Thursday, June 24, 2010

Do I Need to Understand the Telecoms Business to Work in Telecoms? In Revenue Assurance? Part 2

In Part 1 of this post (which you might want to read first), I talked about how telcos are not like banks and not like retailers, that the telco business model is based on technology. Part 2 will now talk about how telcos make money based on that technology focused business model.

Technology, Technology, Technology

When the way you deliver value to your customers is through technology, your business model is going to be different. If the reason why people value what you produce is because it is "technological" and new and innovative, it means you have to continuously provide that value, and do so persuasively.

Telecoms customers are not going to accept warmed over technology that is just "a little different" from what you or your competitors did yesterday. They want genuinely new things and they want it all the time. Keeping up with that pace of innovation is clearly possible, telcos do it all the time, but if your business model is structured that way, there will be limitations and problems.

This is true of any strategic business decision you make - choosing one way of doing things over another means gaining advantage in some way, but being less efficient in other ways.

Do You Choose Your Business Model? Or Does it Choose You?

In this regard telcos have no choice. In order to be in this industry and give customers what they really want (technology), they have to make it work somehow, or they need to find another industry to work in. This means living with the consequences of being a telco, and simply dealing with whatever inefficiencies come with that business model.

When your business model is all about innovation and bringing things to market as fast as humanly possible (not just new technologies but new products people will pay money for) it is not going to be easy. More than that, it is going to be chaotic and messy.

Have you ever complained about that aspect of working in telecoms? I have. But that is what happens when we choose to work in this industry. Are there telcos where things are not chaotic and messy? I'm sure there are, but I am not sure you want to work there - I'm not sure how long those jobs are going to last, because they don't understand the business model.

Surrender is Not an Option, Hope is Not a Plan

Am I saying this means you should work without any kind of structure? Absolutely not. Chaos and messiness means there is even more need for structure, not less. But can any structure ever make telecoms not be chaotic and messy? If there is I have never heard of it.

So what structure can allow telecoms to make money, produce real value, give customers the innovation they want, but not drive those who work in this industry to tears on a daily basis? That's really two questions so I'll answer the first one first.

Making money from telecoms is relatively easy. If a hundred years of telecoms history has taught us anything, it is how to monetize a service that customers genuinely think has real and lasting value. But these proven formulas still have to be implemented well - preferably by people who understand them.

Subsidy-Based Customer Acquisition/Retention

If you have ever asked yourself why telcos offer free/cheap handsets/customer equipment, the answer is simple - because that's what helps you get customers, especially when you are constantly offering new products that are expensive to produce. You subsidize offerings up front, but recover the cost of the deployment over the life of the subscription.

The reason telcos can offer cheap/free on-net calls, or unlimited calling for family and friends, is for a similar reason. Customers like it, and so the subsidy is useful. Where telcos actually make money in these situations is on interconnect, when customers call people on other networks, or overseas.

This model also creates an incentive for groups of customers to stay on the same network. And with a large pool of users, the chances of high revenue on incoming interconnect goes up. So if you have ever asked why interconnect rates are so expensive, or why your telco is so concerned about the assurance of interconnect, now you know why.

(Obviously there's more to it that just the two examples above, but I'll talk about this more soon.)

Useful Structure Means Less Chaos, Faster 

So that is how telcos can make money, even if they are constantly having to create new technologies and products. The question then is how do telcos actually deliver these technologies and turn them into customer-ready products? And how do they do it without driving their employees crazy?

The short answer (and again, I will elaborate on this more soon) is structure. The way you make an inherently chaotic and messy process into something actually useful and do-able is by imposing useful structure that does not get in the way of the creative process, but instead makes it go faster and increases the chances of success.

Because when you impose structure on something, the people who did not have structure before are not going to like it. One of the reasons why they do not like it is they assume the structure will make things go slower. But we do not want things to go slower - not if we understand the business model. And so we design structure that, as much as possible, fits in with a business model that demands speed.

Revenue Assurance: Masters of Change, Believers in the Business Model 

Obviously I am going to have to say more about this, and I will, but even at this point it should be clear to everyone reading - once you understand the business model and understand how telecoms make money, you start to understand what you have to do and how you have to approach things.

People who do not understand this, or who do not believe it, are working on assumptions that make it very difficult for them to be successful or happy in this industry.

But me? Obviously I am a believer. I am so much a believer that I am trying to convince other people, like you, to be a believer too. That is how much I am convinced that this is what telecoms is is really about. And I have to be convinced, because I work in Revenue Assurance.

Revenue Assurance is the place in the telco that has to deal with the most change, because Revenue Assurance is where all the changes - that happen everywhere in the telco - end up. Other people make changes, and we have to deal with it. That's our job. So if Revenue Assurance does not believe in change, who else is going to?

And that's why I LOVE Revenue Assurance.

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