Home
About Black Swan Editorial Mission Reports & Papers
Fraud Systems SIM Box Roaming Fraud PBX Fraud Subscription Databases
RA Practices Business Assurance RA Maturity RA Consulting Bill Testing
Wholesale Systems Net Inventory Margin Assure Partner Mgmt
Customer Behavior Machine Learning Network Analytics Marketing Analytics
Network Behavior Mobile & IoT Security Trusted Communication Signaling
Email a colleague    

July 2011

What If a Large Telecom Operated as a Thousand Business Units?

interview with Eric Priezkalns

What If a Large Telecom Operated as a Thousand Business Units?

The nation of China is a manufacturing titan, but it’s not known as an incubator of great management ideas.  For that you need to go to Harvard Business School, right?

Well, we may need to recalibrate our collective stereotypes when you hear how Zhang Ruimin, head of the $20 billion Haier Group, has reorganized his company.

Back in 1984, government officials made Zhang (a former Red Guard himself) the boss of the Haier refrigerator factory in Qingdao.  The quality of refrigerators put out by the plant was so bad at the time that Zhang had 76 of the faulty reefers publicly destroyed by sledgehammers.  Employees got the message, and today Haier is a fast growing and respected global brand.

But to get where he is today, Zhang drastically shook up the Haier organization, instituting radical management and accounting practices unheard of at a large company.  Here are some of those reforms as detailed in a recent Fortune magazine exposé:

  • Business Units — Instead of a conglomerate with a few dozen business units, he created thousands of self-managing units, each with its own P&L.
  • Organizing principle — Rather than organize by product line or geographic region, Haier’s business units are devoted to a single or group of similar retailer customers.  The units contain employees of all functions from manufacturing and design to marketing and sales.
  • Management — Members who work directly with customers make all the major decisions in the unit.  The operating and executive managers are not entrusted with authority because they are not “close enough to customers.“ In addition, if the members of a unit don’t like their manager, they can vote him out.
  • Accounting — Revenue is defined as cash received, but does not include orders booked as is customary in accounting.
  • Inventory Charges — In another change from traditional accounting, units pay a capital charge for inventory.
  • Profits — Finally, if a unit beats its profit target, the members can split what’s left over.

Pretty radical, don’t you think?  But it’s rather obvious what Zhang is up to.  He’s trying to prevent Haier from becoming the low profit, bureaucratic couch potato that’s the stamp of many other Global 500 firms.

Now wouldn’t it be interesting if one of the larger telecoms was modeled after Haier.  Talk about a Cultural Revolution!

Well, to get some perspective on that thought, I teased revenue assurance guru, Eric Priezkalns, with that idea by email.  And sure enough, Eric was intrigued enough to fire me back the analysis I’ve reproduced below.

What would be different if telcos were organized like the Haier Group:

  • Internal Fraud -- The WorldCom scandal would not have happened.  If everyone had routinely asked about the “cash in the till,“ then the frauds would have been apparent much sooner.
  • Management -- No more clever-clogs buffoons paid to improve or control things but who actually get in the way because they have no real responsibility or real hard targets.
  • Products -- A possible explosion of product lines, followed by a sharp and permanent contraction as the failures get cut forever because there’s no more opportunity to fudge about the value they create.
  • Customer Experience -- The end of seeing the customer as a “whole“ and deciding you can give them service X at a loss because you’ll make money on service Y and that service Z increases loyalty although it’s service W that you really want them to use.  Instead, you just look cold and hard at what people actually want, give them that, and charge them accordingly.
  • Regulation -- Less need for regulation except when governments want telcos to serve the public good — in which case they can spend taxpayer’s money on doing the public good instead of exercising an excruciatingly opaque interference on a less-than-efficient market.
  • Billing -- Single bill but with clearly different charges for every different service provided.
  • Accounting -- Revolutionary advance in accounting for the cost of customer service.  Of course, if the customer becomes dissatisfied, you’d have to wallop the people responsible with the real cost of their failure.
  • Network Investment -- It would hasten the splitting off the network business from everything else and certainly reverse infrastructure spending priorities.  Customer-driven businesses would only spend CAPEX on things they could convert to sales soon.
  • Shareholders -- Possible choking effect on shareholders and investment managers who still believe the share price is something to do with long-term opportunities and not this year’s dividends
  • Transformation -- It would further move the focus of the value chain from things customers don‘t have an emotional connection with (radio masts, wires in ground) to things they do (content, useful services), and hence encourage telcos to trade network capacity and share infrastructure.
  • Impact -- Fewer jobs, clearer strategies.
  • Caveat -- However, if customers are irrational, and what they really want diverges from what they think they want � then it could be a disaster.

    • This article first appeared in Billing and OSS World.

Copyright 2011 Black Swan Telecom Journal

 
Eric Priezkalns

Eric Priezkalns

Eric Priezkalns is one of the editors and founders of talkRA, the revenue assurance blogging site.  He is the lead author of ‘Revenue Assurance: Expert Opinions for Communications Providers’.

Eric splits his time between freelance consulting and his various passions, which include creative writing.  Eric has specialized in the field of risk and assurance for communications firms since he qualified as a chartered accountant in 1999.

During that time, he has served as Director of Risk Management at Qatar Telecom, Head of Controls for Cable & Wireless Group, Best Practice Manager for Revenue Assurance, Billing and Carrier Services for T-Mobile UK and Billing Integrity Manager for Worldcom UK.   Contact Eric via

Black Swan Solution Guides & Papers

cSwans of a Feather

  • Is Your Company Penny-Smart and Dollar-Foolish in Auditor Productivity? — by Peter Yelle — Operators who fail to automate their invoice reconciliation process could be seriously undermining the morale and efficiency of their most valuable auditors.  This article explains the many subtle ways that manual auditing process can cost operators money.  Also presented is an analysis of the typical returns achieved by CSPs with mature cost assurance programs.
  • What If a Large Telecom Operated as a Thousand Business Units? — interview with Eric Priezkalns — The Haier Group, a $20 billion consumer appliance manufacturer is a one-company Capitalism Revolution.  It’s organized into thousands of business units with bottom-up as opposed to top-down decision making.  What would happen if Haier’s management style was used to transform a large carrier?  That questoin is the starting point for an intriguing “outside the box” analysis by one of RA’s biggest thinkers.
  • What Are the Proper Boundaries of Revenue Assurance Software and Organizations? — interview with Guera Romo — Is the mission of a revenue assurance department to be simply a watchdog over billing and operations functions?  This article challenges readers to examine the fundamental assumptions that underlie RA organizations.  Issues discussed include personal accountability, training, the scope of RA oversight, and the role of assurance software.
  • When Revenue Assurance and IT Clash, Look in the Mirror — interview with Rob Mattison — Succeeding in RA requires coordination with outside departments — billing, customer care, marketing, engineering, and especially IT.  This article shows how conflict often arises between RA and IT over what it truly means to “run systems”,  However, IT can be an even bigger roadblock when RA is confused about its proper mission.

Related Articles

  • Tokopedia, Indonesia’s E-Commerce King, Partners with 11 Million Merchants; Adopts Multi-Cloud to Drive Innovation — interview with Warren Aw & Ryan de Melo — Indonesia’s Tokopedia, founded in 2009, has grown to become one of world’s leading e-commerce players.  Read about its success, technology direction, and multi-cloud connectivity adoption.
  • Bridge Alliance: Knocking Down Regional & Mobile Connectivity Barriers so Connected Car Markets Get Rolling in Asia — interview with Kwee Kchwee — The CEO of an Asian consortium of mobile operators explains how they  help simplify and harmonize their members‘ operations in support of multi-national corporations.  This integration is enabling two huge industries to come together in Asia: auto manufacturing and telco.
  • Epsilon’s Infiny NaaS Platform Brings Global Connection, Agility & Fast Provision for IoT, Clouds & Enterprises in Southeast Asia, China & Beyond — interview with Warren Aw — Network as a Service, powered by Software Defined Networks, are a faster, more agile, and more partner-friendly way of making data global connections.  A leading NaaS provider explains the benefits for cloud apps, enterprise IT, and IoT.
  • PCCW Global: On Leveraging Global IoT Connectivity to Create Mission Critical Use Cases for Enterprises — interview with Craig Price — A leading wholesale executive explains the business challenges of the current global IoT scene as it spans many spheres: technical, political, marketing, and enterprise customer value creation.
  • Senet’s Cloud & Shared Gateways Drive LoRaWAN IoT Adoption for Enterprise Businesses, Smart Cities & Telecoms — interview with Bruce Chatterley — An IoT netowork pioneer explains how LoRaWAN tech fits in the larger IoT ecosystem.  He gives use case examples, describes deployment restraints/costs, and shows how partnering, gateway sharing, and flexible deployment options are stimulating growth.
  • ARM Data Center Software’s Cloud-Based Network Inventory Links Network, Operations, Billing, Sales & CRM to One Database — interview with Joe McDermott & Frank McDermott — A firm offering a cloud-based network inventory system explains the virtues of: a single underlying database, flexible conversions, task-checking workflow, new software business models, views that identify stranded assets, and connecting to Microsoft’s cloud platform.
  • Pure Play NFV: Lessons Learned from Masergy’s Virtual Deployment for a Global Enterprise — interview with Prayson Pate — NFV is just getting off the ground, but one cloud provider to enterprises making a stir in virtual technology waters is Masergy.  Here are lessons learned from Masergy’s recent global deployment using a NFV pure play software approach.
  • The Digital Enabler: A Charging, Self-Care & Marketing Platform at the Core of the Mobile Business — interview with Jennifer Kyriakakis — The digital enabler is a central platform that ties together charging, self-care, and marketing.  The article explains why leading operators consider digital enablers pivotal to their digital strategies.
  • Delivering Service Assurance Excellence at a Reduced Operating Cost — interview with Gregg Hara — The great diversity and complexity of today’s networks make service assurance a big challenge.  But advances in off-the-shelf software now permit the configuring and visualizing of services across multiple technologies on a modest operating budget.
  • Are Cloud-Based Call Centers the Next Hot Product for the SMB Market? — interview with Doron Dovrat — Quality customer service can improve a company’s corporate identity and drive business growth.  But many SMBs are priced out of acquiring modern call center technology.  This article explains the benefits of affordable and flexible cloud-based call centers.
  • Flexing the OSS & Network to Support the Digital Ecosystem — interview with Ken Dilbeck — The need for telecoms to support a broader digital ecosystem requires an enormous change to OSS infrastructures and the way networks are being managed.  This interview sheds light on these challenges.
  • Crossing the Rubicon: Is it Time for Tier Ones to Move to a Real-Time Analytics BSS? — interview with Andy Tiller — Will tier one operators continue to maintain their quilt works of legacy and adjunct platforms — or will they radically transform their BSS architecture into a new  system designed to address the new telecom era?  An advocate for radical transformation discusses: real-time analytics, billing for enterprises, partnering mashups, and on-going transformation work at Telenor.
  • Paradigm Shift in OSS Software: Network Topology Views via Enterprise-Search — interview with Benedict Enweani — Enterprise-search is a wildly successful technology on the web, yet its influence has not yet rippled to the IT main stream.  But now a large Middle Eastern operator has deployed a major service assurance application using enterprise-search.  The interview discusses this multi-dimensional topology solution and compares it to traditional network inventory.
  • The Multi-Vendor MPLS: Enabling Tier 2 and 3 Telecoms to Offer World-Class Networks to SMBs — interview with Prabhu Ramachandran — MPLS is a networking technology that has caught fire in the last decade.  Yet the complexity of MPLS has relegated to being mostly a large carrier solution.  Now a developer of a multi-vendor MPLS solutions explains why the next wave of MPLS adoption will come from tier 2/3 carriers supporting SMB customers.
  • Enabling Telecoms & Utilities to Adapt to the Winds of Business Change — interview with Kirill Rechter — Billing is in the midst of momentous change.  Its value is no longer just around delivering multi-play services or sophisticated rating.  In this article you’ll learn how a billing/CRM supplier has adapted to the times by offering deeper value around the larger business issues of its telecom and utility clients.
  • Driving Customer Care Results & Cost Savings from Big Data Facts — interview with Brian Jurutka — Mobile broadband and today’s dizzying array of app and network technology present a big challenge to customer care.  In fact, care agents have a hard time staying one step ahead of customers who call to report problems.  But network analytics comes to the rescue with advanced mobile handset troubleshooting and an ability to put greater intelligence at the fingertips of highly trained reps.
  • Hadoop and M2M Meet Device and Network Management Systems — interview with Eric Wegner — Telecom big-data in networks is more than customer experience managment: it’s also about M2M plus network and element management systems.  This interview discusses the explosion in machine-to-machine devices, the virtues and drawbacks of Hadoop, and the network impact of shrink-wrapped search.
  • The Data Center & Cloud Infrastructure Boom: Is Your Sales/Engineering Team Equipped to Win? — by Dan Baker — The build-out of enterprise clouds and data centers is a golden opportunity for systems integrators, carriers, and cloud providers.  But the firms who win this business will have sales and engineering teams who can drive an effective and streamlined requirements-to-design-to-order process.  This white paper points to a solution — a collaborative solution designs system — and explains 8 key capabilities of an ideal platform.
  • Big Data: Is it Ready for Prime Time in Customer Experience Management? — interview with Thomas Sutter — Customer experience management is one of the most challenging of OSS domains and some suppliers are touting “big data” solutions as the silver bullet for CEM upgrades and consolidation.  This interview challenges the readiness of big data soluions to tackle OSS issues and deliver the cost savings.  The article also provides advice on managing technology risks, software vendor partnering, and the strategies of different OSS suppliers.
  • Calculated Risk: The Race to Deliver the Next Generation of LTE Service Management — interview with Edoardo Rizzi — LTE and the emerging heterogeneous networks are likely to shake up the service management and customer experience management worlds.  Learn about the many new network management challenges LTE presents, and how a small OSS software firm aims to beat the big established players to market with a bold new technology and strategy.
  • Decom Dilemma: Why Tearing Down Networks is Often Harder than Deploying Them — interview with Dan Hays — For every new 4G LTE and IP-based infrastructure deployed, there typically a legacy network that’s been rendered obsolete and needs to be decommissioned.  This article takes you through the many complexities of network decom, such as facilities planning, site lease terminations, green-safe equipment disposal, and tax relief programs.
  • Migration Success or Migraine Headache: Why Upfront Planning is Key to Network Decom — interview with Ron Angner — Shutting down old networks and migrating customers to new ones is among the most challenging activities a network operators does today.  This article provides advice on the many network issues surrounding migration and decommissioning.  Topics discussed include inventory reconciliation, LEC/CLEC coordination, and protection of customers in the midst of projects that require great program management skills.
  • Navigating the Telecom Solutions Wilderness: Advice from Some Veteran Mountaineers — interview with Al Brisard — Telecom solutions vendors struggle mightily to position their solutions and figure out what to offer next in a market where there’s considerable product and service crossover.  In this article, a veteran order management specialist firm lays out its strategy for mixing deep-bench functional expertise with process consulting, analytics, and custom API development.
  • Will Telecoms Sink Under the Weight of their Bloated and Out-of-Control Product Stacks? — interview with Simon Muderack — Telecoms pay daily for their lack of product integration as they constantly reinvent product wheels, lose customer intelligence, and waste time/money.  This article makes the case of an enterprise product catalog.  Drawing on central catalog cases at a few Tier 1 operators, the article explains the benefits: reducing billing and provisioning costs, promoting product reuse, and smoothing operations.
  • Virtual Operator Life: Enabling Multi-Level Resellers Through an Active Product Catalog — interview with Rob Hill — The value of product distribution via virtual operators is immense.  They enable a carrier to sell to markets it cannot profitably serve directly.  Yet the need for greater reseller flexibility in the bundling and pricing of increasingly complex IP and cloud services is now a major channel barrier.  This article explains what’s behind an innovative product catalog solution that doubles as a service creation environment for resellers in multiple tiers.
  • Telecom Blocking & Tackling: Executing the Fundamentals of the Order-to-Bill Process — interview with Ron Angner — Just as football teams need to be good at the basics of blocking and tackling, telecoms need to excel at their own fundamental skillset: the order-to-cash process.  In this article, a leading consulting firm explains its methodology for taking operators on the path towards order-to-cash excellence.  Issues discussed include: provisioning intervals; standardization and simplicity; the transition from legacy to improved process; and the major role that industry metrics play.
  • Wireline Act IV, Scene II: Packaging Network & SaaS Services Together to Serve SMBs — by John Frame — As revenue from telephony services has steadily declined, fixed network operators have scrambled to support VoIP, enhanced IP services, and now cloud applications.  This shift has also brought challenges to the provisioning software vendors who support the operators.  In this interview, a leading supplier explains how it’s transforming from plain ol‘ OSS software provider to packager of on-net and SaaS solutions from an array of third party cloud providers.
  • Telecom Merger Juggling Act: How to Convert the Back Office and Keep Customers and Investors Happy at the Same Time — interview with Curtis Mills — Billing and OSS conversions as the result of a merger are a risky activity as evidenced by famous cases at Fairpoint and Hawaiian Telcom.  This article offers advice on how to head off problems by monitoring key operations checkpoints, asking the right questions, and leading with a proven conversion methodology.
  • Is Order Management a Provisioning System or Your Best Salesperson? — by John Konczal — Order management as a differentiator is a very new concept to many CSP people, but it’s become a very real sales booster in many industries.  Using electronics retailer BestBuy as an example, the article points to several innovations that can — and are — being applied by CSPs today.  The article concludes with 8 key questions an operator should ask to measure advanced order management progress.
  • NEC Takes the Telecom Cloud from PowerPoint to Live Customers — interview with Shinya Kukita — In the cloud computing world, it’s a long road from technology success to telecom busness opportunity.  But this story about how NEC and Telefonica are partnering to offer cloud services to small and medium enterprises shows the experience of early cloud adoption.  Issues discussed in the article include: customer types, cloud application varieties, geographic region acceptance, and selling challenges.
  • Billing As Enabler for the Next Killer Business Model — interview with Scott Swartz — Facebook, cloud services, and Google Ads are examples of innovative business models that demand unique or non-standard billing techniques.  The article shows how flexible, change-on-the-fly, and metadata-driven billing architectures are enabling CSPs to offer truly ground breaking services.
  • Real-Time Provisioning of SIM Cards: A Boon to GSM Operators — interview with Simo Isomaki — Software-controlled SIM card configuration is revolutionizing the activation of GSM phones.  The article explains how dynamic SIM management decouples the selection of numbers/services and delivers new opportunities to market during the customer acquisition and intial provisoining phase.
  • A Cynic Converted: IN/Prepaid Platforms Are Now Pretty Cool — interview with Grant Lenahan — Service delivery platforms born in the IN era are often painted as inflexible and expensive to maintain.  Learn how modern SDPs with protocol mediation, high availability, and flexible Service Creation Environments are delivering value for operators such as Brazil’s Oi.
  • Achieving Revenue Maximization in the Telecom Contact Center — interview with Robert Lamb — Optimizing the contact center offers one of the greatest returns on investment for a CSP.  The director of AT&T’s contact center services business explains how telecoms can strike an “artful balance” between contact center investment and cost savings.  The discussion draws from AT&T’s consulting with world class customers like Ford, Dell, Discover Financial, DISH Network, and General Motors.
  • Mobile Broadband: The Customer Service Assurance Challenge — interview with Michele Campriani — iPhone and Android traffic is surging but operators struggle with network congestion and dropping ARPUs.  The answer?  Direct  resources and service quality measures to ensure VIPs are indeed getting the quality they expect.  Using real-life examples that cut to the chase of technical complexities, this article explains the chief causes of service quality degradation and describes efficient ways to deal with the problem.
  • Telco-in-a-Box: Are Telecoms Back in the B/OSS Business? — interview with Jim Dunlap — Most telecoms have long since folded their merchant B/OSS software/services businesses.  But now Cycle30, a subsidiary of Alaskan operator GCI, is offering a order-to-cash managed service for other operators and utilities.  The article discusses the company’s unique business model and contrasts it with billing service bureau and licensed software approaches.
  • Bricks, Mortar & Well-Trained Reps Make a Comeback in Customer Management — interview with Scott Kohlman — Greater industry competition, service complexity, and employee turnover have raised the bar in the customer support.  Indeed, complex services are putting an emphasis on quality care interactions in the store, on the web, and through the call center.  In this article you’ll learn about innovations in CRM, multi-tabbed agent portals,  call center agent training, customer treatment philosophies, and the impact of  self-service.
  • 21st Century Order Management: The Cross-Channel Sales Conversation — by John Konczal — Selling a mobile service is generally not a one-and-done transaction.  It often involves several interactions — across the web, call center, store, and even kiosks.  This article explains the power of a “cross-channel hub” which sits above all sales channels, interacts with them all, and allows a CSP to keep the sales conversation moving forward seamlessly.
  • Building a B/OSS Business Through Common Sense Customer Service — by David West — Delivering customer service excellence doesn‘t require mastering some secret technique.  The premise of this article is that plain dealing with customers and employees is all that’s needed for a winning formula.  The argument is spelling out in a simple 4 step methodology along with some practical examples.