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Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage by Colin Price, Scott Keller

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6

Act

How Do We Manage the Journey?

When Julio Linares took over as executive chairman of Telefónica de España in January 2000, Spain's incumbent telecom operator was in a perilous situation. The fixed-line business was in decline, and gross earnings had fallen for three years running. Between 1997 and 1999, the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) had shrunk by 10 percent, and its cash flow by 15 percent. At the same time, the sector was liberalizing, competition was intense, and growth opportunities were unclear. Not surprisingly, employee morale was low. The future looked uncertain.

As Linares admits, “the company needed to change completely.”1 But with such strong industry headwinds and a demoralized workforce, how could he and his senior team motivate the organization to go the extra mile? Simply running the business would be tough enough; how could they transform it too, and keep the effort going not just for months, but for years?

It was clear that Telefónica's transformation program would need to be handled with great care. Above all, employees needed to be able to make sense of what was going on. With that in mind, Linares and his team created a structure emphasizing three themes—growth, competitiveness, and commitment—that would run through the whole transformation.

The team developed a range of actions to improve performance and health and grouped them under these themes. For instance, developing new distribution models ...

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