TELECOM PERFORMANCE NETWORK

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1 Chapter 15 TELECOM PERFORMANCE NETWORK Mr. Watson, come here, I want to see you. First phone call of Alexander Graham Bell, inventor of the telephone (1876) Market Dynamics in Telecom The telecomunications market has gone through a profound transformation. In almost nothing does it resemble the market of 15 or 20 years ago. In many countries, the telecom business did consist of large stateowned (regional) monopolies managing landlines. The business model largely consisted of two sources of income: subscriptions and selling minutes of phone time. In most countries telecoms are now privatized, public companies, listed on the stock exchanges. The shift was needed to encourage competition and to create more efficient organizations, offering better prices for their services. Many telecom companies also acquired other telecoms in other countries, in order to expand their business. Telecoms have experienced a huge growth because of mobile telephony and digital subscriber lines (DSLs). In many countries there are now more mobile phones than inhabitants. The traditional landline business has negative growth, an increasing percentage of customers and households do not have a landline at all anymore. At the same time, new uses for the traditional landline backbone infrastructure 267

2 268 Part IV Implementing the Performance Leadership Framework has emerged, through fixed/mobile convergence, broadband, and local loops. Competition is fierce, from direct competitors but also from unexpected angles, such as financial services firms, i.e., banks, who want to have control over business-critical infrastructure for mobile banking. Another source of competition comes from providers without an infrastructure, who just buy minutes in bulk from established telecoms and sell them at a low price to end consumers; or from cable TV providers and even electricity providers, who also have an infrastructure reaching many households, and through modern technology, offer telecommunication services using their infrastructures. The way for telecoms to survive and to maintain margins is to offer an ever-expanding range of subscription types, ranging from prepaid offers, to a multitude of value packs, including text messaging, data access (Internet), special rates for international calling, and discounts on special phone numbers, all based on different consumer behaviors and life styles. Although it would be in the best interest of consumers for all these subscription types to be comparable, telecoms deliberately differ enough from the competition to make sure consumers cannot choose a provider purely on price. In other words, the margins of telecoms partly exist due to the lack of transparency for their customers. Next to expanding the capabilities of the telecom infrastructures, telecoms also aggressively enter other businesses, to compete with the firms that enter the telecom market. Almost every telecom has invested in being an Internet provider as well. And in the corporate world, telecoms increasingly compete with systems integrators by offering integrated information and communication technology (ICT) services. One of the most interesting areas of expansion is in product and service integration, offering cable TV access as fixed-price packages to customers triple play : Internet, (Internet) telephone, and TV. At the same time, within the various products and services, there is an extreme differentiation with many different types of subscriptions and marketing campaigns. In this hypercompetitive environment, execution must be flawless. In order to manage this complexity and speed of business, telecom organizations need to focus on their internal alignment, even before aligning with their external stakeholders in their performance network. Figure 15.1 shows how the internal performance network of a telecom company that offers triple play is organized into

3 Chapter 15 Telecom Performance Network 269 Figure 15.1 An Example of a Telecom Performance Network Outsourced Activities Core business Sales Planning Operations Billing Retail Website channel Internet Internet Internet Call Center IP Telephony IP Telephony IP Telephony Customer Branded Shops Digital TV Digital TV Digital TV Support business Hardware, software, services providers Helpdesk Internet Helpdesk Telephony Helpdesk Digital TV Integrated billing Marketing separate product divisions. Although the figure looks complex, it is a highly simplified version of reality. Managing Internal Relationships Traditionally, internal relationships in telecoms and in many other divisionally oriented organizations are rather transactional. The style of alignment is often vertical, senior management treating the divisions as a portfolio. However, with the telecom market becoming more integrated and product offerings being combined, horizontal alignment becomes more important. In order to manage the internal performance network, we need to have an understanding of the following: The nature of the relationship between the stakeholders Which level of transparency is needed to be able to collaborate

4 270 Part IV Implementing the Performance Leadership Framework Which reciprocal metrics are needed to manage the relationship The trust between the stakeholders in order to form a single value proposition that focuses on the customer Telecoms have tons of different products, service delivery processes, and associated departments. In offering integrated telecommunication services, the various parts of the organization are highly interdependent. Many departments are involved in installing triple play. The operations departments in the back office need to program the infrastructure, and usually multiple services and service companies are involved, for the basic connection, for ADSLs (asymmetric digital subscriber lines), and for additional telecommunication equipment. This is typically not a single process. Often every department has its own planning process. This makes it hard to coordinate a single installation, since there is a specific order of how an installation needs to take place. The order fulfillment time is negatively affected by such a process. What further complicates the service is that equipment is often sent by yet another department or comes from the hardware vendor of choice, by mail. If the wrong material is sent, or incomplete material has been sent, the service company has to return on another date. The call center needs to be called again for a next appointment. If there is a problem with the installation, each division has its own help desk. This makes taking ownership of a problem (Internet doesn t work) very hard, help desks start referring to each other. For a complete installation, customers have to fill out different forms. In addition to that, there are different billing systems; however, sometimes there is an integrated billing system, overlaying the various product-specific billing systems. All the coordination required makes a triple-play installation very error prone. Often, when confronted with suboptimal overall results, divisions or departments invest in a more added-value relationship with each other. This translates in, for instance, internal account management offering internal customers a single person to coordinate horizontal alignment. Although this will help fix problems, it doesn t solve the issue of a fundamentally disconnected process. It will help further to connect processes by, for instance, swapping planning data between systems. However, there are still multiple systems in place. Service will still not

5 Chapter 15 Telecom Performance Network 271 be fast, right, easy, and cheap. The process also doesn t drive growth, optimize profit, lead to a positive customer opinion, or build trust. Building the Performance Network The only real solution for telecoms to offer good customer service is to define an internal performance network based on joint-value relationships. Within joint-value relationships, there are no internal customers or internal suppliers, just colleagues sharing the same goals and objectives geared toward customer service and needs, instead of their own service level agreements. Colleagues each contribute unique skills and resources to service joint customers. The joint-value relationship defines success in terms of results for the consumer of the service. Within the joint-value relationship, there most likely still are departments and divisions, but they do not each own a part of the process. The involved departments act more as a resource pool in a process-oriented organization. The planning, fulfillment, and billing systems are not connected to the department, but to a certain product group or set of services. Where work needs to be handed over from one department to the next for the process to continue, there should be a focus on the business interface metrics as well. However, most performance indicators should be focused on the results for the joint customers, the consumers. These performance indicators should also be co-owned by the involved departments. Table 15.1 shows an overview of reciprocal performance indicators between divisions of a telecom. The table lists which performance indicators are needed to drive and evaluate the different types of relationships. In the performance networks for insurance and retail, the types of relationships are descriptive. They are all good, as long as the choice for a certain relationship is made explicit. In managing internal relationships within the telecom industry (and other divisionally organized companies), the relationship style is normative. Transactional relationships lead to dysfunctional behavior and local optimizations; a jointvalue relationship is needed to optimize the overall process. This is also the reason why the added-value relationship is missing in Table The performance indicators in a joint-value relationship are co-owned between the two departments that are interfacing.

6 272 Part IV Implementing the Performance Leadership Framework Table 15.1 Reciprocal Performance Metrics in the Telecom Performance Network Fast Right Cheap Easy Profit Growth Opinion Transactional Relationship Joint-Value Relationship Receiving Department Requirements Average time per process within department Turnaround time for queries and crossdomain processes Internal service level agreement Data quality TCO department benchmark On budget Function points per departmental process Time order-to-fulfillment customer process Average waiting time between departments Time to market Time to decision-making process % right first time overall products and services (external) % perfect handover (internal) Days-sales-outstanding Overall process TCO Competitive comparison Cost from a customer perspective Function points for overall customer process Crossover resources (capital, staff, material, use of facilities, information exchange) Supplying Department Requirements Positive result internal charging cost budget Growth of department Growth of budget Annual internal customer satisfaction survey Joint profit, based on sales to consumers Revenue growth of integrated products and services External customer satisfaction Continuous internal feedback Trust Not measured # customer referrals Growth triple play (#, $) Brand trust, brand preference TCO = total cost of ownership The table lists stakeholder contributions and requirements based on the performance prism (discussed in Chapter 12), connecting both internal and outsourced functions involved in the triple-play installation process.

7 Chapter 15 Telecom Performance Network 273 In transactional internal relationships, internal coordination, or horizontal alignment, is usually done using service level agreements (SLAs). SLAs often trigger transactional behavior, and tend to focus on costs. Cost savings on a departmental and divisional level are usually achieved by optimizing economies of scale in one s own process, instead of alignment of the overall process. Also, SLAs tend to be defined in terms of the department s own processes, or the internal customer s processes, instead of the real customer s (the consumer s) results. Information exchange is often very transactional of nature, such as planning details or many kinds of internal charging. Although the results for each department may look acceptable or even good, the results in terms of customer satisfaction may not be good. In general, performance indicators should not focus on department processes, but on customer processes, such as concept-to-market, lead-to-cash, and trouble-to-resolve processes. To measure the speed of the processes ( fast ), performance indicators should shift from optimizing the planning for their own department to overall installation speed. Optimization per department leads to large batches of repetitive work or single activities, to get efficiencies of scale. This means, however, that each individual installation must wait until a complete activity batch is finished, before the installation moves to the next process step. The average time from order to fulfillment will be much longer than needed, due to long waiting times between steps. On the managerial and coordination level, speed on a transactional basis is measured by the turnaround time for every query that comes in. As important as it is, success comes from a more strategic perspective: a shorter time-to-market, and swift cross-domain decision-making processes. On the transactional level, quality is measured based on the output of the department. Service level agreements are put in place to provide transparency to other departments. Process data quality is important to create valid reports. Within a joint-value relationship, all this is of secondary importance. The key metric is which percentage of installations is done right first time, sometimes also referred to as the once and done rate. No errors, no need to come back. Internally, the coordination between departments can be improved by tracking the quality of handover moments, how many mistakes are

8 274 Part IV Implementing the Performance Leadership Framework made handing over work from one department to the other. A very tangible way of measuring the result of high (or low) quality, is tracking the days-sales-outstanding, the amount of time it takes the customer to pay the invoice. If mistakes are made or processes take too long, the customer will not (and should not be forced to) pay. This information is not only vital for the finance department, but for all departments involved in the process, including planning. To manage cost within a transactional relationship, the only thing you can do is manage departmental budgets. And once in a while the specific process undergoes an external benchmark. Within a more collaborative, joint-value process, cost-effectiveness is measured by an overall total cost of owner ship (TCO). A competitive comparison on cost, price, and margin (estimated if there is no precise public information) has more meaning than in internal budget variance analysis. The bottom line, however, is cost from the customer perspective. Local optimizations may lead to various service organizations visiting customers, each performing their own installation process for a specific product or service. However, the customer must be home multiple times, and may even be faced with multiple charges for at-home visits. Although this represents revenue for each product division, the key question is if this revenue is healthy, as it represents unneeded costs for the customer. An operationally excellent triple-play installation process minimizes the customer cost. Function-point analysis is a technique used in IT application development as well as in the automotive industry. Every activity (programming in IT, or assembly in automotive) is evaluated on its complexity and is tagged with a number of function points. The higher the complexity, the more points. Telecoms would do good to perform such analysis on complex installation processes as well, to better manage the ease of doing business. It helps to identify local optimizations, and design overall processes with lower complexity. On the managerial level, in joint-value relationships, the ease of collaboration could be measured by tracking to which extent resources such as capital, staff, materials, facilities, and information are shared and reallocated dynamically between the various departments. In many organizations, finance professionals frown on double counting outcomes. However, in a joint-value relationship, all involved

9 Chapter 15 Telecom Performance Network 275 parties should be recognized for the results that are being generated, such as revenue, profit, and growth. With even a single party missing in the process, the results wouldn t be what they are. Even if it is possible to break down revenue or profit by department, division or function, this should not be attempted. Departments should be recognized for the full result that was achieved by all parties involved, in order to drive the right behavior, which is seeking ways to optimize the overall process. When outcomes are broken down by department, the usual suboptimization will start to appear again. In transactional relationships, customer satisfaction surveys are often a once-in-a-while activity, typically reactive after informal feedback becomes hard to ignore. Projects are started to improve satisfaction, and business returns to normal. However, a transactional focus on managing the department doesn t invite managers to continuously mind customer satisfaction. Yet, this information should be continuous and driven down to the people on the work floor who interact with customers every day. External customer satisfaction surveys should be a continuous process. Within internal joint-value relationships, an internal customer satisfaction survey is not even needed. As the management teams between divisions collaborate all the time, there is a continuous stream of feedback. Trust is usually not even relevant in transactional relationships; there is a focus on doing transactions only, not on recurring business within the organization. This is hard to understand, as departments need to work with each other every single day. However, with vertical alignment, only reporting up, there is simply not much horizontal dialogue. Trust by customers is bound to be not very high if all departments work in isolation and cannot commit to a certain customer result. The best way of measuring trust, and providing that feedback to all departments, is to measure customer referrals. If customers are happy with the service, then they feel comfortable endorsing the company to their friends (the so-called net-promoter score); this is the true measure of success. In order to reach flawless execution in a complex and fast-moving environment, joint-value relationships are required. Performance indicators focus on external results and on internal collaboration. In order to build trust, right first time, order to fulfillment time, and customer

10 276 Part IV Implementing the Performance Leadership Framework Figure 15.2 Key Performance Indicators for Triple-Play Installations in Telecom Faster Order to Fulfillment Right First Time Customer Cost Better Cheaper cost are crucial and key differentiators in a hypercompetitive market (see Figure 15.2). Within the three performance indicators in Figure 15.2, the most important driver of trust is the right-first-time percentage, how many installations succeed without any mistakes. Although each department may independently achieve its service level of, say 95 percent, a combination of that service level across five departments leads to an overall score of not more than 77 percent (0.95 to the power of 5). And if only one department scores 60 percent for one month, the overall result immediately drops dramatically to 48 percent. This leads to more rework and more delays, negatively affecting the second crucial performance indicator: order fulfillment time. This is the time that it takes between a customer ordering the service and its being operational at the customer s address. Also, the need for several service people drives the cost of the service up. Every set of balanced performance indicators tracks cost, quality, and time, and a disconnected process makes a telecom score bad on all three.

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