Case Study Analysis of STC Culture Change

The assignment delves into a real-world case study of the culture change journey at Saudi Telecom Company (STC), analyzing the company's efforts to transform its organizational culture. The document reviews various studies, articles, and reports related to culture change management, including the work of experts such as Pink, Pfeifer et al., Sirkin et al., Whetten and Cameron, Whelan-Berry and Somerville. It also references specific events and announcements from reputable sources like Reuters, Saudi Press Agency, and Trade Data US. The case study offers insights into the challenges faced by STC during its culture change journey, highlighting the importance of effective communication, leadership, and employee engagement in achieving a successful transformation.

Abdulrahman Alharbi
Student ID: 19004031
Leading, Change and Creativity in Organisation, Global MBA, Manchester Metropolitan
University
Submission Date: 08/11/2020
1

The telecommunications and information technology industry are growing fast and is always
subject to ongoing change, responding to globalisation, technology, and external factors. Harker
(1996: 1) posits that “a tidal wave of change is headed towards the telecommunications
industry”. Furthermore, the change that is taking place in the telecommunications and
information technology industry is reshaping the social, political, and economic environment for
nearly every person on the planet (Harker, 1996). For example, it affects methods of
communication, computing, and information, and doing business. Only companies that are aware
of and prepared for revolution will survive. Saudi Telecom Company (STC) has a market
capitalisation of $21 billion; it is considered the biggest company in the Middle East and is
ranked 20th globally in terms of revenue, financial net profit and human resources (Saudi Press
Agency, 2018). STC has more than 15,000 employees and its services include post-paid, card
telephone, pre-paid, video streaming demand 3 and 4 G. STC has taken bold steps to keep its
activities abreast with the dynamic nature of the industry. The changes that have occurred in STC
is imperative in line with the external and internal environments. STC was privatised in 1998 and
has been the most successful privatisation in Saudi Arabia; the company has enjoyed a monopoly
of telecommunications in Saudi Arabia due to regulations not allowing other telecommunications
companies to enter the local market. STC generates 85% of its revenue from the local market.
However, it has expanded its presence in foreign countries, such as Kuwait, Bahrain, Turkey,
and South Africa, to obtain half its revenue from abroad (Reuters, 2013).
The Saudi government holds 70% of STC shares and the rest are held by private and institutional
investors. However, in 2002 Saudi authority gave a license to Etihad Etisalat Company to
operate in the local market, and in 2007 a licence was given to a third operator, Zain Company.
These companies could operate well and benefit from the boom in mobile services. STC lost
approximately 40% of its share to Etihad Etisalat Company (Branch and Cameron, 2008) and the
cost of operation increased. Paul Director of Sydney – based telecommunication advised STC to
reduce cost to stay competitive and profitable (Reuters, 2013). Furthermore, STC’s foreign
investment did not meet board expectations (Reuters, 2013). Mr Biyari, who was later assigned
as STC’s Chief Executive Officer (CEO) said, “When I joined in 2013, the organisation was very
complex – telecom is complex. People were extremely demotivated because they were not clear
on exactly what was going to happen. Some were scared. Many of the top management decided
to leave or were let go. There was a bit of a management vacuum. The time between mid-2013 to
the latter part of 2014 or early 2015 was a time of changing…a period of stabilization” (Branch
and Cameron, 2019: 2). Therefore, something had to change at STC.
The board chairman assigned Mr Biyari as CEO, who deployed McKinsey & Company’s
Organizational Health Index (OHI) to establish a baseline of the company’s culture, health, and
ability to succeed. The OHI result was disappointing. Only 19% of employees participated; it
was one of the worst-performing companies that used it the metric. Moreover, when Mr Biyari
took over the CEO position at STC, the external environment was challenging; the oil price was
declining quickly, which was affecting customer spending in Saudi Arabia (STC Culture Change
Journey, 2018). The OHI and external environment motivated the new CEO to transform STC’s
2

culture through its people. A transformation of culture includes changes in company operations
and employee thinking and behaviours (Cummings and Worley, 2009).
According to Kotter (1995), evaluation market position, completion environment, financial
performance and technology trends is important to create a sense of urgency, which is a sign for
a successful change. He adds that the reason for the change must be appreciated to authorise a
change agent with the necessary power for change; otherwise, the change is likely to fail.
Armenakis et al. (1993) suggest exploiting resources outside the organisation as they contribute
to reinforcing the transformation message. Kotter (1996) advises using a consultant to create a
sense of urgency. The STC CEO used the OHI result to create a sense of urgency which was
added to the macro environment. Gist et al. (1989) suggest using many sources to create a sense
of urgency.
The new CEO started to build a guiding coalition by recruiting executive leaders. Change agents
with powerful positions are more successful than change agents with low or limited power
(Lines, 2007). Kotter (1995) argues that putting the right people together as a guiding coalition is
critical to successful change. He also suggests some characteristics for the guiding coalition
team, namely position, power, leadership, credibility, and expertise. Furthermore, the CEO
created a new position that had not previously been at STC, i.e. Head of Culture, who was to
report to the CEO rather than the HR department (Branch and Cameron, 2019). This step was
important to show how the new CEO desired to build a powerful team to make a change. The
team articulated the most important values for STC. The culture change team solicited feedback
from employees from different levels and involved them in generating company values.
Employees produced 37 values that were later reduced to five: customer first, innovation, lead
with agility, build trust, and one STC (Branch and Cameron, 2019). There is a ripple effect,
because if STC does not pay attention to caring about its employees, the employees will not care
about customers (Filfilan, 2019). The culture change team rolled out the initiatives for
transformation culture of the company’s culture, which consisted of four initiatives over five
years. The first wave was the implementation of STC values. The second wave was ‘employees
first’. The third wave was ‘employees and customers first’. The final wave was ‘customers first’.
Each wave concentrated on the new culture of STC and had its own programme to support it
(Branch and Cameron, 2019). The involvement of employees increases the probability of the
acceptance of change and sustainability (Robert and Warren Schmidt, 1973).
The CEO and the culture change team developed a vision to guide the company’s actions. The
vision was formulated as “STC would be recognised as the country’s information
communication technology leader” (Culture Transformation at STC, 2018). Whelan-Berry and
Somerville (2010) define the change vision as a key element of the change process. Kotter
(1996) states that an effective vision is important to break the status quo. Moreover, a clear
vision must be easily understood by employees and facilitate their actions. Flamholtz and
Kurland (2006) reveal that vision and strategic planning contribute to addressing an
organisation’s long-term issues and change the competitive dynamics. The top managers and
3

executives at STC were encouraged to visit employees at workplaces, such as call centres and
STC shops, to listen to both customers and employees. Various meetings and gatherings were
held; for example, 22 group discussions and 47 workshops based on the OHI results were
organised.
The STC culture change team deployed several ways to communicate the change vision. Kotter
(1996) suggests using several ways to communicate, such as two-way communication and
providing employees with significant information through their immediate supervisors or
managers. Communication plays an important role in the success of the change and encourages
employees to engage with the change (Bordia et al., 2004). There is a clear relationship between
high quality communication and reduction of anxiety. Employees who are satisfied with
management communication see personal opportunities and have a positive reaction toward the
change (Nielsen and van Selm, 2008). The STC culture change team organised dozens of
meetings with the top hundred employees at STC to brainstorm ideas for culture change, then the
meetings included the top four hundred employees, then the top thousand employees.
Furthermore, the event “Breakfast with the CEO” allowed ordinary employees to meet with the
CEO (Branch and Cameron, 2019). This was important to ensure both management and
employees were on the right track (Reichers et al., 1997; Marks, 2007).
The culture change team at STC designed a training programme for managers (Branch and
Cameron, 2019). This step was important to increase the ownership of the change among
employees to maximise the likelihood of the change being implemented successfully. According
to Kotter at al. (2007), one of the major elements playing a role in empowering employees is
training. Denton (1994) emphasises that training contributes to building a sense of responsibility
and empowers employees. Empowering employees is important for successful transformation in
an organisation (Paper et al., 2001). Empowerment also plays a significant role in dealing with
obstacles. The STC culture change team tried to motivate employees to change by giving them
autonomy. For example, employees were selected randomly from different levels across Saudi
Arabia to discuss their points of view with the CEO. These meetings had no agenda to encourage
employees to speak their minds (Branch and Cameron, 2019). Pink (2011) includes autonomy,
mastery and purpose in his list of key motivators.
The culture change team tried to gain some short-term wins Kotter (1996) believes that short-
term wins provide an opportunity of the real test for the vision and adjustment. Short-term wins
can help to reduce the difficulties of a change and reinforce the change vision in an employee’s
mindset (Drtina et al., 1996). Leaders need to show that the new way is effective and long-term
objectives are achievable; therefore, short-term gains are important (Kotter, 1995). Pfeifer et al.
(2005) maintain that show the credibility of vision and strategy through the use of measurable
result in the primary objective for gathering succussed. The purpose of executives visiting
workplaces was to ensure that top management listened to employees; STC desired to improve
the work environment. It also designed recognition and rewards for excellence in customer
experience (Filfilan, 2017). These short gains should be used to deal with other issues that need
4

to be improved in line with the change. Furthermore, leaders could use these gains to
demonstrate that the new approach is working (Kotter, 1995).
Kotter (1995) believes that the new behaviours need to be rooted in the organisational culture to
avoid regression. He mentions a couple of factors that help to embed the transformation into
organisational culture. The first factor is demonstrating the impact of a new culture on
performance. The second factor is preparing the next generation of leaders for the new approach.
In 2018, STC established an academy to prepare employees for ongoing change, as is the nature
of telecommunications, and equip them with the necessary skills. The STC academy
concentrated on mindset and skills to grow digital competence among STC’s future leaders. The
academy offers optional leadership development programme to identify and develop the next
generation of leaders. For example, the programme ‘Hi Potential’ teach skills for leading digital
transformation and creating a positive and agile work culture (Branch and Cameron, 2019).
Moreover, in 2016, the STC culture change team developed recognition and rewards initiatives,
such as a bonus scheme, career development support, an internal career portal and a support
succession plan (Karam, 2017).
The climate of positivity during the transformation process is a significant element. Effective
change management needs leaders to support and encourage employees to embrace the future.
Top leaders can create a positive environment by modelling certain behaviours, such as passion,
forgiveness, and gratitude (Branch and Cameron, 2016).
The STC culture change team paid attention to the physical environment that would impact on
STC employees. For example, they launched a pilot programme to improve the work
environment, including open-plan offices, modern spaces, and improved break areas. The STC
procurement and support services sector said: “If you want to change the culture, you have to
improve the places where employees work, and customers and vendors are received. We built
open and friendly and transparent offices. People started to love their offices. They wanted to
invite their friends and families to them. The ownership and commitment to the change was top-
to-bottom. They saw it was fair to everybody. There was no different treatment, from the VIPs to
the employees” (Branch and Cameron, 2019: 8). The head of STC’s culture department said that
“the company needed to demolish ivory tower” (Branch and Cameron, 2019: 6). However, this
step encountered internal resistance from some leaders, who did not accept the changes to the
work environment, and external resistance from those who believed the culture change at STC
would not happen because of its previous culture, which was associated with the legacy of the
government agency. Resistance to change appears when employees believe the transformation is
threatening the status quo. Other elements behind resistance to change are lack of understanding
and poor communication (Audia and Brion, 2007; Sirkin et al., 2005). Miller and Friesen (2010)
argue that employees show resistance even when the business environment is threatened with
extinction. Samuel (2013) believes employees accept change when environmental factors show
the change is inevitable. Kotter and Schlesinger (2008) emphasise that there are six steps to
overcome resistance and continue the transformation: education and communication;
5

participation and involvement; facilitating and support; negotiation and agreement; cooperation
and manipulation; and implicit and explicit coercion. A common reason for the failure of change
initiatives is resistance to change (Maurer, 2006; Waddell and Sohal, 1998; Anderson, 2010).
Therefore, the STC culture change team had an open-door policy and opened new lines of
communication, such as a blog, a company newsletter and meetings between executive-level
managers and employees. This action was labelled “This STC Transparency, Health and
Positiveness”. Adapting the role model from the CEO and executive level (Branch and Cameron,
2019). Leaders have an influential role in creating a culture that underpins learning from change
and enhancing commitment to it (Hitt, 1995).
Furthermore, STC took advantage of the innovations during the cultural transformation to
support its customer vision, for example, by deploying an innovative analytical platform. The
analytic data helped STC to produce a competitive offer, identify customer needs and increase
customer satisfaction. Using the analytic platform contributed to increasing STC’s daily revenue
from US$267,000 to US$400,000 and reduced call centre calls by 60% (Teradata, 2018).
The STC culture change team deployed Kotter’s change model, which helped them to obtain the
desired result. The Kotter change model is easy to understand and follow. However, there are
some disadvantages to implementing it. The first is that all eight steps should be followed to
obtain the desired result and if leaders change the order or ignore items because of the
organisational culture, the model will not be effective (Burnes, 1996). Secondly, the model
requires a long time to be taken to cover the eight steps (Penrod and Harbor, 1998; Betters-Reed
et al., 2008). For example, STC took about five years to complete the process of cultural
transformation, whereas the telecommunications industry generally requires quick change to
cope with changing technology, globalisation, and the external environment.
In 2018, STC achieved astonishing result in the OHI, increasing by about 22 points over three
years. This achievement was unprecedented in OHI history. According to the CEO, the major
reason for this achievement was that the company had valued the employees first, followed by
the customers (Filfilan, 2017). Furthermore, the percentage of employee participation in the OHI
survey increased from 19% to 66% and customer complaints declined by 35%. The capitalisation
doubled whereas competitors declined by 50%. All these achievements from 2013 to 2018 were
reflected in STC’s financial performance. For example, the net profit increased from 9.9 to more
than 10 billion US dollar in 2018 (Market Screen, 2020). However, the majority of STC’s
revenue still comes from the local market and the company failed to open a new market. For
example, STC failed to acquire Vodafone Egypt and to expand its presence internationally in
Asian counties, such as Myanmar and Bangladesh, which have low telecommunications
penetration (World News Today, 2020). Recently, the Saudi authority has increased the value of
additional taxation (VAT) from 5% to 15%.(Financial Times,2020) The oil price is unsteady and
this impacts on customers spending in Saudi Arabia, which has exposed STC’s main revenue to
potential decline. All these facts indicate that STC did not achieve its goal; the change only
focuses on people and neglects other departments. As the telecommunications industry is
6

dynamic, the transformation process should focus on all departments. For example, the majority
of STC customers would be serviced by an automatic system and human interactions will be
phased out over time as a result of advanced technology. For example, an STC customer could
obtain a service from a self-service machine. The CEO said: “During my tenure as a CEO, I
never spent much time with my CFO. I was spending most of my time with my HR guys and my
cultural team and interacting with people. I always had the belief that you do the right things, and
financials would come out in the wash. Make sure you have a good CFO and the right
governance but don’t get too much involved in engineering financial statements and making sure
the ratios look great” (Branch and Cameron, 2019: 10). This created a gap between the
technology and business units. This has impacted on STC’s future development in terms of
financing its future projects, as its main revenue is still the local market, which is subject to
change as a result of the declining oil price and increase in VAT. STC achieved a good financial
performance from 2013 to 2018. However, some researchers argue that financial indicators are
not enough, as they do not cover all sides of organisational performance (Kaplan and Norton,
1992). Enz (1986) suggests that a strong culture does not assure good performance, and when an
organisation is unable to adapt to the external environment, this leads to the decline of the
organisation. Therefore, a strong culture would have a positive impact on organisational
performance when the organisational culture fits and responses to the external environment.
7

References
Armenakis, A.A., Harris, S.G. and Mossholder, K.W. (1993). “Creating readiness for organizational
change”, Human Relations, Vol. 46, No. 6, pp. 681–703.
Audia, P.G. and Brion, S. (2007). “Reluctant to change: Self-enhancing responses to diverging
performance measures”, Organizational Behaviour and Human Decision Processes, Vol. 102, No. 2, pp.
255–269. DOI: 10.1016/j.obhdp.2006.01.007.
Betters-reed, B.L., Nitkin, M.R. and Sampson, S.D. (2008), “An assurance of learning success model:
toward closing the feedback loop”, Organization Management Journal, Vol. 5 No. 4, pp. 224-41.
Bordia, P., Hunt, E., Paulsen, N., Tourish, D. and DiFonzo, N. (2004). “Uncertainty during organizational
change: Is it all about control?”, European Journal of Work and Organizational Psychology, Vol. 13, No.
3, pp. 345–365.
Branch, J. and Cameron, K. (2019). Transformation culture in the Kingdom: How Saudi Telecom focused
on people to compete in the digital age. Publisher WDI. W23C29. Michigan
Burnes, B. (1996). “No such thing as …. a ‘one best way’ to manage organizational change”,
Management Decision, Vol. 34, No. 10, pp. 11–18.
Cummings, T.G. and Worley, C.G. (2009). Organization development and change, 9th edition. Mason,
USA: SouthWestern Cengage Learning. Retrieved 21 October 2020 https://books.google.com.sa/books?
vid=9780324421385&redir_esc=y
Denton, D.K. (1994). “Empowerment through employee involvement and participation: Ford’s
development and training programs”, Empowerment in Organizations, Vol. 2, No. 2, pp. 22–28.
Drtina, R., Hoeger, S. and Schaub, J. (1996). “Continuous budgeting at the HON Company”,
Management Accounting, Vol. 77, No. 7, pp. 20–24.
Enz, C.A. (1986). Power and shared value in the corporate culture. Ann Arbor, MI: UMI.
Fey C.F. and Denison D.R. (2003). “Organizational culture and effectiveness: Can American theory be
applied in Russia?”, Organization Science, Vol. 14, No. 5, pp. 686–706.
8

Flamholtz, E. and Kurland, S. (2006). “Making strategic planning work: A case study of Countrywide
Financial”, Handbook of Business Strategy, Vol. 7, No. 1, pp. 187–193.
Filfilan, K. (2017). “CEO Khaled Biyari: Putting employees first at Saudi Telecom”, Change –
ARB.https://www.changeboard.com/article-details/15005/ceo-khaled-biyari-putting-employees-first-at-
saudi-telecom/. Accessed 20 October 2020.
Gist, M., Schwoerer, C. and Rosen, B. (1989), “Effects of alternative training methods on selfefficacy and
performance in computer software training”, Journal of Applied Psychology, Vol. 74 No. 6, pp. 884-91.
Harker, R.A. (1996). “Change – the future for the telecommunications industry”, IEEE Africon, Vol. 1,
No. 4, pp. 1–6.
Hill, WD (1995). The learning organisation: Some reflection organisational renewal leadership
Development Journal,16 (8) pp 17-25
Kaplan, R.S. and Norton, D. (1992). “The balanced scorecard: Measures that drive performance”,
Harvard Business Review, Vol. 1, pp. 71–79.
Karam, S. (2008). “Mobily looks to boost market share in ’08.” Arabian Business, 25 May 2008.
https://www.arabianbusiness.com/ mobily-looks-boost-market-share-in-08-49488.html. Accessed 26
February 2020.
Kotter, J.P. (1996). Leading change. Boston, MA: Harvard Business School Press.
Kotter, J.P. (1995). “Leading change: Why transformation efforts fail”, Harvard Business Review,
March–April, pp. 59–67.
Kotter, J.P. (2008). A sense of urgency. Boston, MA: Harvard Business School Press.
Kotter, J.P. and Schilesinger, L.A. (2008). “Choosing strategies for change”, Harvard Business Review,
Vol. 57, No. 21, pp. 106–144. Retrieved from https://hbr.org/2008/07/choosing-strategies-for-change 22
October 2020.
Lines, R. (2007). “Using power to install strategy: The relationships between expert power, position
influence tactics and implementation success”, Journal of Change Management, Vol. 7 No. 2, pp. 143-70.
Marks, M.L. (2007). “A framework for facilitating adaptation to organizational transition”, Journal of
Organizational Change Management, Vol. 20, No. 5, pp. 721–739.
Market Screen.com /Saudi-Telecom- Company -SJA-6497838 and www.bvdinfo.com. Accessed 21
October 2020.
Nelissen, P. and van Selm, M. (2008). “Surviving organizational change: How management
communication helps balance mixed feelings”, Corporate Communications: An International Journal,
Vol. 13, No. 3, pp. 306–318.
Paper, D.J., Rodger, J.A. and Pendharkar, P.C. (2001). “A BPR case study at Honeywell”, Business
Process Management Journal, Vol. 7, No. 2, pp. 85–99.
Penrod, J.I. and Harbor, A.F. (1998). “Building a client-focused IT organization”, Campus-Wide
Information Systems, Vol. 15, No. 3, pp. 91–102.
power, influence tactics and implementation success”, Journal of Change Management, Vol. 7 No. 2, pp.
143-70.
9

Pink, D. (2011). Drive. London: Canongate.
Pfeifer, T., Schmitt, R. and Voigt, T. (2005). “Managing change: Quality-oriented design of strategic
change processes”, The TQM Magazine, Vol. 17, No. 4, pp. 297–308.
Reuters (2013). “High costs, foreign troubles challenge Saudi telecom giant STC”,
https://english.alarabiya.net/en/business/telecoms/2013/06/27/High-costs-foreign-troubles-challenge-
Saudi-telecom-giant-STC. Accessed 20 October 2020.
Reichers, A.E., Wanous, J.P. and Austin, J.T. (1997). “Understanding and managing cynicism about
organizational change”, Academy of Management Executive, Vol. 11, No. 1, pp. 48–59.
Samuel, K. (2013). “The effects of change management in an organization: A case study of national
university of Rwanda. Wyno Journal of Management and Business Studies, Vol. 1, No. 1, pp. 1–18.
Retrieved from http://www.wynoacademicjournals.org/management_biz.html 22 October 2020
Saudi shoppers hit by tripling of VAT rate. Financial Times. (2020).
https://www.ft.com/content/f605dada-9c93-49c3-a506-1f75e8104a74. 23 October 2020.
Saudi Press Agency. (2018). “STC ranks 20th globally of top 100 telecom companies”
(2018).https://www.spa.gov.sa/viewfullstory.php?lang=en&newsid=1769171. Accessed 22 October 2020.
STC Culture Change Team (2018). STC Culture Change Journey, September 2018 (internal STC
document).
Sirkin, H.L., Keenan, P. and Jackson, A. (2005). “The hard side of change management”, Harvard
Business Review, pp. 109–118. Retrieved from https://hbr.org/2005/10/the-hard-side-of-change-
management. 22 October 2020
Tannen R and Schmidt, WH (1973) How to a choose a leadership pattern, Harvard Business Review, May
– June, pp 3-12.
Trade Data (2018). Saudi Telecom Company calls on digitisation to deliver better customer experience.
(2018). Trade data.US. Trade Data Corporation.
The World News Today (2020). “Saudi ‘STC’ announces that the acquisition of 55% of Vodafone Egypt
has failed.” https://www.world-today-news.com/saudi-stc-announces-that-the-acquisition-of-55-of-
vodafone-egypt-has-failed/. Accessed 22 October 2020.
Whetten, D.A. and Cameron, K. (2016). “Leading positive change”, in Developing management skills,
9th edition. Pearson.
Whelan-Berry, K.S. and Somerville, K.A. (2010). “Linking change drivers and the organizational change
process: A review and synthesis”, Journal of Change Management, Vol. 10, No. 2, pp. 175–193.
10

11