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Innovation in the Digital Age - Lecture 4| Case Summary
Summary of the required case material for Lecture 4 of Innovation in the Digital Age: HBS "Vodafone: Managing Advanced Technologies and Artificial Intelligence" case.
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Innovation in the Digital AgeLecture 4 | Case Summary: Vodafone - Managing Advanced Technologies and Artificial
Intelligence
- Introduction:
• Jan 2018: Recently launched Digital Vodafone program to improve the customer experience/
boost revenue/cost efficiency. V. Colao (CEO of Vodafone Group) was pleased with the early
wins. Main aspects of this program were: on the customer side, to use big data to produce
personalised offers for customers (which will help optimise their channel mix) and to support
customers more effectively/efficiently via chat bots and artificial intelligence (AI); on the
technology management side, to scope efficiency gains in the network by using real-time
analytics to enable smarter network planning and predictive maintenance; on the support
operations side, to simplify support activities and automate many of them through robotics.
• Colao's objective → Not to be creative or innovative, but the most engaging digital customer
experience by blending physical assets with a digital and personalised interaction.
• Calao reflected on how to move towards increasingly using data analytics, automation and AI:
1. How do I change the organization to incorporate the digital skills o improve the way the
functions work?
2. How do I incorporate machine learning and AI that improve productivity and slash costs?
3. What is my duty vis-à-vis broader society: what can I do to give back to society to make sure
that we all create new opportunities for the next generation?
- Vodafone Group:
• 1984: Founded in UK as a multinational telecommunications firm.
• 2017: Worldwide presence → Operations in 26 countries across two geographic regions
(Europe & Africa and Middle East & Asia-Pacific). It had 48 partnerships with local operators and
was present in 73 countries with IP-VPN and 118 countries with 4G.
• Decentralised structure → Colao banned the word global preferring the term international
firm. He believed each country had their own dignity/culture, where Vodafone is a multi-country
firm with a lot of accountability. Colao thought this came with responsibility, where ideas should
emerge from each unit rather than them waiting for central innovation. As ideas emerged, Colao
used a combination of carrot and stick methods to spread it through the firm (i.e. push and pull).
• 2017: 516 mln mobile customers, 17.9 mln fixed customers and 13.8 mln TV customers. 23% of
mobile customers were from Europe, and remainder from emerging markets (e.g. India/Africa).
Vodafone served 1,900 MNCs, 90,000 public sector/national companies, and 9 mln SMEs. The
firm had 100,000 employees in 2017, where group service revenues were €43bn, adjusted
EBITDA €14.1bn and operating profit of €3.7bn.
- The Telecommunications Industry:
• 2017: Essential service used by over 7bn mobile customers and almost 1bn broadband users
across the globe. Demand for mobile data services increased due to the desire to watch videos,
browse the internet and use various apps. 48% of global revenue came from data, compared to
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, Innovation in the Digital Age
22% five years previously → continuous growth driven by rising living standards and
population growth, combined with lower airtime and device costs.
- Consumer Demand Preferences:
• Vodafone monitored demand in (1) data and (2) high-speed network, and converged
solutions.
• Data → Developments in network technology innovation led to growth in data traffic. Between
2011-2016, mobile data traffic increased, on average, by 75% p.a. and, in 2017, 95% of total
traffic on mobile networks across the globe was data.
• High-speed network → 2020: Expectations for 5G to launch commercially, most likely only in
dense urban areas in Europe. 5G would enable speeds of up to 1 Gbps combined with high
reaction times, which would support the development of new apps, in the area of augmented
reality and virtual reality.
• Simultaneously Vodafone observed that consumers' demand for bundles of mobile and fixed
services was increasing. This allowed simplicity and better value for customers (one provider for
multiple services); higher customers loyalty and operational efficiency for operators; businesses
took advantage of converged services that brought together communications tools that worked
across fixed/mobile end points.
- Technological Advances in the Industry:
• Fast-moving market with innovation and scale a key preoccupation for Vodafone's senior
management. Three key areas for digital transformation:
1. Big data: especially data analytics for marketing. From experience, the marketing department
in South Africa argues: do not allow the marketers to put their fingers on big data, because if
they put their logic above the logic of the machine, they will ruin the offer.
2. Automation using bots: to automate call center type of work, which Vodafone currently
offshores and outsources. The machines can perform 7x faster at 1/4th of the cost.
3. AI: Vodafone was at the beginning here, which Colao found promising but scary.
- Is This Time Different?
• Consensus among Vodafone's senior executives regarding the scale of these technologies
changes compared to those of the past → The data processing power and abundance of data,
combined with the development of neural networks and the ability to see correlations that it
couldn't see before, is unprecedented in terms of business implications.
• Multiple technologies were hitting firms simultaneously, where AI is the least clear and most
ambiguous... because everyone has a different conception of what it is.
• Below several executive opinions will be shared:
→ HR Director (R. Schellekens): "The digitisation of Vodafone is positive thing for customers/
employees as they prefer not to deal with physical channels/call centers, but there is concern
regarding the de-humanisation of the firm if everything is digital, and people still need a human
interface from time to time... yet, technology removes a lot of unproductive time which can be
spent on better uses."
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