Weekly Reflections W6: Customer X’s Situation looks bad, no surprise

Chinese New Year (CNY) is a bit like Brazilian Carnival, the year doesn’t really start before it. Before CNY here I was trying to get engagement going with the project, but the account was busy with an offer, the support teams had their minds in the details of the offer. Now, this week, everybody gets back from CNY holidays and I have engaged with more than 40 people in 2 days. Expectations are high, including mine, and that’s where they should be.

We’ve received the first deliverable from our external partner. It paints, as it always does, a negative picture of our customer. Underperforming stocks for just too long, a trace of dislike among the investor community (as an analyst said “This is not our favourite operator”), broker’s ratings not looking good year over year, EPS forecasts do not look promising, too much cash on their balance sheet, and no clear growth story communicated by top management. Data ARPU for the whole market not expected to see substantial growth for the next 4 years when it stands at a staggering 15% of ARPU level.

Tough, huh? This will be a nice engagement. Great people, great environment, feels good!

PS: as a side note, looking very much forward to Nokia’s strategy and Financial Briefing. That was really good PR, agree? :-)

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February 11, 2011 at 8:47 am Leave a comment

Weekly Reflections W3: Openness defining Leadership 2.0

I had a week in Stockholm, full days, a lot done.

I realized I haven’t been able to share my latest weekly reflections (they have been posted in my company’s internal blog), as they wouldn’t add much value here in the outside world.

Among a few other meetings and workshops, I took part in a leadership training course and this post is about the course’s Aha! moment.

canvasTraining off-site, a bit outside Stockholm for three days. Tools, methods, how to lead yourself, how to lead others…and so on..…Now, the biggest highlight of these days was to hear our invited speaker, this really made most impression on me in that off-site. And I was not alone. In the course closing session, we all had the chance to share our thoughts and 90-95% of us mentioned his talk.

So what did our speaker talk about? Leadership!

The talk made me remember of the straight talk tone, I once read about, set by Jamie Dimon at JP Morgan. The Economist wrote an article on Why some banks did much better than others and in short this is what Jamie did/does:

  • Discouraged PowerPoint presentations
  • Encouraged informal discussions of what is wrong, or could go wrong

Our guest talked about openness and how he is substantially changing the way they work in his unit. He went on talking about the need for us all to challenge each other. And ultimately he mentioned the importance to hire based on professional values as opposed to competence (Yes, Jack Welch), since smart people will always be able to learn the job at hand but they won’t be changing their values.

Have a great week!

January 24, 2011 at 1:58 pm Leave a comment

How many blog posts are titled New Year Resolutions every January?

Dear readers, Happy 2011,
 
New year, and new resolutions (we never get tired of promising things to ourselves, isn’t it?).
  1. Make time for blogging,
  2. Make time for tweeting,
  3. Make time for my company-internal (how should I call it???) micro-blogging site.
  4. Make time for writing weekly reflections
Weekly reflections are something a dear former manager of mine started a few years ago. He thought the week over, poured down some thoughts in an e-mail and pushed the “send to all his organization” button. By doing that, he updated everyone about what was keeping him awake at night, used the channel to thank others for achievements/efforts, opened issues up for general discussion. All in all, no fluff! Well, I am planning to do that…not in an e-mail, but through this blog.
 
So, looking back at 2010 (it won’t take long, I assure you). What happened?
  • I started a new job;
  • met new colleagues; 
  • learnt the dynamics of a parallel (non-telecom) value chain;
  • joined a cool career development program at work;
  • evangelized about customer value management;
  • worked with innovation; 
  • discussed heavily the future of management/leadership; 
  • developed a passion for innovation;
  • evangelized again about customer value management;
  • deepened my passion and saw the benefits for corporate openness (down with silos, out with collaboration);
  • thought of disrupting even more the collaboration/innovation platform space by opening a company of my own;
  • decided I will continue to evangelize about customer value management;
  • gave up (for good) the idea of opening a company of my own.
So with that much happening, why didn’t I blog my heart out? My take: I think…decisions were made too fast, I had too little of “I will sleep over it”. But this will change…in 2011, telcostrategies will be a better telcostrategies. :-)
 
For now, what is new:
  • I moved to Asia
  • I am out there, close to our customers. Yay!
Ambitions:
  • Sell a lot!
  • Improve this poor Mandarin of mine….
That’s it for now.
 
Take Care.

January 12, 2011 at 12:35 am Leave a comment

A case of Product Leadership or Customer Intimacy?

The case I will discuss here was presented by James Anderson in the Kellogg’s program that several marketers in my company attended in November last year.

To put all this into context, in short, we were lectured on the Customer Value Management (CVM) discipline and the importance of that in a Business to Business marketplace. You may rightfully ask yourself, what is Customer Value Management? Well, that means to run your business with the one objective of creating value (and yes, we are talking $$$ here) for the customer. In other words, develop, tailor and market your products/solutions with basis on the value they add to the customer’s business operations.tl

THE CASE

“Tata Steel supplied steel tubes to a boiler manufacturer. The tubes were oiled to avoid rusting en route to the customer’s plant. Bizarre as it may seem, the customer first cleaned the oiled surfaces and then let it pick up rust before using it!

Result: $30 to $40 of savings per metric ton for the customer while lowering Tata’s cost by eliminating the oiling step “

MY VIEW ON THE CASE

The CVM theory classifies the above as a typical Value Drain (offerings that cost more to provide than they are worth to customers and that have no strategic significance). For me though, in order to make it simple, that’s no more than a case of tailoring, customization and customer intimacy. A lot has to be in place to make that happen, including resources (to understand that opportunity), flexibility (to adapt products) and sales strategy (you can’t customize everything for all. So, who are your prioritized customers?)

YOUR OPINION

I would appreciate to hear your comments. So, what do you think about customer intimacy as a strategy for high-tech B2B companies? How to manage that strategy without compromising a technology leadership culture?

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February 5, 2010 at 1:07 pm 1 comment

The Long Tail for Business Development in Telecom

We have roughly 900 customers. That’s quite a number you may agree with me… Now, as interesting as it may be, Vilfredo Pareto (the Italian economist) would tell us that for any chosen time window, all those existing accounts generate only 80% of our revenues, while the remaining 20% comes from the 1-2 new accounts added every year (the 80/20 principle). Profitable new business, huh? Yeah, this makes truly sense to me. Why so? Well, if “a well prepared” account team goes after a specific new player (let’s say a Telecom Greenfielder) in the marketplace, they will possibly sell, and sell well since…

  1. The customer is in need of all our treats (they have all possible problems just waiting to be solved)
  2. The customer is in need of a business partner in order to mitigate their business risk
  3. We face nearly no competition since our competitors possibly won’t have an organized channel to sell to this customer

And why did I say “a well prepared” account team? That’s because this team should be extremely well armed with customer understanding, as well as experienced enough to be able to pull the right pieces (out of our portfolio) together in order to send the customer a proposal. As you might guess…This sales strategy costs and it isn’t small money. Selling to new customers is said to cost five-ten times more than selling to existing customers.

Ok, so that was one approach to business development: Search for sales outside the scope of today’s businesses, while still pushing out the same pieces of products we have been selling to all other customers (the Market Development quadrant of an Ansoff matrix )

The second approach to business development (I am painting the world with a very wide and rough brush here) has to do with those 899 customers. Pareto’s teachings tell us that, as a matter of fact, 80% of our current accounts’ revenues is generated by only 20% of our customers (Only 180 customers out of our 899 customers are actual “spenders”). The rest of the customer base is either not buying at all; buying very little (accounting in total for 20% of our current accounts’ revenues) or buying solely from our competitors. Now, where does business development fit in? Well, since those 180 customers have chosen to spend with us, why not try as hard as we can to sell them things they didn’t even thought they needed.

I am sure you see where I am heading…right, customer segmentation! A common argument with regard to customer segmentation is that customers that aren’t “good” today (not part of the 180-customers “spender group”) may turn out to be “good” customers tomorrow. Agreed, but that’s why we create strategies (product, marketing and sales ones) for, isn’t it? And strategies aren’t written in stone, they expire and should of course be re-evaluated (after a pre-defined timeframe of e.g. 3 years).Pareto.gif

Some sanity check notes:

  1. Important: Those 180 customers are possibly good ones but that shouldn’t stop us from asking ourselves some further questions, e.g., what are these clients’ potential for growth; their debtor days; their own commercial risk, etc.
  2. In addition, there are many ways to interpret the Pareto principle. We could say for instance that possibly 80% of our profitability is generated by just 20% of our products. Should we then think about rationalizing the portfolio as well? Raised hands by now would say: “No, that’s how we differentiate ourselves. We solve all possible customer issues”. Point taken, but I believe it is never wrong to ask ourselves these tough questions.
  3. Now, does it matter if we hold to the 80/20 relation (Pareto Principle), a 70/20 or even a 50/20? I don’t think so, the long tail behavior still holds true. Meaning that in order to boost profitability we need to continue to focus our resources and guide them with thought-through strategies.

I am sure you will have an opinion to share here. So please, be my guest.

Further reading: Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales

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January 25, 2010 at 5:40 pm 2 comments

The Printer, the Ink and Amazon’s Kindle

Business week called the last decade, the lost decade. Now, I beg to disagree here…the Telco world saw Amazon’s Kindle, so how can 1999-2009 possibly be a lost decade?

Jokes apart, I am far from being the first one to praise Kindle’s “doing good” to the industry, and you may have already heard about it several times before, but allow me to throw a paragraph about Kindle here. Amazon’s Kindle is an e-book reader. Once the consumer purchases the device (from Amazon) and turns it on, it connects to Sprint’s network automatically (the Kindle is connected to the network for life, no fees are ever paid by the user to Sprint). The user then may purchase books from Amazon, having them downloaded directly to the device.

Kindle represents exactly the kind of deal service providers would like to be signing with over-the-top players. Even so, you may be asking yourself: What kind of money is Sprint making here? Well, Sprint makes $2 per Kindle per month (a low ARPU segment managed inside the very same $56 post-paid ARPU company). And since Amazon handles all the billing, support, SAC, and activation, the cost per subscriber for Sprint is minimal, i.e. that income goes almost directly to the carrier’s bottom-line.

271144_old_70s_phone_5 Seeing things from Amazon’s perspective, customers bought more e-books than physical books for the first time ever on Christmas Day, 2009. Just like in HP’s famous case (the printers are used to build the market and the ink is used to make the money), Amazon just proved to have found new printers (Kindles) and new ink (e-books) to refresh its business.

Great, I see there is money to be made in the service provisioning business. Well, so what is in it for me, being in the telecom infrastructure business? I attended a Telco 2.0 executive brainstorm session a couple of years ago and remember clearly what a competitor, presenting at the event, had to say back then about two-sided business models: “Network Sharing” (Yes, that’s what they covered in their slot). What I mean is: 300 executives were discussing the difficulties to evolve a business model that has been successful for nearly three decades and what they get to hear from the only supplier presenting in the event is that they should share their networks. Disappointing? Yes, that was also my take on it.

As of now, the competitor seems to have moved on and is being considered a proponent of two-sided business models. Well, yeah they are struggling to reach profitability after a not so recent merger and I hardly believe tackling this “industry problem” will help them sell more infrastructure equipment. In spite of that, the problem they attempt to attack holds water and is central to all of us working in this industry.

This subject has been of interest to me for quite some time, so you can expect me to come back with more. In the meantime, you are more than welcome to share your feelings. Happy to receive comments!

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January 8, 2010 at 3:53 pm 4 comments

The delta value formula: Price premium ≤ (value of your product) – (value of your competitor’s product)

As time goes by and the picture gets clearer, I take one important learning from the Kellogg course with me. The good thing is: This learning can be summarized in one equation. Well, good thing for me since I have to admit liking mathematical humour-908907-lrigor (No, please don’t take me as a boring/picky!).

Well, this is the equation:

Δ price ≤ Δ value

So, why do I like this equation? Let me explore it further.. in other words that equation equals:

Price(your price) – Price(your competitor’s price) ≤ Value(your offering) – Value(your competitor’s offering)

So, what does the left hand side of that inequality represent? That’s your price premium. What about the right hand side? That’s the additional monetary value your offering provides, the extra value that only your offering can provide (and that competition can’t match).

Thus, what if there is no Δ value? Or what if you “don’t know”/”can’t prove” the differential value your offering has in comparison to competition?

Well, this is what our equation gives us:

Δ price ≤ 0, that is to say:

Price(your price) – Price(your competitor’s price) ≤ 0, which finally means:

Price(your price) Price(your competitor’s price)

Yes, you got it all right. In case you cannot prove the value side of that equation in monetary terms, your offering/product might be, and as a matter of fact should be, perceived as a commodity. And how do you think procurement managers buy commodities? They buy the cheapest!

Then you might think: Great, that’s a matter of having my marketing people creating some smart business cases. Well, I wouldn’t simplify things to that extreme. Please have a look at the value creation arrow below: value creation arrow

Marketing should rightfully be held accountable for “Communicating the value, educating the market”. However, the value creation process should start much earlier. In fact, it should start as early as when you decide what to take to market.

Very well then. So, what is the monetary value proposition for the product/service you plan to offer? And how is it better than competition or the second best alternative (that solves the customer’s problem)? In case you can’t answer that, you better get prepared for a price war!

Links:

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November 27, 2009 at 5:06 pm Leave a comment

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