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Ringing the changes: Vodafone ‘insider’ makes some tough calls as CEO 

18 June 2024 • by Jean-François Manzoni in LeadershipPodcast availablePodcast available

Margherita Della Valle tells IMD President Jean-François Manzoni how she is delivering radical change to reenergize Vodafone and paving the way for greater diversity in leadership ...

When Margherita Della Valle, a 30-year veteran of Vodafone, advanced to the CEO role in April 2023, she knew business as usual wouldn’t cut it.

With the British telecoms group seen to be underperforming, experiencing a slump in its share price, and a poor return on capital employed, Della Valle, who joined the company as a marketing analyst in 1994 and climbed the ranks to become CFO in 2018, did not allow her “insider” background to stand in the way of delivering immediate, painful, but necessary change.

“I didn’t want to have any misunderstanding that because I am the ‘usual Margherita’ things will continue as normal,” she tells IMD President Jean-François Manzoni. “In my first message to the organization, I had to say straight away, ‘Make no mistake, things are going to be tough because change is tough, and we need to have radical change’.”

A few weeks into the job, she gave the company a stark assessment of its problems and announced 11,000 job cuts – 12% of its workforce. Over the past year, she has been on a mission to “right-size” Vodafone’s portfolio and focus on strong assets in strong markets where it can profitably grow. This has meant selling its Spanish and Italian businesses and agreeing a merger of its UK mobile operations with those of Three UK.

“All that we have been doing in the last year implied tension and discomfort, but I think all companies need tension and discomfort to be successful and win,” she says.

Ultimately, the biggest obstacle remains that the definition of successful leadership is still very much informed by the man's profile.

Three priorities: consumer experience, simplifying the business, and growth

Many internally promoted CEOs come up against hurdles, such as struggling to emerge from the shadow of their past or finding it hard to lead former peers. Yet Della Valle says advancing from within was more of a help than a hindrance.

“For me, my experience started as interim CEO. And I felt a very strong support from the organization during that phase precisely because people knew me from before,” she says. “I also had the chance to listen and speak to people very quickly and understand what the organization needed because we had already established relationships.”

Her resulting turnaround strategy revolves around three axes: customers, simplicity, and growth.

A new strategic focus and smarter portfolio

Despite its challenges, Vodafone remains one of the world’s biggest telecoms groups with €45bn of revenues in its fiscal year 2023 and more than 300 million mobile customers. The company operates Europe’s largest 5G network and is the world’s leading Internet of Things (IoT) service, connecting more than 150 million devices.

Yet the fragmented nature of the European market – with more than 100 operators – combined with the need to invest heavily to satiate the appetite of data-hungry consumers and businesses have weighed heavily on the sector: it has the lowest return on capital of all European industries.

The average telco network in Europe has five million customers, compared with 100 million in the US and half a billion in China. “Why is this a problem? Because we have to sustain very high capital intensity and investment. Having fully fledged 5G networks is very expensive.”

Della Valle compares the sector’s fragmentation to “having four different plugs bringing energy to every room”. The result is that European investment has fallen behind, with network speeds not just slower than in China or the US but also many parts of Latin America.

“All that we have been doing in the last year implied tension and discomfort, but I think all companies need tension and discomfort to be successful and win.”

Her response to these challenges is to exit markets where the company would struggle to generate returns above the cost of capital to focus on markets where they have a strong position, good scale, and a decent level of market share. “So, in each of those markets now, effectively winning is in our hands, and it depends on how good a job we will do. And that’s what we have achieved with reshaping the portfolio,” she says.

She has also vowed to put greater emphasis on Vodafone’s B2B division, which currently makes up 30% of revenues and is a fast-growing area. This requires a greater investment in relationships than in its consumer business and the development of new skills. “I had to recruit a new CFO, and it’s not an accident that I hired him from a B2B software company because that’s the type of competencies we need to build to be successful.”

Customer service as a unifying goal

In the past, admits Della Valle, Vodafone did not do enough to get the “basics” of customer service right. She says fixing customer service has become a rallying point for a broader cultural change and an area where the company can score some quick wins.

“This is something that makes sense to all the people in Vodafone, and it’s something that has given me a lot of satisfaction to see how much energy this has mobilized,” she says, adding she is keen to change the definition of success within the company away from hitting internal KPIs toward ensuring customers are more satisfied. This includes plans to publish customer satisfaction scores along with its financial results.

“I’m putting them out there also for all investors to see because it’s essential for the long-term structural health of the company,” she says.

She also wants to move away from “an excessively consensus-driven culture” to encourage a stronger sense of ownership and accountability. This has involved handing more power to local market leaders to speed up decision-making and respond better to customer needs.

“From my perspective, there was not enough speed and agility. To win, we need the intensity of a high-performing organization, which means being able to disagree with each other more. And disagreeing can mean breaking eggs. Of course, we can also disagree agreeably, and we are inclusive. I like to be challenged from all sides, but it needs to be a tough, direct challenge and include some tough discussions and decisions,” she says.

To win, we need the intensity of a high-performing organization, which means being able to disagree with each other more. And disagreeing can mean breaking eggs.

Transitioning from CFO to CEO

The 59-year-old Italian spent 16 years in the finance function before taking over the helm of Vodafone. While the CFO to CEO transition is an increasingly common path in many organizations, Della Valle admits it isn’t always successful, particularly if leaders remain too focused on risk.

“There is a slight risk when you’re focusing on finance activities that you get so driven by risk management as a priority that you become what I would call a little bit like a spectator toward the business. So, you sit on the sidelines and are very good at criticizing,” she adds. “It’s really important in finance, as elsewhere, that we all see ourselves as full owners of the business and focus on taking action. So, it’s not just what doesn’t work, which comes very easy for finance to say, but also, ‘So what are we going to do instead?’”

Della Valle believes she was an “anomaly” as CFO since she started her career in marketing and doesn’t have the traditional accounting qualifications. She encourages a similar diversity of disciplines within her teams, with marketers working closely with technical finance experts or engineers collaborating with financial controllers. “It’s really important to have this sort of cross-fertilization and careers that cut across because they give you a broader perspective.”

Empowering women in leadership

Della Valle is one of only 10 female CEOs at the helm of FTSE 100 companies – and Vodafone’s first female leader. Coming from the finance function, she is used to being in the minority, noting that there is only a similar percentage of women CFOs across Europe’s largest listed companies.

Drawing on her experience, Della Valle founded a group called “Next Gen Women in Finance” with other female CFOs, where women who have made it to the top identify rising female talent to mentor and sponsor by sharing their experiences and giving them visibility.

“It’s really important that women think about this, and everyone thinks about initiatives that can remove the obstacles,” she says.


Jean-François Manzoni

Jean-François Manzoni

IMD President

Jean-François Manzoni is the President of IMD, where he also serves as the Nestlé Professor. His research, teaching, and consulting activities are focused on leadership, the development of high-performance organizations and corporate governance.

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