"When You Decide to Change, Nothing Can Stop You"

Telefonica's COO, Álvarez-Pallete, with IESE MBA students

18/10/2013 Barcelona

José M. Álvarez-Pallete

When Telefónica named José M. Álvarez-Pallete COO in 2012, the company took an important step towards reinventing itself to keep up with the digital revolution.

"We are living one of the most exciting periods in human history, living a revolution that affects and challenges everything. It transcends all of society and is irreversible," he told an auditorium of MBA students during his visit to IESE as a speaker in the MBAGlobal Leadership Series on October 17.

Dean Jordi Canals described José M. Alvarez-Pallete as a truly global manager who has been an important part of Telefónica’s transformational process. Alvarez-Pallete joined Telefónica Group as General Manager in 1999.

Joining the Revolution

Telefónica has been evolving in step with society, reinventing itself many times over the last few decades. With 26 times more customers today than in 1989,15 times more revenue and expansion into 25 countries, the company has undergone many changes.

But in many ways, these are just the tip of the iceberg. How the digital revolution has changed people’s lives globally is inescapable. The challenges and opportunities for a large company like Telefónica are what Alvarez-Pallete is focusing his efforts on.

"Today, the smartphone is king, with 1.6 billion in use around the world. The processing capacity of the smartphone an average consumer holds in his or her hand is greater than that of the technology NASA had to send the first man to the moon." With smartphone in hand and a 3G network nearby – something 50 percent of the world's population already enjoys – there is no stopping the potential of our new connectivity, he explained.

And connectivity begets greater connectedness, with social networks expanding at impressive rates. "If Facebook were a country, it would be the second most populated just after China, Twitter the third."

Constant change at rapid speed characterizes the landscape in which Telefónica competes, and here is where Álvarez-Pallete comes in. With a passion for innovation and technology, he explained Telefonica’s current strategies to keep up with these revolutionary changes and to position itself to compete in the future.

Traditionally, voice calls were Telefónica’s core business. Skype, Whatsapp and other similar free apps have pushed the company to rethink its model. Moreover, LTE and the cloud will increase traffic exponentially. Álvarez-Pallete also underscored the potential shifts that could occur in Europe’s highly fragmented market.

"These are times for change and times for revolution in our own company," he said, explaining the company’s focus on customers and technology.

For starters, a digital Telco with as many distribution points and expansive reach of fiber as Telefónica’s is best positioned to capture value from the digital revolution. These assets offer deep capillarity, and the potential to really understand its customers and their expectations. As a result, the company has decided to simplify its service offering. At the same time, it is bringing alternative ecosystems to its customers, allowing them to test out new operating systems. Telefonica’s COO also emphasized his desire to provide the Internet experience customers want and the interoperability of operating systems.

He also discussed an increase in network-sharing, such as with Vodaphone in the UK as an important shift in approach. "In my view, sharing will help accelerate competition. Not having to duplicate an already existing network allows the company to invest money in other areas instead like improving capillarity, developing more products, and so on."

Innovation is crucial to staying competitive and is an important part of Telefónica’s transformation. Wayra, the company’s accelerator of technology, with a network of academies in twelve countries, is an initiative to promote innovation, supporting 20,500 projects and 268 start-ups.

Álvarez-Pallete also discussed the changes in store for Europe in terms of consolidation of vendors. "M&A between European vendors will be inevitable. There will be fewer, yet stronger, players." Finally, he addressed the need for Europe to have a vision of where it wants to be and implement it. "Investing in connectivity and fiber as the U.S., Korea and Japan have done is going to be an important way to respond to consumer demands."