Section 1 : Mergers in the Telecoms sector
Over the past 2-3 years, there have been many mergers and takeovers in the telecommunications sector, and more are envisaged or else in the pipeline for the coming period also. There are also some initiatives that would see telecommunications companies merge with non- telecommunications companies: for example there is a proposal in place for BT to merge at least some of its interests with EE. The quality of leadership, culture change and its management and development in such positions is critical.
Questions
• Describe the traits and styles that are present in leadership positions in the telecommunications industry. Of these traits and styles, which are the most essential for leaders in delivering enduring high performance in the sector.
• What are the key attributes required of those in leadership positions in terms of implementing successful mergers and takeovers?
• In any merger, it is essential that the newly merged company gains a life and existence of its own very quickly. What actions do those in leadership positions need to take in order to ensure that the new company does have its own identity as soon as possible ?
• Where do the resistances to change come from and why do these resistances exist? What steps need to be taken by those responsible for driving organisation change and
advancement in order to overcome these resistances?
Section 2: HR
When developing organisations for the future, attention to the staffing aspects is essential – this represents managing the return on investment of up to 75% of working capital. Attention to questions of underperformance is therefore vital.
• Using the Belbin approach as your basis, state the issues that this form of HRM approach would have to face when restructuring an organisation and its teams to ensure the best possible returns on the staff investment.
• State clearly the costs and benefits that accrue as the result of a strategic approach to HR development; and define the benefits that you expect to see, and give some example timescales with reasons as to when you might expect to see them.
Section 3: IBM, Virgin Telecommunications and data management developments
Like every other data driven organisation in the world, everyone in the telecommunications sector is concerned with managing its data to best advantage, so that it is not cluttered with data that is useless, and so that it can get to the target audiences that it needs if it is to develop, market and service its products and services to its own best advantage. With this in mind, a proposal exists for a joint venture between IBM and Virgin Telecoms to develop an approach that will enable Virgin to target its telecommunications customers in promoting its other products. Virgin especially would like to be able to develop its healthcare business using the services that IBM can provide, targeting people with products and services promoting healthy lifestyles, pedometers, diet management apps, calorie counters and heart and blood pressure monitoring apps.
Questions
• What kind of an innovation is this and why have you arrived at this conclusion (use Tidd’s model approach to support your answer)?
• What is the proof of concept required for this approach? What further work needs to be done in order to establish whether or not this initiative is truly viable for the long term?
• What are the strengths and weaknesses of the approach proposed? What are the risksinvolved?
• How are you going to measure the innovation for success or otherwise?
A. Mergers in the telecom sector:
A: As per Pettinger (2010), the following traits and characteristics are present in the telecommunications industry. It is important for potential leaders to inculcate these traits in their workstyle in order to deliver more powerful and efficient business results:
- Communication: A leader comes in contact with numerous people across the different spheres of business. The key aspect of communication involves information sharing, understanding and responding back – a leader should make communication a continuous and effortless process for every individual he comes in touch with.
- Decision-making: Leaders need to take decisions taking into account multiple criteria and scenario in a very small span of time. Also effective decision making requires a holistic view of the situation with ability to gauge pros and cons of potential decisions on the business scenario. It is to be kept in mind that decisions are both strategic and tactical in nature; hence leaders need to take into account long-term and short-term measures of their decisions.
- Commitment: A leader brings a high energy team into the table which successfully delivers business performance across various constraints and drives the organization towards continuous growth.
- Concern for staff: A leader understands that the strength of the team lies in the teamwork of the individual members. Collaboration and trust enables a leader to transform and motivate her team into a group of high-performers. The power of care and concern elevates the spirit of the staff to deliver for the team whole-heartedly.
- Quality: Dedication to quality of products and services is an important internal organizational benchmark. A leader needs to ensure that irrespective of staff or client, the commitment to quality is essential to the success of any business.
- Business values: It is considered to be a very important attribute which showcases an organization as ethical, genuine and responsive to the core needs of the stakeholders. More than anything else, these values are people-centric and focus on triple bottom line.
- Personal integrity: A leader is someone everyone in the organization looks up to. Hence she needs to uphold the highest value in terms of commitment, dedication and honesty.
- Positive attitude: At times business run through difficult circumstances. A positive attitude transmitted across the organization will help sustain a profitable business even at the face of adversity.
- Mutuality and dependency: A good team members understand strength and weakness of various members and support each other well-knowing the limitations of each other at work.
Johnson (2015) looked into the 5 major types of leadership styles that are present across the organization. A brief understanding of the types is given below:
- a) Laissez-Faire: It is useful for employees in the organization who are in mid-senior level and do not require constant supervision. Although this tactic empowers employees to perform better, it might not be particularly useful for those requiring support or guidance for performance.
- b) Autocratic: In this case, leaders take decisions solely on her discretion and without inputs from others. Full command and authority lie with the leader herself. A country like North Korea is an ideal example of autocratic leadership. In case an employee is creative or willing to think beyond the directive, the leadership will not yield good result.
- c) Participative: It is a leadership style which thrives on continuous discussion and input from the overall team, however the final decision making power rests with the leader only. It makes the employees feel that their opinions are heard and valued.
- d) Transactional: A team which works with the idea of reward and punishment on fulfilment of goals, the transactional leadership work well. It is important to keep in mind that in this form of leadership, developmental activities play a key part in achieving goals.
- e) Transformational: This form of leadership brings the whole team on the table, providing high visibility and clear communication across the organization. The team is aware of the long term vision set by the leadership and tries their best to aligns their objectives accordingly.
Among these various traits and styles present, one can argue that in order to be successful in the telecom sector, the following factors will also play a vital role:
- i) The geographical consideration of business operation which will vary from country to country – the specifics of telecommunication industry in that country or region will be a driving factor.
- ii) The competitive landscape which will determine the business scope for market size, revenue model and profit margin
- iii) The specific culture of the country and how it will integrate with the company under consideration.
The various literature discussed however doesn’t pin-point any specific trait or leadership style which will enhance and deliver higher business performance, however keeping in mind the ultra-competitive nature of the telecom industry across various countries in the world, we can postulate the following traits which might deliver strong performance:
- i) Vision: Having a clarity regarding the technical requirement and latest developments, along with competitive offerings are critical for success in the industry.
- ii) Flexibility: The telecom industry changes very rapidly through introduction of new technology and service offering – the organization also needs to adapt itself to the changing market need.
- iii) Communication: Since the margins are often wafer-thin, it will require very robust communication and motivation to keep the tempo alive within the employees, driving them towards business success.
b) What are the key attributes required of those in leadership positions in terms of implementing successful mergers and takeovers?
A: Successful mergers and takeovers are critical and the following factors play important roles in defining the same:
- i) Drive: Organizations need to allocate the right leader to drive the change in terms of merger and substantial effort needs to be put into place to achieve the same. The drive should be across the organization and across all spheres of the employee pyramid.
- ii) Leadership motivation: There is no doubt that employees look at their leaders for motivation and going beyond the call of duty on certain occasions. A leader who guides the team through example, will be more successful in case of a successful merger and acquisition.
- iii) Honesty and integrity: Often we have seen mergers and acquisitions resulting in job loss or change of roles, promotion and demotion etc. The newly appointed leader needs to handle all such organizational issues with commitment towards excellence.
- iv) Cognitive ability: The leaders’ ability to look beyond the words spoken and understanding the feeling of the employees result in better performance. The pulse of the business at time provides more information than what can be seen by the naked eye.
- v) Knowledge of business: Above all, the business leader must keep herself abreast of what is happening across the newly merge organization. It is essential to keep a tab on the ground reality.
Apart from these points, it is important to remember that strategic and tactical approach are also vital – the leader must keep in mind a short term and long term view of every action taken and what can be the potential consequences. Moreover, sometimes a leader also needs to be ruthless to get her point across the newly merged organization, where resistance to new leadership can be a roadblock to start with.
c) In any merger, it is essential that the newly merged company gains a life and existence of its own very quickly. What actions do those in leadership positions need to take in order to ensure that the new company does have its own identity as soon as possible?
A: As we know, a merger is seldom between 2 equals however efforts must be put to ensure that the resulting organization is more powerful than that of the two combined. According to various consulting firms who handle global merger assignments, the following actions ensure a rapid post-merger transformation:
- i) Tap synergy: An appropriate synergy framework can help organizations capture the most from the 2 organizations. It is important to build a firm foundation before gaining on the synergy staircase.
- ii) Create cultural bonding: Often 2 organizations fail to merge because of the lack of cultural similarity between them. Hence it is important for organizations to understand the cultural uniqueness of both the organizations and how they can be leveraged to the full.
- iv) Speed up integration: The integration towards the merger need to be well developed with key deliverable and milestone lined up across the work schedule. The sooner the merger is complete, the faster will be the functioning of the new organization.
Apart from these parameters, we also need to realize that every organization has a story to share. The leadership needs to flexible enough to understand the core value every division or employee has to offer and take them in their stride for the post-merger functioning of the organization.
There are certain occasions where post-merger organizational restructuring has led to a failure. Certain organizations thrive under certain leadership styles (as discussed previously). The merged organization will however face a new identity and the success of the same will be a function of the new cultural and leadership principle on offer.
d) Where do the resistances to change come from and why do these resistances exist? What steps need to be taken by those responsible for driving organization change and advancement in order to overcome these resistances?
A: The resistance to change is a natural process and can be broadly divided into 2 major types – individual resistance ( economic factors, habit, security, selective information processing, fear of unknown, etc.) and organizational resistance (limited focus of change, group inertia, structural inertia, threat to expertise, threat to established resource allocation,threat to established power relationship, etc.)
Also as Robbins, Judge and Vohra (2012) explained in their book of Organizational Behavior, the forms of resistance can be of 2 types: overt and immediate (voicing complaints, engaging in job actions etc) and implicit and deferred (Employees losing motivation, more number of error at work etc)
The issue of change resistance can best be tackled by using ‘Lewin’s 3-step change model’. There are various factors which are at work while engaging with the community for an effective change management. The factors can be listed as
- i) Education and communication: The main idea and goal behind the change must be communicated to the people at large without hindering their point of view.
- ii) Participation: If the employees or team members take part in the decision making process, then the resistance towards change lessens.
- iii) Building support and commitment: Several skill building and training sessions can be incorporated to reduce the worry and fear among employees of losing their jobs.
- iv) Selecting people who accept change: The employee hiring policy can be re-tuned to allow those who enjoy the process of change.
Although these factors are at play, the 3-step change model talks about how to implement the changes:
- i) Unfreezing: The inertia to oppose change will be naturally quite high at the beginning. The organization must structure the change management process in such a way that it slowly overcomes the pressure from individual and group non-conformity, and then integrate the change into the system.
- ii) Moving: Once the inertia lessens, the organization needs to structure and implement the change management process towards the end-state.
- iii) Freezing: The final hurdle comes at developing a fine balance between the causal and restraining forces at work. Once this step is achieved, the organization can move into the new process and policy making.
B. HR
A:While trying to ensure 75% ROI for human capital, it is essential to realize that according to Belbin (1985), a successful team is composed of 3 groups – action-oriented, people-oriented and cerebral. The following diagram talks about the 9 roles present with these 3 groups:
As we know, success of a team is measured across 2 parameters – success of the team members, followed by overall success of the team. Hence in order to stay ahead of the competition, the Belbin approach will yield result only when the team composition is chosen wisely. This concept of division of labor however faces tremendous challenge when
a) the staffing policy is not aligned to the Belbin principle and b) the roles are not made clear to the employees. Also, it is to be kept in mind that the rewards policy should be structured in such a way that it honors the work of each and every role individually, rather than only rewarding the team. The theory of disproportionate reward will not work well in this case since not all individuals are supposed to perform similar activities. The incentive scheme will be required to motivate employees to outperform themselves rather than the rest of the team members. In instances where a certain role is missing, the chairman can assign the added responsibility to 1-2 team members, thus enhancing their role as well as reward compensation. The selection however needs to be done meticulously.
b) State clearly the costs and benefits that accrue as the result of a strategic approach to HR development and define the benefits that you expect to see and give some example timescales with reasons as to when you might expect to see them.
A: The following factors contribute towards both cost and benefit in a strategic HR development in an organization:
- a) Strategic hiring: Organizations develop a blue-print to recruit at top and middle level management to attract and retain the best talent in the industry as a short term policy. In the long run, organizations develop a strategy to recruit and develop young minds who will lead the business transformation for tomorrow. While the first policy delivers immediate result (within 6-12 months) in terms of both top and bottom line, the second policy is far more intrinsic in nature and requires a broader timescale (8-10 years) before the results are obvious. However, developing the right talent pool from an early age provides an organization with several benefits such as horizontal business understanding; having a diverse view on any matter and most importantly understanding the ground reality better, having worked closely with the stakeholders. Many organizations nowadays run leadership programs spanning across a decade where they groom future leaders from top business schools. The initial cost of investment is high but it pans out over a period of time.
- b) Rewards and recognition: While working with a diverse set of people and across culture, the rewards and recognition strategy need to be diverse as well. Entry level employees look more for cash or similar reward but middle level managers look more for flexibility in their work life balance. Developing such flexibility will require investment in terms of alternative workforce or developing parallel skill set. However, with the right policy and reward system, strategic HR can help reduce the attrition rate, thus reducing the cost of employee acquisition and at the same time, motivate employees to push themselves further. These policies are generally long term in nature (2-3 years) while benefits also are seen over a similar period of time frame.
- c) Learning and Development: Many organizations have developed dedicated teams to head learning and development (L&D) across the business verticals. The main intention here is to elevate the employee potential to make them understand business potential and also encourage to employee to work beyond her normal course of work. L&D serves as a ladder for many individuals to climb higher in the organization through knowledge and personality development. Organizations generally tie up with 3rd part experts to provide the learning module to the employees which involve investment. However the return is expected only after a minimum 1 year time which is allowed for the employee to culminate the learning and integrate with their work schedule on a day to day basis.
C: IBM, Virgin Telecommunications and data management developments
a) What kind of innovation is this and why have you arrived at this conclusion (use Tidd’s model approach to support your answer)
A:According to Tidd’s innovation model approach, this innovation is more in terms of organization alliance born through strategic integration. According to Tidd, there are 6 major forms of collaboration (Managing Innovation: Tidd, Bessant and Pavitt, Ch: 8) as shown below:
If we look in terms of the different forms of collaboration, we can take the venture between IBM and Virgin communications to be of ‘Strategic alliance’ since it offers Virgin the chance to grow its healthcare business using the technology IBM has in offer. It however doesn’t talk about any potential benefit for IBM in general; hence we can-not term it as Joint Venture or Network in that sense, since there is no complementary know-how or strong learning potential for both the organizations. Also, the term of the deal can be flexible in nature with a short term goal or a long term goal in mind for the organization.
Using the Innovation framework by Tidd, where the 4 core innovation models are discussed, we can also term this innovation concept as ‘Incremental Innovation’ since Virgin telecommunication will necessarily be true to the core business concept of telecommunication but they want to expand their product offering and business portfolio to those customer who require additional value before buying the product –the various instruments and apps will come in handy for that. Also, we need to understand that IBM is a technology company while Virgin is a telecommunication company – it will be difficult for Virgin to adopt the core business value of IBM in such a short period of time, hence a timely and slow adaptation to the innovation process seems critical for success – hence the ‘Incremental Innovation’ approach sounds more appropriate.
b) What is the proof of concept required for this approach? What further work needs to be done in order to establish whether or not this initiative is truly viable for the long term?
A: In order to make this work, IBM and Virgin communication need to take the following approach:
- i) Market feasibility: It is essential for any organization trying to develop a new product or service to first understand the pulse of the market – what they are looking for, at what price point and through what channel of promotion will it work. This is important because many a time organizations develop the right product for the wrong market and vice versa. A good market study removes a lot of uncertainty about the new product and helps the organization speed up the prototype building process.
- ii) A trial sample: Often it is best to offer a prototype or sample product to the customer to understand and visualize their reaction and gauge their reflection on the appearance and utility of the product. A sample study can also incorporate changes in the product which will create a wider appeal among the customer.
- iii) Ability to scale up: As we know, customer demand is unprecedented and can pour in immediately after a new product launch or release. Hence it is absolutely essential for the organization to gauge and understand the demand flow over a certain period of time. Ability to scale up and satisfy the customer demand successfully will deliver a strong commitment towards the stakeholders.
- iv) Core business message: Every successful product delivers a strong business message – hence it is also vital for Virgin to figure out the associated core business message for its product which will align the customer need at the right price point. It will help them sustain an early mover’s advantage in the market in spite of threat from new entrant.
In the long term, the successful viability of the decision will also depend on recruiting the right people and having the right set of competency to drive the business forward.
c) What are the strengths and weaknesses of the approach proposed? What are the risks involved?
A: The approach proposed certainly isn’t free of flaws and possess certain strength and weaknesses:
- a) Strength: It allows Virgin to gain access to the technological know-how of IBM which otherwise would had taken them a considerable time to develop, test, rectify and release in the market. Having the technological edge provides them with a head-start against competition. Also, when it comes to technology, IBM is a big name which evokes credibility, a genuine attitude and most importantly trust. Virgin will be able to bank on the same going forward. Finally, the advantage comes for Virgin at minimum cost – probably paying a royalty or part of the incremental revenue to IBM compared to an initial investment in millions of $ in case they wanted to develop the technology from scratch.
- b) Weakness: Virgin will not own or have proprietary rights to the technology in use which makes them vulnerable in case the business deal doesn’t work out in favor of IBM. As in the past we have seen that it is relatively easy to copy technology in case there is no patent and also share technology on a common platform (like android uses a freeware for developing apps) which reduces the competitive advantage for the incumbent. Virgin also needs to pay heed to terms and conditions imposed by IBM since they will provide the technological support and architecture for the entire project – it might be difficult for Virgin to take autonomous business decisions in the face of a crisis and require IBM to support every step they take. Finally, we cannot discount the factthat going forward IBM might also venture into similar business opportunity which will create a conflict of interest in terms of business fundamentals.
Virgin is no doubt looking ahead to diversify and expand their product portfolio – since there is little investment, the financial risk involved will be low. Also, Virgin has little to lose in terms of Business Empire since this is a new venture and supported by a technological powerhouse. The biggest risk for me however lies in the brand identity – Virgin has been always associated with something radical, subtle and taking the world by storm. We are yet to see Virgin fail in an initiative. Hence there is a subtle risk of losing brand resonance which right now resonates with success. Richard Branson being an icon in the world of entrepreneurship would definitely want to account for this risk.
d) How are you going to measure the innovation for success or otherwise?
A: Generally speaking, innovation should spark growth. Now growth in business domain can be measured by either the top line (revenue growth) or bottom line (profit growth). Few organizations, especially in the e-commerce sector in developing countries use market share at the cost of profit as a driver for success, through various innovative measures but those actions are unlikely to be sustainable in the long run. Hence innovation can be measured across the following index:
- i) Creating value for shareholder: Through top line or bottom line growth, increasing market share with profitability or expanding through new business opportunities in same or new product category, in same or new market region.
- ii) A sustainable move: Apart from ensuring short term business achievement, innovation should also lead a sustainable future, in terms of ensuring environmental sustenance, human resource sustenance and sustenance of the society (concept of triple bottom line).
- iii) Creates a benchmark: Although the measure of success is relative, it is imperative to understand that innovation should lead to a benchmark creation in the industry. If we look at from a business strategy perspective, many a move has been deemed unsuccessful because of the lack of long-term vision and inability to break free from the mass. An interesting concept to talk about here can be ‘Blue Ocean Strategy’ where the incumbent transforms non-customer into customer and thereby setting a new benchmark for business to follow.
Overall success of innovation is a relative measure but if we look into the history of organizations that have been counted as successful, we would notice that almost all of them have a single unique trait – leadership. It is unquestionable that in order drive innovation through the heart of the business and make it a success, there needs to be a strong leadership team at work who has the right vision, the right resource and the right tactical firepower to deliver the goods. It is seen that brilliant innovative ideas lack a firm implementation plan and eventually die out. Only a strong leader will be able to grasp the complete detail, filter and cascade the same down the organization and transform the business through the power of innovation.
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