<AIM Business School>

Managing, Developing and Implementing Strategy

By

<Rabab Taoube>

<7th July 2020>

<Angelina Zubac and GSB004>

Your Name 2018 1 of 20

 Executive Summary

Telecommunication industries across the spectrum are now faced with the

fundamental change of digital transformation, and Telstra is not different. For Telstra,

this push for change comes hot in the heels of OTT competition that is creating an

existential crisis for the traditional aggregators of services. For decades, Telstra’s

traditional and primary role has been in providing voice, text, and TV services with ISP

as a complimentary service. However, people are finding newer, cheaper, and more

innovative ways to stay connected globally through email, WhatsApp, and other digital

ICT services mediated through the cloud. As these changes take effect through low cost

and high-speed penetration provided by telecom companies, the demand for traditional

core services is falling fast and cutting the companies' revenue to size . As a result,

Telstra must find newer and more innovative ways to compete in the digital market

space by setting up its own cloud infrastructure and providing services that can rival

and compete sustainably in the OTT market. To accomplish this, the organization must

take a fresh look at its internal resources and cultivate a leadership culture that is

cognizant of the trends and challenges in the digital market space that it wants to

compete in.

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 Contents
Executive Summary.......................................................................................................2

Introduction....................................................................................................................5

Discussion of Internal and External Analysis................................................................6

Summary of Current Strategy........................................................................................8

Discussion of Strategic Options.....................................................................................9

Strengths.....................................................................................................................9

Weaknesses................................................................................................................9

Opportunities............................................................................................................10

Threats......................................................................................................................10

Evaluation of Options...............................................................................................10

Options Consistency with Mission and Vision............................................................11

Implementation Plan....................................................................................................12

Change Management Approach...................................................................................15

Conclusion....................................................................................................................16

References....................................................................................................................18

Appendices...................................................................................................................19

SWOT Analysis........................................................................................................19

Strengths...................................................................................................................19

Weaknesses..............................................................................................................19

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 Opportunities............................................................................................................19

Threats......................................................................................................................20

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 Introduction

Telstra’s corporation is Australia’s oldest and largest telecommunications

service provider by market share. The company is headquartered in Melbourne and is

listed in the New Zealand stock exchange as well as the Australia stock exchange. The

organization is a full-service telecommunications and information services company.

Telstra's core services include traditional wired telephony, mobile telecommunications,

internet services, and pay-TV through Foxtel with online services and data as

complementary services. Telstra is also Australia’s largest ISP provider, and according

to IBIS World Australia Industry (ANZSIC) Report, the organization currently controls

46% of the total market share (Australia Industry (ANZSIC), 2020). Since the year

2013, Telstra has been in competition with low budget ISPs who are increasingly

eating into the organization’s market share. Traditionally, Telstra has offered more

expensive internet packages through its hybrid fiber-coaxial infrastructure (Jirakasem

and Mitomo, 2019). Through the years 2014-2020, Telstra's annualized growth in

revenue is expected to average at 1.5%.

A Five Forces analysis of the market in which Telstra is a significant player

reveals that the industry as a whole is engaged in a competition that Michael Porter

described as destructive to the industry because of its transference of profits from

players to customers through lowering prices (Dobbs, 2014). Telstra is bearing the

brunt of this unhealthy competition because of younger, leaner, and more agile startups

are deploying higher speed telecommunication products and services while most of

Telstra’s investments in infrastructure are still stuck in an old business model in an

industry that is experiencing a lot of obsolescence. As a result, Telstra’s overall

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strategy involves intensive infrastructural investment in the NBN, which will offer

competitive products and services at desirable prices. Unfortunately for Telstra, a

below-average industry growth in revenue and inability to make a profit is still

inconsistent with its overall goal and strategy of digitization and customer experience

improvement (Jirakasem and Mitomo, 2019).

Discussion of Internal and External Analysis

Telstra's strategy for the year 2019 to 2022 follows a four-pillar based strategy

that aims above all things to: extend its "network superiority and 5G leadership,

achieve global high performance in employee engagement, attain a post-National

Broadband Network (NBN) return on invested capital of 10 percent and improve the

experience of its customers (Telstra2022 - our plan to lead | Telstra Exchange, 2020).

Unfortunately, there are several gaps in the organization's resources and overall

preparedness to attain these strategic targets in the given time. An internal introspection

of the firm's financial, technical, and financial resources, as per the firm's resource-

based view shows glaring signs of overall unpreparedness in attaining the set objectives

(Beamish, Hubbard and Rice, 2008). Telstra board has made several assumptions in

laying its strategies and objectives for the 2019 to 2022 period, but the organization

also seems not to be privy with the evolving terrain of the market and the industry at

large. A lack of strategic agility to implement projects quickly, the rise of Over The

Top (OTT) service providers as more efficient competitors, and unprepared

leadership/human resources in the digitization of the organization are some of the

significant gaps in resources that may derail Telstra from achieving its set targets.

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 For Telstra to have a defensible portfolio of capabilities that make it

heterogeneous and give it a sustainable and competitive edge over the medium term, it

has to consider rivalry and competition from OTT service providers. Over The Top

(OTT) service providers are today providing to Australians a substitute service aimed

at making traditional voice and text services from Telstra obsolete (Jirakasem and

Mitomo, 2019). OTT services provide multimedia connections to customers at only a

fraction of the traditional voice and text services, which is the core of Telstra's services.

OTT competitors achieve this through the IP network and, therefore, completely

bypass market incumbents like Telstra (Jirakasem and Mitomo, 2019). OTT providers

contribute very little revenue to Telstra’s revenues and have become a significant

competitor.

As a consequence, high OTT subscriptions will lead to high bandwidth usage

for Telstra, requiring more infrastructure development despite falling revenue as the

industry witnesses falling subscriptions in voice and text. Telstra is, therefore,

experiencing falling revenues from this competition, which derails its financial goals.

Unfortunately, the generation of financial resources is the most significant enabler of

other pursuits in Telstra like customer experience, 5G leadership, recouping

investments from the NBN, and bolstering its human resource expertise (Jirakasem and

Mitomo, 2019). This situation needless to say paints a bad picture of Telstra's inventory

of resources in the future, and without these resources, Telstra may as well be walking

into an existential crisis.

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 Summary of Current Strategy

Customers today want more innovation and speed in their products. The

complex traditional products and services portfolios offered by Telstra and incumbents

need to be simplified and made cheaper for the customer. Telstra has mostly been

preoccupied with offering voice, text, and TV services with data subscription as a

compliment. Unfortunately, most of all OTT services that bypass traditional Telstra

services are meant to be substitutes for voice and text, which are mainstay products for

Telstra. OTT service providers like WhatsApp, Zoom, and other popular messaging

platforms can easily provide a dynamic and multimedia connection for Telstra

customers at a fraction of the cost. In the area of TV, OTT providers like Netflix are

also becoming popular among users, and their success spells doom for market

incumbents like Telstra (Jirakasem and Mitomo, 2019).

Telstra’s strategy is primarily focused on attaining 5G leadership and

developing other network infrastructures that assure customers on speed (Telstra2022 -

our plan to lead | Telstra Exchange, 2020). This singular focus is, however,

unsustainable given the presence of OTT operators in the market today. Alone, this

strategy would see Telstra's capital investments in infrastructure increase

disproportionately to its revenue because of the rise and adoption of OTT cheaper

services and the nature of the industry to cannibalize profits and transfer them to the

consumer due to intense competition and rivalry (Ancarani and Di Mauro, 2018). Any

of Telstra’s strategy that does not reconcile the differences between technology

innovation and economics will fail in the long term. Telstra must find a proper way to

respond and contain the threat of OTT service providers. The emergence of OTT

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services poses a threat as well as creates an opportunity for Telstra. Unchecked and

unrivaled, OTT services will continue creating a strain in the development of ISP

infrastructure for Telstra, making it harder for Telstra to run their infrastructure but

while undercutting its revenue. In the next iteration of medium-term planning, Telstra

has to incorporate elements of collaboration with OTT providers, making their own

OTT services as a way to compete or blocking OTT service providers from using their

network.

Discussion of Strategic Options

Strengths

At the present moment, a close look at Telstra and the industry reveals a few

factors that strengthen the operation of the organization. Some of these include:

 Low volatility
 Minimal imports
 Low product/service concentration
 Low customer class concentration

Weaknesses

In like manner, Telstra and the industry, in general, have had to battle a number of

weaknesses as follows:

 High capital requirements

 High competition
 Unhealthy competition among players that cannibalizes profits and transfers
them to consumers
 Decreasing ARPU (Average Revenue per User)

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 Opportunities

Telstra is the oldest and largest telecom market player in Australia, and as a full-service

telecommunications products and services company, the organization has several

opportunities:

 Telstra stands a chance to digitize its services and attract a huge customer base
 Collaboration with OTT providers creating a new portfolio of products and
services
 Attainment of 5G competency leadership which will open the IoT market
 Simplification of complex and traditional products may increase revenue
growth and expand market coverage

Threats

Currently, Telstra has to contend with a number of threats to the continued sustenance

of the primary activities of the organization. These threats include:

 The high rate of obsolescence

 Rise of OTT services as substitute products
 Rapid changes in technology
 Low-performance drivers
Consideration of current Vision and Mission in Relation to Recommendations

Evaluation of Options

Presently, Telstra has been singularly minded in pursuing the improvement of

its network infrastructure and attaining 5G leadership as the panacea to its problems,

which are mainly financial and customer experience-oriented (Telstra2022 - our plan to

lead | Telstra Exchange, 2020). While this is still admirable and an, in fact, a necessary

part of the whole strategy, it is not a sufficient strategy in solving the most critical

challenges that Telstra is going to face in the medium and long terms. Having a proper

response to the emergence of the OTT service providers, improving its strategic agility

to respond quickly to changing technology evolutions, and building a capable human

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resource workforce and leadership that will herald these changes is a critical element of

the overall strategy (Berman and Marshall, 2014). Going forward, Telstra should

clearly articulate in its next iteration of strategy how it is going to deal with these

integral parts of the strategy and generate a wider and more encompassing approach to

bolstering the organization in the medium term.

Telstra's infrastructural investments and products are stuck in an old business

model, attaining 5G leadership, and speedier internet, which is justifiably a good

strategy to improve customer experience. Pursued as a strategy, this option would grant

Telstra relief in the medium term, but it would not solve the issue of decreasing

revenue in the longer term. The provision of ISP services by Telstra is still listed as a

complimentary service, yet the competitive provision of this service is capital

intensive, and a strategy to extract more value from ISP service provision is what

Telstra must now plan for (Berman and Marshall, 2014). As a result, a mixed strategy

approach where Telstra improves its services as an ISP provider while pursuing the

digitization of its product portfolio allowing it to compete and collaborate in the OTT

space is the right strategic leaning for Telstra.

Options Consistency with Mission and Vision

Telstra aims and purposes to create a connected world that is brilliant and has

a future for everyone. According to the official site, the organization's vision is to make

Telstra a world-class technology company that empowers people to connect. In keeping

up with this vision of global connectedness, Telstra is increasing its international

footprint and is increasingly offering business and service solutions to people and

businesses outside the jurisdiction of Australia and New Zealand, where the company

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trades in. The mission statement of the organization is also to build a connected future

where everyone can thrive.

To a large part, Telstra’s vision, mission, and the overall goal of world

connectedness have been achieved. It is also, however, true that people are changing

the way they connect to each other today, and probably Telstra's products and services

need to reconcile themselves with this fact. If one thinks of world connectedness,

services like email, WhatsApp, Facebook, and other digital communities immediately

come to mind. Granted, all these popular digital platforms to communicate and keep in

touch around the globe would not work without the critical ISP services that core

telecommunication companies like Telstra offers (Berman and Marshall, 2014). As a

result, Telstra has taken a back seat as a second abstraction level in fulfilling this most

central value offer and promise of ensuring a brilliantly connected future. To keep this

vision and mission today, Telstra will have to work harder in digitizing its products and

services and demonstrate real innovative and customer efficient products and services

that can truly be embraced on an international and global scale.

Implementation Plan

Overall, the strategic plan for Telstra to regain its place of connecting people

internationally as per its vision and mission depends on a program of digital

transformation. Globally, telecommunication companies are undergoing this

transformation in order to compete sustainably and avoid obsolescence (Berman and

Marshall, 2014). Through this program, Telstra is going to build both the technological

and human capacity to compete sustainably with other digital companies that are

offering services at the first tier of technology and communications. As a full-service

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telecommunications company with a footprint that is slowly increasing its global

presence, this is a move in the right direction and one way to capitalize on the

company's existing strengths. The digital transformation will counter OTT service

providers, allow Telstra to compete in the OTT market, and diversify the organization's

products that have primarily included TV, voice, and text.

Efforts in digitization will help Telstra acclimatize itself to the new reality of

the highly disruptive and market powerful cloud computing trends. By using the

improvement of the undergoing NBN fast network infrastructure as a foundation,

Telstra should position itself for market leadership in emerging markets like the

Internet of Things (IoT), augmented reality (AR), virtual reality (VR) and

microservices. All these services require that Telstra become cloud relevant in

technology. Additionally, this will call for an internal re-orientation where Telstra

develops new business units, architecture of networks, organizational structures, and a

new generation of human resources that have a comprehensive understanding of the

new opportunities that are powered by cloud technology. Additionally, Telstra needs to

understand how to co-create products and services with its customer base to provide

customized solutions and create long-term, mutually beneficial relationships with its

corporate and individual customers (Berman and Marshall, 2014). This will be the

basis of a successful program and strategy for Telstra in a highly competitive and

disruptive market.

Telstra’s traditional role is an aggregator of low-cost voice and data services

instead of cloud computing, and therefore the implementation plan will present a long

learning curve. However, the right acquisition of expert human resources and adopting

private cloud implementation templates will make the process easier. The ability to

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quickly produce solutions through prototypes reiterations until a perfect solution is

found through development, user testing, feedback, and development cycles will be the

basis for an agile approach in Telstra’s digitization process and implementation of

cloud solutions (Ancarani and Di Mauro, 2018). The actual deployment of a private

cloud infrastructure for Telstra involves the acquisition of private cloud hardware,

which consists of fast computers with sufficient storage, networking infrastructure, and

application stacks. Fortunately, Telstra has some good experience and human resources

that can efficiently help the organization do this within a timeline of a year. The actual

challenge of the digitization program would actually be in perfecting customer quality

of service requirements and marketing the cloud services in a market that has already

witnessed a number of successful and entrenched market startups.

Financial resources to acquire computer hardware and network equipment

represent a major part of the whole digitization program, but a greater resource

consideration for the program has to do with human capabilities. The ability of

executives and managers and technical staff to successfully navigate challenges

associated with the execution of the digital transformation in the organization is a high

premium resource. The digitization program team should be competent enough to offer

organizational leadership so that Telstra can take a fresh look at the ICT resources it

has and adapt these resources by developing cross-functional interfaces that maintain

the organization's flexibility. While there can be no specific timeline for achieving this,

Telstra should recruit human resources with a background and experience in fast-paced

organizations with a similar project as this represents a critical success factor for the

overall digitization strategy. The program team should also depict innovation and

creativity in the development of various application programs that add value and

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simplify customer needs (Ancarani and Di Mauro, 2018). The development of such

programs should, as earlier stated, follow the path of co-creation with corporate as well

as individual customers as a way to ensure maximum acceptability and utility. When

done, this program will diversify Telstra's services and, most importantly, will grant

Telstra the capacity to compete through heterogeneous services and products in the

digital and ICT space.

Change Management Approach

The digitization process is going to impact leadership, and leadership is also

going to impact leadership in a cyclical feedback loop. Digitization will, in the outset,

transform the organization through the creation of new business units, markets,

organizational methods of creating value, and also leadership skills (Kazim, 2019). One

of the challenges to leadership in operating a newly actualized and digitized Telstra is

the introduction of an interconnected work environment characterized by the mass

adoption of digital services. Telstra's executive leadership, including the CEO, CFO,

and CTO, will have to overcome several challenges associated with the digitized

economy and process of the organization. Digitization is a transformation process and a

quantum leap in the whole organizational model. Most of the current leadership and

others who work below them are stuck in a business model of the complex,

cumbersome managerial processes and corporate culture instead of the agile,

collaborative, and nimble moving programs that characterize most digitized culture

(Kazim, 2019).

Organizations that are considered ‘digital masters’ move with agility and can

transform quickly because of the leadership guiding these organizations have embraced

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the need for collaboration as opposed to secrecy and openness instead of siloed

operations (Ancarani and Di Mauro, 2018). This explains the presence of open source

platforms across the industry and APIs that allow players to quickly develop new

products and services as well as the high satisfaction ratings from consumers using

these products and services. Consequently, it will be upon these leaders to cultivate a

new corporate culture that is in synchronization with these digital industry best

practices, culture, and management ideas (Kazim, 2019).

Conclusion

In summation, I believe that the time for Telstra to pursue the digitization of

its products and services and compete in the digital market space is now. There is no

denying the fact that OTT service providers are here to stay and that their services will

continue to disrupt and become an existential threat for Telstra's traditional roles of

voice, TV, and text more and more in the medium and long term. Today in Australia,

there are OTT providers that provide virtual local format numbers that can receive text

and calls without the need for installing a SIM card, and these functions without a

GSM mobile cell network. Such virtual numbers use the IP protocol to operate, which

is above the second level ISP service provision that Telstra providers. Additionally,

such services cost a fraction of the cost that Telstra would charge local users to

maintain a SIM-based GSM operated line. Telstra cannot hope to compete against such

innovative products and services, and it cannot hope to ignore them all the same. The

organization must plan to respond appropriately in the next iteration of strategic

planning.

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 The digitization strategy offers the value of diversification, cost-cutting, and

extra revenue generation for Telstra. The strategy should be implemented according to

my proposal because cultivating a culture of agility in the adoption and implementation

of organizational products will bolster the overall organizational capability to compete

sustainably in an industry whose technology changes rapidly with a high rate of

obsolescence. Additionally, agility grants organizations the advantage of quickly

fielding products through prototypes, taking them under user testing, and getting

structured feedback to help in product and service improvement. Telstra is also a full

services telecommunication company, and as a result, it presents an admirable capacity

in human resources and networking resources within its internal resources. These will

provide a basis for the necessary digital and ICT revolution that will push the carrier

from its traditional role to a creative and innovative company that can compete in the

emerging OTT market in a sustainable manner.

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 References

Ancarani, A. and Di Mauro, C., 2018. Successful digital transformations need a focus

on the individual. In Digitalisierung im Einkauf (pp. 11-26). Springer Gabler,

Wiesbaden.

Berman, S. and Marshall, A., 2014. The next digital transformation: from an

individual-centered to an everyone-to-everyone economy. Strategy &

Leadership.

Australia Industry (ANZSIC), 2020. Internet Service Providers In Australia. [online]

Melbourne: IBIS World. Available at:

<https://my.ibisworld.com/au/en/industry/j5911/industry-at-a-glance>

[Accessed 7 July 2020].

Beamish, H.R., Hubbard, G. and Rice, J., 2008. Strategic management, thinking

analysis action. Australia: Pearson Education Australia, pp.85-95.

Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of

industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

Jirakasem, M. and Mitomo, H., 2019. Relationship of Over-the-top (OTT)

Communications and Traditional Telecommunications Services: the Case of

Thailand.

Kazim, F.A., 2019. Digital Transformation and Leadership Style: A Multiple Case

Study. The ISM Journal of International Business, 3(1), pp.24-33.

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Telstra Exchange. 2020. Telstra2022 - Our Plan To Lead | Telstra Exchange. [online]

Available at: <https://exchange.telstra.com.au/telstra2022-our-plan-to-lead/>

[Accessed 9 July 2020].

Appendices

SWOT Analysis

Strengths

At the present moment, a close look at Telstra and the industry reveals a few

factors that strengthen the operation of the organization. Some of these include:

 Low volatility
 Minimal imports
 Low product/service concentration
 Low customer class concentration

Weaknesses

In like manner, Telstra and the industry, in general, have had to battle a number of

weaknesses as follows:

 High capital requirements

 High competition
 Unhealthy competition among players that cannibalizes profits and transfers
them to consumers
 Decreasing ARPU (Average Revenue per User)

Opportunities

Telstra is the oldest and largest telecom market player in Australia, and as a full-service

telecommunications products and services company, the organization has several

opportunities:

 Telstra stands a chance to digitize its services and attract a huge customer base

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  Collaboration with OTT providers creating a new portfolio of products and
services
 Attainment of 5G competency leadership which will open the IoT market
 Simplification of complex and traditional products may increase revenue
growth and expand market coverage

Threats

Currently, Telstra has to contend with a number of threats to the continued sustenance

of the primary activities of the organization. These threats include:

 The high rate of obsolescence

 Rise of OTT services as substitute products
 Rapid changes in technology
 Low-performance drivers
Consideration of current Vision and Mission in Relation to Recommendations

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