Lexington, MA - February 15, 2005 - Almost 60% of telecom executives surveyed in a major new study said that performance improvement initiatives undertaken at their companies over the past three years failed to achieve the strategic business and financial objectives they were designed to support. Despite these disappointing business results, the executives surprisingly judged 90% of their improvement initiatives a success.

The results emerged in a study conducted by the Economist Intelligence Unit in collaboration with Celerant Consulting, the global firm renowned for implementing major operational performance improvements.

"The apparent contradiction between disappointing strategic business results and the high perceived success rate for individual initiatives suggests that operational improvement initiatives may often be inappropriately measured or poorly understood," said Mick Holly, Executive Vice President of Celerant Consulting's Telecoms practice. "Ultimately, that means they have also been poorly executed in terms of the strategy they are intended to serve."

Entitled "Strategy Execution: Achieving Operational Excellence," the study surveyed 276 senior executives across the telecom, retail, manufacturing, life sciences, healthcare, consumer goods, oil & gas, and chemicals industries. Of the 29 telecom participants, 65% are from the C-suite.

For industries overall, 43% of executives reported disappointment in meeting business and financial goals, significantly less than the figure of 57% for retail executives. Executives overall also reported a success rate of 84% for performance improvement initiatives, somewhat higher than the figure of 80% for telecom.

Of some 160 company-wide performance improvement initiatives undertaken in the past three years by telecom companies in the survey, 13% were devoted to major technology implementation, followed by process automation and corporate organization realignment, both at 11%. Telecom companies also undertook improvement initiatives that ranged from major IT implementation to IT outsourcing, process automation, supply chain rationalization, direct or indirect procurement initiatives, Lean Manufacturing, and Six Sigma.

In order to manage and track improvement initiatives, telecom companies increasingly use a range of techniques, with steering committees (38%) and program management offices (34%) leading the way. Measures used to gauge the business and financial success of strategic initiatives range from earnings before interest, taxes, depreciation and amortization (EBITDA) to return on investment (ROI), return on invested capital (ROIC), return on assets (ROA), economic value-added (EVA), and earnings per share (EPS). Telecom companies rely most heavily on ROI and EBITDA.

The study asked the executives to identify up to three of their most important strategic objectives that performance improvement was intended to help achieve. Improving customer satisfaction and loyalty was cited by 70% of telecom executives, versus 61% for industries overall. Increasing market share was cited by 53% of telecom executives, compared with only 31% for industries overall. Increasing shareholder value, at 47%, was the third most frequently cited strategic objective by telecom executives, compared with 49% of executives overall.

"Faced with intense competition and constant customer churn, telecom companies know that to retain existing customers and win new ones they must continuously improve their service performance," said Holly. "However, meeting those strategic objectives, even with the wide range of improvement initiatives being pursued and their perceived success, can be extremely difficult."

Despite the strategic importance of continuous improvement and the range of techniques to track and measure improvement initiatives, the study uncovered a number of troubling barriers to performance improvement:

Only 40% of telecom executives (versus 34% of executives overall) consider their current performance management systems and processes to be effective.
Some 47% of telecom executives (versus 38% overall) say they lack sufficient data to effectively make decisions regarding operations performance.
Only 40% of telecom executives (versus 36% overall) indicated that they completely measure strategic initiative performance by using timely and accurate operating data.
Only 37% of telecom respondents (versus 44% overall) indicated that they have the right amount of operating data to make effective decisions regarding operations performance.

The study found widespread agreement in the telecom industry, as in the other industries surveyed, that communication with frontline employees is the key ingredient in making performance improvement programs support the company's strategic objectives. Only 40% of telecom companies said that senior management clearly communicates the objectives of strategic initiatives to frontline employees, a significantly lower figure than the 52% for all industries surveyed. Further, only 46% of telecom companies considered themselves successful at capturing frontline employees' recommendations for implementing initiatives, somewhat higher than the figure of 38% for all industries.

"To make sure that improvement initiatives are truly supporting strategic goals, telecom companies must become more adept at establishing clear communications from senior managers to frontline employees so that strategy and operations become two sides of the same coin," said Holly. "They also have to be equally good at creating change from the bottom up by listening to those frontline employees and leveraging their first-hand understanding of the real work of the company."

Looking forward to 2005, 67% of the telecom companies surveyed expect to grow their revenues, compared with 55% for industries overall. The top initiatives that telecom companies expect to pursue in the coming year include corporate organization realignment (33%), Six Sigma (17%), and business process reengineering (17%). Among all respondents, the top three initiatives for 2005 include pursuing corporate organization realignment (15%), business process re-engineering (13%), and major technology implementations (11%).

About the study respondents

A total of 276 executives from the US (94% of respondents) and Canada (6%) took part in the study from September - October 2004. Fifty percent of participants are C-level executives, and all have operational responsibilities. Their distribution by industry is life sciences (12%), oil & gas (16%), manufacturing (17%), chemicals (11%), telecom (11%), healthcare (11%), consumer goods (11%) and retail (11%). Fifty percent of respondents represent companies with over $500 million in annual revenue. For purposes of the survey, small-to-medium enterprises (SMEs) are defined as companies with less than $1 billion in annual revenues; large enterprises are defined as companies with over $1 billion in annual revenues. Top performers are organizations that have outperformed their industry in revenue growth and report success at executing strategic initiatives over the past three years.

About Celerant Consulting

Celerant helps leading companies worldwide achieve better business results by improving their operational performance. Our collaborative style truly connects us to each client's business, while our can-do approach and the practical tools we provide change the fundamental dynamics of how people work, individually and collectively. The outcome? Rapid improvements in process and personal performance, leading to improved business results and sustained financial benefits - all within clearly defined timeframes. Celerant Consulting is an affiliate of Novell, Inc.