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Most everybody who’s read Walter Isaacson’s biography on Steve Jobs enjoyed it.
The book reveals the many facets of this complex man. You hear about his creative genius as well as his temper tantrums. All in all, Isaacson did a splendid job of researching Jobs‘ legacy and interviewing close to 100 people who interacted with Jobs across his business life.
Ed Shanahan reached out to me after seeing the industry map I published showing the interplay of assurance and B/OSS functions. And no sooner did we get on the phone together but the subject of Isaacson’s book came up. Ed had just finished the book, loved it, and saw important parallels between Jobs‘ struggles and those faced by telecom service providers.
In the early to mid 2000s, Ed was probably the most visible revenue assurance consultant in the U.S. Not only did he head up the RA practice at TMNG, for several years he also teamed with Telestrategies to deliver seminars at their annual RA conference.
Ed Shanahan is certainly one of the sharpest consulting minds I’ve come across. And yet, if you put him in a room with 30 random people, you’d probably not pick Ed to be the consultant in the group because Ed’s a soft-spoken and cerebral guy with the relaxed manner of, say, a senior engineer. And perhaps that’s his secret — an ability to calmly analyze the structure of a telecom’s operations much like an engineer tests the cable stresses of a suspension bridge.
In our interview, Steve Jobs‘ leadership tenets are merely a springboard for Ed’s deeper diagnosis of organizational flaws and how executives and business assurance pros can get things moving in a simpler, better coordinated, and more focused direction.
|Dan Baker: Ed, be perfectly honest with me. What did you think the telecom analytics map of mine you saw?|
Ed Shanahan: Dan, I think you did a good job of getting a lot of these functions on a single map and alluding to the many different terms people use whether you call it revenue assurance, business optimization, cost management, etc.
Trouble is, you can‘t look at all those functions and say, “Let’s focus on cost assurance today and revenue assurance tomorrow.”
The best way to run a company, I think, is to start with something simple and understand what you’re really trying to accomplish. You choose a relatively small number of objectives and then really knock those things out of the ballpark.
And that’s where Steve Jobs comes in. Jobs‘ view was that design and function are tightly integrated and you need to do things holistically. And unfortunately, the way most business people solve problems is in piece parts fashion.
Jobs‘ overriding management style was a top down, simple is better approach. It extended to many minor details. For example, most Apple products don’t have an on/off button because Jobs considered that rather inelegant. Then, when Apple first came up with a CD drive for the Mac, he forced the CD drive makers to redesign their drives so there was no sliding tray. Rather you simply slip the CD into a slot on the side of the machine. He brought that same sense of simplicity to all Apple products.
The second thing that Jobs did -- and as he matured as a leader he got better at it — was to adhere to a relatively small number of high-priority items.
Rather than try to do everything, he rigidly focused on what was in the best interest of the company. And if that meant shedding products or shuttering ineffective plants, so be it.
Another virtue of his was patience. Just before a product was launched, if he saw that something needed to be changed significantly, he would delay the launch so he could be sure to get it right.
Take the Apple stores. Just about every retail industry expert thought the plan for Apple stores was a big mistake. They said, “Apple doesn‘t have enough products to fill those stores”, and they thought it was foolish to put the stores in high-traffic/high-cost areas as opposed to a big box store that you open up in lower-cost suburbs.
But Jobs‘ vision was that the way to make money was to get traffic going by and get people excited about Apple products. Yet only a month before they launched the stores, they realized something in the design was wrong. So they delayed the launch by three or four months.
Now as a public company, that was hard for Apple to do, because the company might take a financial hit for a quarter or two. But in Jobs‘ view, letting the finance guys drive the business was totally upside down. He believed if you created innovative and elegant products that solved problems, and then priced them correctly -- even at a premium -- you could take a company much further than focusing on quarter-to-quarter economic results.
And you can hardly argue with his results. Today, Apple has the highest sales per square foot of any US retailer and the highest market cap of any company in the world.
|So how can telecoms simplify their businesses?|
In our industry, I think the approach that gets it most right is the one that looks at the business as a horizontal flow of activities and data. That approach forces you to have a cohesive look at running particular business processes and services end-to-end.
And to make that work implies some simplification or rationalizing of what it is that you do as a business. You need to provide more products that the customer perceives as being high value. And you remove products and services that the customer sees as low value — or alternatively that are too costly to manage. Along the way you need to keep your eye on your own economics. If you do those things well, you are going to dramatically improve the value proposition for your customers and your company’s profitability.
So looking back at what Jobs did really reinforces the need to drive towards simplicity.
|Can you give me an example of what you mean by business simplicity?|
Well, just the other day I wanted to send Vanguard [an investment bank] a check, but I couldn‘t find anywhere on their website instructions as to how to send them a check. It sounds kind of silly. And Vanguard actually is a pretty good company, but the point is I had to call them.
Their statements used to have a coupon that you could tear off and send in with your payment. But when they redesigned their statements, they got rid of the coupon. What they are probably trying to do is to eliminate the processing of checks by encouraging people to wire in their money. That’s fine, but in my case they incurred an extra expense since I had to make a phone call to get information that could have been readily available on their website.
One way or another you need to have a way to pay by check. A company could charge for the privilege of sending a check, if they felt that was appropriate, but should make it easy and pain-free for their customers‘ to send them money.
|OK, so it’s moving towards simplicity and driving a limited number of objectives from a thorough, end-to-end view. It’s a great strategy. But how to drive it through an organization given the constraints of corporate politics and people being stuck doing things the same old way they’ve done year after year?|
You’re right. Inserting the strategy into the organization is the biggest challenge.
I’ve found that people react in an organization -- and even in life — by following two guiding tenets. First, they tend to do what is in their habit or individual nature, and second, they tend to do what is in their best interest — or at least the perception of their best interest.
Now to avoid problems of the first order, you need to be careful about hiring people who are inclined to do the right things. And if you go back to Jobs, he was a big believer in hiring A-Team players. He believed A-Team players wanted to work with A-Team players and if someone didn‘t measure up to that potential, then he moved them out of the company.
But assuming you have hired smart and conscientious people, a lot of good management then comes down to the first tenet — getting people to following their self-interest and making sure that coincides with the goals of the larger organization.
This is why I feel telecoms need to pay a lot more attention to their method of compensating people. This is crucial in sales type organizations or even when rewarding executives.
When you look at how people are typically comped, it generally doesn‘t follow that horizontal flow I mentioned before — say, following an order from beginning to end or following a process to ensure it succeeds. Usually people are comped on individual slices of that end-to-end process. One guy is comped on saving costs and another is comped on revenue. Or alternatively, people in different parts of the world are comped differently.
|What’s wrong with having different methods of compensation? What’s the virtue of having people on the same comp plan?|
Actually, the point is not to have people on the exact same comp plan as much as it is to ensure that all comp plans align with what is in the best interests of the company.
Without this alignment, smart people typically do work at odds with what is in the best interest of the company, as they are incented in ways that do not align with the corporate self-interest.
So if you hire smart and motivated people and you build the comp plan to incent people to act in fulfillment of the larger mission, problems start solving themselves and people start working on the right things and dropping the things that are not so important. It is actually pretty simple, once you take the politics out of the equation and focus on the underlying incentives.
At one US carrier I’m pretty familiar with, the management is focused on two mandates: 1) integrating functions with a new European based parent organization and 2) converting its internal ERP systems to the ERP systems used by (and built by) the new parent company
Now those two corporate mandates make strategic sense, but not if there is not sufficient bandwidth to accomplish both these mandates and to also do the things the company needs to do to remain competitive. So mandates being what they are, the child company is focusing on them and all other initiatives including new product development, customer support, and high value stabilization and cost management initiatives are taking a back seat. Net-net the company will lose a year fulfilling corporate mandates and worse will continue to leave profits on the table by deferring high value, non-controversial initiatives until 2 years later.
|Ed, I’m curious to hear an example of how current compensation plans cause problems. What do you propose as an alternative? And what about the back office? Do we need to include those folks in the compensation plan too?|
The current ways people are compensated in the back office are fine. Where compensation really matters is in sales, and cost of sales, particularly to B2B accounts. And here, there are two different views of the world. One is to incent sales on revenue and assume that other business issues will take care of themselves. The other approach is to incent people on, for example, gross margin — the direct revenue that you get from the customer minus the direct cost of servicing that revenue. And that would include things like termination charges and any special places where you might have to have dedicated staff just to support it.
If global sales people are incented on revenue rather than gross margin, then the salesperson in, say, the U.S. is only thinking about the revenue of traffic that originates in the U.S. and vice versa for the guy in Asia Pac. Each will fight for initiatives that favor his or her commission stream, with no one concerned with the end-to-end profitability of these initiatives. So the salespeople will make money but the resulting deals may not cover the costs. And the typical company reaction, once this is understood, is to implement a finance group, with generally either too much or too little power is to act as a fiduciary traffic cop. In my experience this type of approach is costly, ineffective and leads to organization friction and in-fighting.
The beauty of gross margin compensation is that salespeople begin to focus on end to end profitability by weighing both inbound and outbound costs and revenue associated with the traffic. So in the prior example, the US and Asia Pac sales persons actually begin to work together to maximize gross margin between their regions, without the fiduciary traffic cop. They begin to ask questions such as “Why are we terminating this way?‘ and ”What are the alternatives?“ The end result is that the salesperson becomes another squeaky wheel pushing the company in the right direction.
You don‘t even have to issue a corporate mandate because people will start figuring things out for themselves.
|How do people in business assurance roles play into this plan? What’s the impact for them?|
It’s a very positive one for them. People in business assurance know what they are doing. The problem is they often do not have the appropriate sponsorship or their programs are viewed as a low priority. If you talk to most people in the field, many of them are frustrated that they can‘t get executives moving on their ideas.
And this is another area where the right incentives will drive behavior that is in the best interest of the company. If a sales guy comes along and complains that his gross margin is terrible, I, as a revenue assurance guy, can help them evaluate what we can do to improve it. You can say, “I’ve got three things we’ve been trying to do that will pump the gross margin up another 10 to 15 points.” So the adversarial relationship is replaced with a collaborative relationship and gaps in “rules” and processes are closed with minimal pain as the corporate infighting has been removed from the equation.
Now if the salesperson is incented on gross margin, he’ll go to bat for your program and weigh in on your behalf to his boss, who is incented on gross margin at this point.
Running an assurance shop is really about internal sales. One of the biggest challenges in corporate life is to sell your ideas and your initiatives. In every company I’ve been associated with, there are lots of problems and people are jockeying to get funding for their particular programs.
So in an organization where you introduce compensation plans based on the gross margins of horizontal business flows, distractions caused by corporate politics, low value initiatives and “noise” tend to get diminished or eliminated. You start changing the culture of an organization.
And this is a great way to drive initiatives that will impact the bottom line and support the revenue, cost, or fraud assurance person to get his or her job done.
|Ed, thanks for these great insights. I wonder if we can close by circling back to Steve Jobs. If we could miraculously resurrect the guy and put him in charge of a service provider, what changes do you think he would make?|
When you consider his work designing the perfect mobile phone, Jobs was one of the most innovative telecom executives the industry has ever seen.
Everybody was bitching about how hard it was to use their phone. Phones had all sorts of features but most people didn‘t know how to use them. It was a very complicated solution to a fairly straightforward problem which is, “I need a communication device”.
I think Jobs would started by driving his whole simplification philosophy. It wouldn‘t be easy. Jobs was a relentless manager. He could be a real jerk and he demanded perfection or at least a very high level of performance.
But the flipside of his domineering personality was that Apple didn‘t get distracted. He effectively killed the typical fiefdoms that grow up when an organization lacks a strong leader who gives crisp marching orders.
I think Jobs would have also made people at a telecom organization reassess the kind of services they provide right now, and be less attached to the services that were winners two years back.
It shouldn‘t be that complex to provision a service. Are we trying to do something that is overly complicated? Are we trying to solve the problem in a way that doesn’t need to get solved? I think those kinds of questions would bubble up.
Finally, I think the comp plan question would get solved very quickly and he would push for something like a gross margin, something simple to put out, and simple enough for the people getting those incentives to take action on their own initiative.
Copyright 2012 Black Swan Telecom Journal