Dynamic Business: Back in the habit of winning

Spark NZ chief executive Simon Moutter. Photo / Chris Loufte

Before Spark NZ chief executive Simon Moutter was officially named to the top job at what was then Telecom, he saw a business in dire straits that needed to make a fundamental shift to survive. Moutter went into the final interviews for the top job with a transformative plan and a timeline for getting it done.

The Herald talked to Moutter about how he's navigating Spark through a period of unprecedented disruption in the telecommunications industry and the company's transformation to a digital services company.

When you first took over as Chief Executive at Telecom, what state did you find the business in?

Mobile growth and market growth was very strong, so the company was prospering off the back of that. At the same time though, the rise of the competitive position of OEM's (original equipment manufacturers or device makers), the over the top operators - Google, Facebook and the like - combined with the regulatory impulse really started to hit the company from 2004 onwards..

The industry structure was also changing. We saw the combination of our two biggest competitors - Vodafone and Telstra Clear, plus the arrival of 2 Degrees as a third entrant into the mobile market - and that altered the competitive landscape.

Grimly put, we were on a ten-year losing streak from 2004 to 2014 and we're still trying to pull ourselves out of that. It's a challenge anyway you look at it and I often use a sporting analogy - if you get a team on a losing streak, the first job before you can even begin to think about winning the league, is to get back into the habit of winning.

What steps did you take to try and re-establish the habit of winning within the business?

We had tried small changes, but when you have massive inertia, you have to apply a lot for to it to change its direction. The conclusion we came to was that we have to stop dabbling and make several very significant and far-reaching moves - taking on quite a bit of risk in the process. That's what led to the idea to move from a fixed mobile infrastructure company to a digital services company.

That led to a series of decisions around what exactly is a digital services retailer, what are the dynamics of the business and how do we deliver it. From there, we undertook a series of moves from office simplifications through to a change in brand to adopt a name that would work with an unknown set of digital services in the future as opposed to our telco past.

Why do you think it was necessary to rebrand from what was an iconic New Zealand brand in Telecom to something completely unknown like Spark?

The rebrand was the most visible sign to our customers that we were making a new stand to be a different business from what Telecom was and I signalled that as part of my plan when I was interviewing for the role. The name Telecom means telephone to most people - particularly younger people - and telephones are increasingly becoming a less significant element of our business.

We needed a name that can roll with the future of digital services - Cloud applications, television, media, data services. While you might have an opinion on whether Spark was the best one we could have chosen, what we did need to do was move on from Telecom because that name represented our past and not our future.

Is there a precedent for such a large telecommunications company to successfully make such a fundamental shift?

Probably the best example not too far away is Telstra. They achieved a big change from what I understand, mostly off the back of Vodafone's really complete collapse in Australia. They had enormous network problems a few years ago which drove most of their customer base away, so Telstra invested extremely heavily in mobile capability and established massive market leadership on that front.

You've been in the job over two years now, how has the transition gone compared with the blueprint you set out before you even took the job?

It's been tough, but we've accomplished it sooner than I expected. We're either on or ahead of the plan I set out. The one piece that have proved to be more difficult to move has been Spark Digital - what was previously Gen-I. I underestimated the degree of the challenge there and that's been driven by the revolution of cloud computing - which I knew of, but I didn't really understand.

Cloud computing really took off when I was working at Auckland Airport and I had been a part of Gen-I prior to that, I understood the business well and the position we had it in. But the big correction occurring, which is a fundamental change in the way a business buys IT services in the next 20 years or so, meant we had to make a bigger adjustment there.

In his own words...

• Our realisation that we needed to make the transformative shift from infrastructure based Telco to competitive digital services company has been the Big Idea that has underpinned the last two years of change. The world around us is changing rapidly, with much of that change driven by communications technology - we call it the data and mobility revolution.

• It has motivated us to do a complete strategic reset of the business, and completely re-architect where we allocate resources and investment and what types of business we are in.

• It's driven our decision to invest in more 700MHz spectrum than anyone else, because we understand the importance of 4G mobile to NZ's future. It's driven our decision to set up Spark Ventures to focus on growth opportunities and build a portfolio of new businesses.

• It's led to the decision to change our brand from Telecom to Spark, to better represent our future not our past. It's reoriented our business to put customers, rather than the copper wire, at the heart of what we do.

• It's motivated our ambition to help customers unleash their potential, and help them do great things for NZ.

• It has motivated us to do a strategic reset of the business, and completely re-architect where we allocate resources and investment and what types of business we are in.

• It's driven massive change in terms of getting more cost-competitiveness, refocusing on the NZ market and exiting Australia, and investing in things like Cloud and data centres.