrupt the market.
  • Competition: Competitors could adopt similar strategies and erode Deutsche Telekom's competitive advantage.

Key Assumptions:

  • Deutsche Telekom's leadership is committed to digital transformation.
  • The company has the resources and expertise to implement the recommended strategies.
  • Customers are willing to embrace digital services and engage with the company through multiple channels.

8. Next Steps

  • Develop a detailed digital transformation roadmap: This roadmap should outline specific goals, initiatives, timelines, and resources.
  • Pilot test key initiatives: Implement pilot projects to validate the effectiveness of the recommended strategies.
  • Communicate the transformation strategy to employees: Ensure employees understand the rationale for change and their role in the transformation.
  • Monitor progress and adjust strategies: Regularly track progress and make adjustments as needed.

By implementing these recommendations, Deutsche Telekom can position itself as a leader in the digital age and deliver exceptional customer experiences while driving business growth and profitability.

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Case Description

Tim Höttges was at the outset of his seventh year as CEO of Deutsche Telekom (DT) in 2020. The company served more than 184 million mobile customers and had a presence in over 50 countries. Over the course of the previous 7 years, European telecommunication companies had experienced varying degrees of success. Revenues for telecommunication companies in France, Germany, Italy, and Spain as a whole fell by 14 percent from 2012-2019, while DT's revenues rose by 38 percent, with fully two-thirds of DT's revenues generated outside of Germany in 2019. In late January, 2020, Höttges and his executive team are focused on the challenges faced by European telcos: advances in "digitization," "cloudification" and "softwarization" of the telecommunications network, along with the growth of 5G wireless capabilities, and the emergence of new types of co-opetitive relationships with the hyperscalers, large companies like Amazon and Microsoft that were making efforts dominate the public cloud and cloud services industries and expand into related verticals. This case describes the strategic challenges facing DT in 2020 and beyond that Höttges needs to think about and act upon: (1) the evolution of network technologies to cloud-centric production models, (2) attractive products and services as well as customer interaction through digital channels, synergies, and efficiency levers in internal processes, (3) the battle with the hyperscalers, and (4) the resolution of the fiber-to-the-home (FTTH) challenge in Germany.

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