Building a global telecom operator

Prior to 2004, all GCC incumbents combined were operating in only six markets outside their home countries. Today, this number stands at 78, with government policies in GCC countries stimulating this drive for corporate globalisation. As the profitability and financial strength of GCC operators have grown, so too has competition in their home markets. This created a surge in globalisation, as operators sought growth through mergers and acquisitions. The disclosed value of GCC incumbents’ cross-border M&A activity between 2004 and 2009 exceeded US$33 billion.

Mohamad Mourad is principal at Booz & Company

Going global, however, comes with a new set of challenges. The leaders of GCC operators can guarantee successful global growth by ensuring that their companies are properly positioned to capture the maximum value from their international investments.

Building a sound foundation for globalisation

As operators pursue global expansion, their market and operational footprints tend to evolve in three stages: from a domestic focus to a regional focus to a global focus – most GCC operators are in the first two stages of this evolution. There are five sets of challenges that GCC operators need to address in their quest to go fully global: governance models; organisational models; management processes; values and culture; and talent management.

Governance models: from limited oversight to strategic alignment

Corporate governance is an ongoing challenge. In the past, most GCC telecom operators worked in protected markets with high margins and little external pressure to produce results. Consequently, some of these operators have legacy systems of governance that often hinder them as they go global.

Overcoming the governance challenges of globalisation will enable operators to address the remaining organisational challenges. There are a number of measures that will contribute to more effective corporate governance. GCC operators can review and adjust the composition of their executive committees at headquarters, by being more inclusive with senior management of international subsidiaries. They should give these executives the opportunity to participate in strategic decision making at the corporate level, as well as standardise decision-making processes across the group.

GCC operators should also examine and redefine decision rights in order to create the proper balance between control in corporate headquarters and autonomy in subsidiaries. This will ensure clear decision rights that cement the ability of headquarters to establish, execute, and enforce key corporate imperatives; and will provide sufficient authority for each international subsidiary to make effective decisions based on local challenges, within the parameters of corporate imperatives.

Finally, GCC operators should ensure that their corporate imperatives are properly represented within their subsidiaries by training the executives who will represent the company on the supervisory boards of subsidiaries. These representatives must be able to identify and analyse the issues that arise within the subsidiary and align them with the overall corporate strategy.

Organisational models: from obstacle to enabler of global business

There is no single organisational model that is best for GCC operators seeking growth but as they go global, inefficiencies that currently exist within their organisational structures will be magnified. These inefficiencies can include misaligned spans of authority, excess layers of management, and paternalistic management models. The inability of support functions, such as human resources and shared services, to cope with global needs can also hinder growth.

To overcome organisational challenges, GCC operators can restructure to integrate, support, and manage global operations. Although some initial redundancies and inefficiencies are unavoidable when expanding aggressively, centralised core functions that are capable of supporting and enhancing all of the subsidiaries should be developed as quickly as possible.

Management processes: from ad hoc to standardised best practices

As operators go global, they often need to improve the flow of information to ensure effective decision making. To do this, they need to standardise, extend, integrate, and institutionalise strategic management processes in a careful and measured way. Process challenges can be exacerbated when operators do not already have effective management systems and processes, particularly strategic and financial planning processes, in place as they begin to expand internationally. Furthermore, as operators acquire new operations, they also acquire the legacy systems and processes of the new subsidiary leading to the systems and processes that support effective decision making to become  fragmented, and the information needed to monitor and manage performance across the organization unavailable.

To be successful, GCC operators need to develop and replicate best practices both at home and beyond their national borders. Values and cultures: from a closed to an inclusive ethos GCC operators are at various stages in the development of global corporate cultures. Many continue to struggle with redefining their legacy values and cultures, which can be inward-looking and not readily adaptable to global organisations operating in multiple geographies with varying dynamics.

To meet the value and culture challenges of global expansion, GCC operators should establish a corporate culture that can successfully cross borders. They should consider their current global footprint, to identify their own differentiating, non-negotiable values and traits, as well as the national and corporate values, attitudes, and behaviours present in their subsidiaries. They should recognise the diversity within their companies, determine how to leverage it, and build relationships with key stakeholders in each geography.

Talent management: from a reactive to a proactive people strategy

As companies go global, their talent requirements become more complex with an increased demand for skills and a  shortage of senior executives with sufficient global experience. To meet the talent challenges of globalisation and put the right people in the right position, GCC operators should start by increasing awareness among senior leaders and executives of the importance of talent management. To build successful global organisations, operators will have to identify, measure, and capture the maximum value from their talent base. They should segment employees according to their impact on the performance of the organisation; develop tailored value propositions for each segment that balance
business requirements with specific segment needs; and cascade these across their people processes.

With this strategic foundation for talent in place, GCC operators can begin to create talent pools to fill international positions. They should determine a standard profile for international hiring and secondment, and coordinate their recruitment efforts across geographies to ensure consistency. They should also invest in hiring executives who are capable of filling international positions in advance of a specific need.

GCC operators should design development programmes aimed at creating the skills required to drive performance in an international organisation. Furthermore, they should align employee compensation and incentive systems with their global objectives, designing consistent and objective assessment tools and processes. These programmes and systems must be flexible enough to adapt to geographic, cultural, and management style differences among subsidiaries.

Finally, an effective leadership succession strategy is critical to achieving uninterrupted growth in a global organisation.