CFOs Want to Predict The Future - Here’s How With Revenue Assurance!

When it comes down to it, CFOs are primarily concerned with “do I have enough money to run the business.” They may delegate that responsibility to the controller, or to various Line of Business managers, but the fundamental need to ensure that the business has enough money to function effectively does not go away.
Because of this, CFOs are constantly looking to any indication of how the business is doing, and ways to forecast a telco’s performance in the coming months. Hard as it is to believe, CFOs are not opposed in principle to losses or leakage (though no CFO will admit to actually being happy about them). They are more concerned when these losses are not detected early and only become evident months after they actually occur. This leaves CFOs no time to plan for how to address them - through adjusting the budget in line with such real-world conditions.

A CFO's Worst Nightmare

When your revenue figures are suddenly far less than projected based on your forecast and your sales figures, you end up with large cash flow problems that severely affect how the business can be run. Huge sudden unexpected shortfalls in revenue due to revenue loss or fraud that were also undetected and not represented in the sales figures, are often a CFO’s worst nightmare. These shortfalls can lead to severe cost cutting, or borrowing large sums/re-capitalize at extremely short notice.
If a CFO knows that losses are occurring, or are going to happen, they can plan and adjust the budget accordingly. CFOs deal with losses all the time, what they don’t like are SURPRISES. This is why they use whatever tools available to forecast how the business will perform in the coming months, in the hope that those forecasts turn out to be accurate and meaningful by the time revenue is finally accounted for.

Planning, Forecasting, Wishing, Hoping

One of the key planning tools a CFO has is the budget, which is effectively based on a forecast of sales activity for the coming year. A forecast of sales activity is borne out/proven by the actual sales numbers that occur. This in turn is an indication of how much revenue will be received (once service is delivered), and the amount of profit that will be made after direct costs are taken out.
But even though forecasts are regarded as an educated guess based on past performance, they are incredibly important, because that is what the CFO uses to plan until interim numbers (like sales figures) come along. These interim numbers allow the CFO to make adjustments and re-assess the budget. Of course in the end, revenue and profit will be accounted for – but by that time it’s often too late. The earlier a CFO can make decisions, the greater effect those decisions will have.

But Marketing and Sales Say We’re Going to Do Better Than We’ve Ever!

Realistically, the only way CFOs can have confidence in the forecast of sales is by implementing marketing assurance, so they know what the marketing people tell him will be the “lift” from their activities will have some actual relationship to reality when the sales figures come in.
But in the end, what CFOs are most concerned about is not forecasts, or even sales figures. They are concerned with the revenue that comes from rendering service. More importantly, they are concerned about the profit this revenue represents. In particular, this manifests as the margin a telco earns once direct costs (such as payments to interconnect/roaming partners) are paid out.
In effect, forecasts and sales figures are simply ways that CFOs can help themselves judge/predict how well the company is going to do once the accounting is done – for instance at the time of a periodic trial balance. These management accounting balances help a CFO get a sense of whether the sales numbers were really a good indicator of how things were going.

The Beauty of the Truth – or Reality

The way a CFO can ensure that the sales numbers are a good indication of reality is through revenue stream assurance (leakage control) and margin controls. That way when the final margin/profit is calculated and accounted for, there are no big surprises that can reasonably occur. This is because, to a large extent, whatever was sold was billed and realized, and done so in a way that is in line with the margin assumptions that were made.
This is the key value that Revenue Assurance can provide as a finance function that reports to the CFO. Revenue Assurance can give the CFO confidence that the numbers being used to forecast, adjust budgets and make business decisions are actually useful and accurate and not random numbers that have no relationship with reality.

Big Money, Big Decisions, Big Problems

When a CFOs get funds, decisions need to be made such as:

• Do I ring fence those funds because I know there will be substantial losses coming, or bad debt that will never be collected?
• Do I invest the money in new equipment, more marketing, hiring more staff etc. because the forecast/sales figures indicate a potential huge rise in revenue and a need for increased capacity to capitalize on it?"

If CFOs are not sure of the forecasts and whether the sales figures will be borne out by the revenue figures, they have to play it safe. They may then miss market opportunities, because they never know what surprises are in store, hidden in the overoptimistic forecasts and inflated sales figures that ultimately manifest as lower than expected revenue due to leakage/fraud. And even when bad things do not happen, and no surprises pop-up, that is still bad, because the CFO is left with money he could have spent but didn’t, which represents dozens, even hundreds of missed investment opportunities. That ultimately manifests as lower future/expected revenue over time.

At the other extreme, a CFO can overspend and not have enough money to run the business by the end of the year because he trusted the forecast and sales figures that ended up not being borne out by the final revenue numbers. This cash flow problem will mean reduced budgets, staff cuts, and an inability to invest in potential future revenue streams. And all this because revenue assurance wasn’t involved in ensuring the figures were accurate, had integrity and not subject to large amounts of fraud or leakage that lead to surprises and abrupt needs to borrow money or drastically reduce costs.

How Does a CFO Determine Their Appetite for Risk?

The question is not whether a CFO needs this assurance, its how much assurance does one need. Depending on the revenue of the company, and the potential upside gains of focusing attention and capital on new investments/opportunities, a CFO may say that a variance between forecast and sales, and between sales and revenue of $10 million USD for a quarter, is acceptable. Most of us would say that’s high. But if a telco can realistically expect an upside potential of $50 million USD profit each quarter by continuing with investments at their current/optimistic levels rather than being conservative with expenditure, a CFO may say that amount of variance (and potential loss) is more than acceptable.

But as CFOs want more accuracy in terms of the numbers they use to plan, the more they will want to invest in a function that helps them have more confidence in those numbers. The more accurate those numbers, the more faith they can have in them. The more risks that can be safely taken and managed, the more investments can be made to generate potential future returns. And that’s what CFOs really want – they want to be able to invest in things that grow the business, and to be able to do so without unreasonable fear that it’s the wrong decision.

That’s why I (and CFOs!) Love Revenue Assurance!

What Can Revenue Assurance Learn From Military Signals?

Because I am a Revenue Assurance guy, I would like to think that I am someone who believes in rationality. I think decisions made in the telco should be based on facts and logic, rather than internal politics. Decisions should be about what is best for the telco, not who the most powerful person is in the company. In saying that I am not trying to be naive - I understand that politics is part of how corporations work.

But I also know that the more business decision come to be based on politics rather than logic and facts, the less likely it is that those decisions will be the right ones for the telco. While I am not saying I have some secret answer that will solve this problem, I am going to say this problem reminds me of something I used to encounter when I was in the army.

Can You Hear Me Now?

One of the things the army taught me, especially when I was an officer, was how to use what they called "signals." Basically most people nowadays would understand this as high powered walkie talkies - though the technical term for it is half-duplex radio.

This means that only one person on a given frequency can broadcast at any given point in time. When you are not broadcasting, you can listen to what others are saying, but when you are talking, you cannot hear anyone else.

This is old technology and it was very easy to disrupt - if you knew the right frequency, you could jam it. All you had to do as the enemy was broadcast on that frequency, and no one would be able to talk to anyone else. But while this kind of jamming was easy, it also meant we knew when the enemy was doing it.

Playing with Fire, and Live Ammunition

If the enemy was being more more sneaky, however, and especially if they had the intelligence capability to find out more about the culture of your unit and how it worked, they could very easily use what we might nowadays call "social engineering" to disrupt the unit and cause problems.

And these would not be small problems. Army signals are used to order artillery and air strikes. It is used to tell large numbers of troops where to go and what to do. If a unit's signals were to get compromised, it often meant many of your best friends end up in harms way, or being the target of friendly fire, bombs or shelling.

The thing is that people in the army are not stupid, so they develop ways to ensure this does not happen, or at least ways to make sure it can't happen so easily. But because they were using relatively simple technology, most of these controls involved personal discipline and following procedure.

Procedure Has Reason, Discipline is Not Optional

If you work in IT, or IT auditing, you know what triple-A/AAA is - Authentication, Authorization and Accounting, and that is basically what "signals" discipline involves (maybe not so much the accounting, but certainly the first two).

Whenever someone wants to contact you or give you an order, you need to challenge them, and they need to authenticate themselves - they need to prove they are who they say they are. Based on that authentication, you know what they are authorized to tell you to do (send air strikes, move to a new location, etc.)

The problem happens when that discipline breaks down. And you know as well as I do - the people who most often break rules or fail to follow discipline can be the ones with the highest rank (ie: top management!). Sometimes you get unit commanders who don't care about signals discipline and who just start yelling into their radios, "don't waste my time," "just do it," or "you know who this is, don't be stupid"

Bad Habits Make Bad Things Happen

And when that happens, what these commanders are doing is bypassing authentication - we cannot be sure if you are who you say you are. And if this becomes a habit, everyone gets trained to do exactly the wrong thing - accept peoples voices and shouting as authentication.

Enemy intelligence agents start to figure these patterns out really fast. And if this culture exists in a unit, you are suddenly going to get this shouting commander asking you to do strange and stupid things - orders you have to obey. And it is only later everyone realizes those commands are coming from the enemy. Usually by then it is too late.

The Role of Professionals in Controlling Management

What does this have to do with telecoms and corporate culture? A lot. Most companies have standards of professional behavior, and they also have policies and procedures designed to prevent bad things from happening. These things don't just apply to professionals - they have to apply to management and executives.

Why? Because professionals can only cause so much damage - it is the executives and top managers who can end up making catastrophic decisions to bypass controls, decisions that hurt everyone who works in the company. That was what happened in companies like Enron - and it was the professionals, a small group of internal auditors, who eventually found out the truth.

To me, that is part of what being a professional is really about - having respect for rules that helps keep everyone a little safer. Just imagine if someone in your telco managed, because they are an executive, and because of the force of their personality, to bypass logical controls such as those around procurement etc., the damage they could do not just to the telco, but everyone who works there.

Listening to Logic, Decisions Based on Facts

But just on a more day to day basis, what I am talking about is making sure that the Revenue Assurance function, one that exists purely to look for risk and to calculate how big the risk is, is never taken for granted. Their facts should never be pushed aside just because people do not want to or cannot handle the reality of a situation - that a deployment is not cost-effective or a campaign is too risky.

It is usually when the professionals give in and fail to enforce policies and procedures that exist for everyone, even the CEO, that some of the worst things happen to telcos. But I know that Revenue Assurance professionals know better.

And that is why I LOVE Revenue Assurance.

Help! I Just Got a Job Doing Revenue Assurance!

Every once in a while, one of GRAPA's members will send me an e-mail that says exactly that. They are suddenly asked to do a Revenue Assurance job, and they are looking to us for advice.

Many Reasons, One Response: Emergency Revenue Assurance (or Louis to the Rescue!)

The circumstances can be very diverse. Sometimes, the old Revenue Assurance Manager left abruptly, and they needed someone in a hurry to replace him/her. Sometimes it is something else.

In some cases the person they pick to do the Revenue Assurance job is from another department - internal audit, fraud, finance, billing, IT, network, etc. - but they had heard of GRAPA before, or they had met me at a conference.

And because they do not have a history specifically doing Revenue Assurance, they are looking for someone to help them understand what the job is and what they should be doing. And of course, because I LOVE GRAPA members, I treat it as an emergency and try to help them as best I can.

Read the Books, Tell Me More

Of course the first thing I do is tell them about our Revenue Assurance Standards Book, as well as our (older, but still very useful) Revenue Assurance Handbook. If they speak Spanish, I tell them about the Spanish translation of our Standards Book.

Next I ask them a few questions. Usually all they have managed to tell me is that they have this new job and then they ask me a question about how we think their department should be run. But I know from experience that usually what they are looking for can be any number of different things, so I need to find out more in order to really help them.

Are they asking who they should report to? (usually the CFO) What should be the scope of the department? ie: what they should or should not be doing? How they approach other departments and interact with them? Also, is this a new department? Or are they inheriting it from someone else? How many people are there in the department already, and what is their background?

The "Condensed" GRAPA Standards!

But even before they answer any of those questions, I try to give them some sense of what GRAPA recommends in terms of our standards and standard approaches. Not everyone has time to read our books before they have to give answers to their management!

So first and foremost for us, Revenue Assurance is always about rationalization. Revenue Assurance cannot ever cost more than we are going to save doing Revenue Assurance. This also means that we need to understand the operational environment, understand how revenue comes into the telco, and prioritize accordingly.

Both books I recommend talk about this in terms of Revenue Mapping and/or Noise Analysis – this is how you figure out where to start, what your priorities are, and what is the threshold of spending for your department (the point when you are spending more than you could ever get back).

Not Just Priorities and How Much, But Who Are We? What Are We Like to Work With?

Next, Revenue Assurance is about Consensus and Sovereignty. We are not internal audit, we are not the police. We need to work with operational teams (billing, mediation, interconnect, network etc.) – not be there to tell them what to do or make them look stupid. We are here to help.

This means that operational teams stay in control and stay responsible. If things go well, they get the credit, but if things go wrong, they are still responsible.

The worst thing that can happen is RA gets into a position where it gets blamed for all the leakage/fraud in the telco. Fraud/leakage happens somewhere, and the manager of that department is responsible, not you. That said, we are always ready to help when these departments have problems.

We can help, but we are professionals, and we do not go where we are not invited. If they have problems, we can help, but it remains their responsibility.

Maintaining Boundaries, Managing Scope, Management's Appetite for Risk

This is how you manage the scope of your department – if operational teams are not asking for your help, you cannot help them. If they do want your help, they need to help convince management to give you the budget and headcount you need to help them.

In this way, the key role of RA is to find risk, quantify it (calculate how big the risk is) and then tell management about it (with the agreement of the operational team). If management says it is okay – that the risk is acceptable, we do not worry about it.

Management sets the appetite for risk – saying what is acceptable or not is not your job. However, if, after you quantify the problem, they think the risk is too high, you can help design and create controls for the operational team to implement and monitor.

Do I Create More Work For Myself By Designing Controls?

RA is not a security guard. It is not our job to monitor controls. The operational department is responsible for what happens in their department, they need to monitor what they do. We can help them find problems and create controls if management says so, but we cannot be responsible for departments we do not run.

Unless they want to report to us, as well as give us their budget and headcount, we cannot be responsible for what they do!

By doing things this way, it becomes a lot easier for Revenue Assurance to make friends and have people cooperate with you (they are coming to you for help!). Because you cannot really do your job if they do not help you understand how things work, and they do not tell you when they have problems, or they do not let you help them find problems.

Convincing People You Only Want to Help is Hard Work!

In order for you to do all those things, you cannot be “threatening” to them, and you cannot “tell them what to do” or “make them look stupid.” If you do, they will stop cooperating, and you stop being able to do your job.

Usually by this point I start to realize that my e-mail (like my blog posts!) is starting to get too long, and I stop, so they actually get the chance to tell me more, and answer my questions!

And I do not know about you, but just like how I describe it above, if you work in Revenue Assurance, the best feeling you can have is that you have helped someone - that you have made their life or job easier. And especially if the people I try to help tell me it made a difference to them, it just reminds me why I love doing my job.

And why I LOVE Revenue Assurance.

Should Revenue Assurance Tell People Their Ideas Don't Make Sense?

Just because my last post was about how Revenue Assurance should deal with people who are not very good at their jobs, I thought it made sense to talk in this post about how to deal with departments who come up with strange ideas - often ideas that do not make sense.

Finding Strange Ideas to Disagree With

For better or worse, in my personal experience, I have heard about this happening most between Revenue Assurance and Marketing/New Product Development. But obviously what I am talking about applies to any department Revenue Assurance works with. But just to be clear, I am not saying these departments always come up with bad ideas, I'm just talking about how to handle it when they do.

The reason I think this kind of conflict or disagreement happens so often with marketing (and I talk about the differences in culture between Revenue Assurance and Marketing in a previous post), is that marketing's job exists mainly to come up with new ideas all the time - as fast and as many as they can think of.

This is neither a good nor bad thing, it is simply their job and they tend to be good at it. They have to constantly come up with fresh new ideas to help sell your telco's products. Often times these will be great ideas that make a lot of sense and everyone agrees will be profitable and attract customers. But not all the time.

No One is Perfect, They Need Help and Advice

Sometimes they come up with ideas that don't make sense to anyone - ideas that you think no one would actually want (especially not customers), and that you are worried may actually cause harm to the telco. And we all know there are bad things that can happen when marketing campaigns go wrong.

I have heard of marketing campaigns/new products that (not on purpose) cause customers to churn. I have heard of campaigns that cause the telco to lose money. I have even heard of campaigns that cause the network to fail - so no one can make calls.

But that's not the worst part. The worst part is that marketing/new products is very expensive. So when things go wrong, you are actually spending money in order to lose money, or to make bad things happen to your telco.

Can Revenue Assurance Predict the Future? No!

At this point the temptation can be for you as Revenue Assurance to step in and say "I can see the future," "I know what's going to happen," or "You are stupid, I am smart, I can obviously do your job better than you can." And when something has just recently gone wrong, people might actually listen. But that is not what you want.

The problem is you do not necessarily know better than they do. You certainly cannot see into the future. I am not saying you should not trust your gut instincts that tell you something is a bad idea, but when you are trying to convince people that a marketing campaign/new product is a bad idea, your opinion doesn't matter - only facts matter.

More importantly, you do not want to volunteer to be responsible for something that belongs to someone else. The more you force your opinions on other departments, the more chance you will get blamed if something goes wrong. And because you have no real control over what they do, it can be their fault, but you still get blamed.

What Do I Do, If I Don't Argue? Act Like a Professional

So the short answer to the main question of "what to do when you see ideas that don't make sense" is not to argue and express your opinions in a subjective way ("I think this is stupid," "I think this won't work," "No one is going to like this").

The way you act like a professional is by offering a professional assessment of the idea in a way that makes use of your core skills. You are not a marketer or a product developer. You are Revenue Assurance. You find risk, find out how expensive the risk is, and you create controls if management says the risk is too high.

And that is how you can contribute usefully to these processes. The idea may be stupid, and not make sense, but it is not your job to say that. You are also not going to be effective saying that. More importantly, you may well be wrong. Marketers (hopefully) are professionals too, and you have to trust they are good at their jobs.

Revenue Assurance Handles Risk, and Only Risk

But you still have to trust your instincts. If you think a plan is risky, you can point that out. You can say there is a high chance of something bad happening, and you can calculate, if that happens, how much it will cost. As long as you can do this honestly, and with integrity, you are doing a good and useful job. You are being helpful rather than being unprofessional and arguing.

After you tell management and the marketing team about the risk, and how expensive it could be, your job is done. If they decided they are willing to take the risk, that is their decision and you cannot make their decision for them or force them to change their minds.
If things go right, then you were wrong, but you did not stop a successful thing from happening. If things go wrong, people are going to ask you "how did you know that was going to happen?"

And your response will be very simple "I work in Revenue Assurance. It is my job to know."

Being Right is the Best Way to Make Friends

Of course, after this happens a few times, people will actually start listening to you and asking your advice. In particular, sometimes management will say that the risk is too high. At that point, you can once again do what Revenue Assurance does best - you can create controls to manage the risk.

For example, if a department wants to pre-activate roaming for every sim card they sell - that is a big risk. If management is okay with this huge risk, they can go ahead, but you warned them. If they see the risk is too high for them to take, you can help find some way of making the plan less risky - or some other way of achieving a similar effect (advertising at airports, border crossings, making roaming activation easier etc.).

You Have to Know Things to Be Right

Now, all this sounds good, and all makes sense (at least I hope so). Our job as Revenue Assurance is not to argue with people, it is to provide them with the facts they need to make a decision. But how can we actually do this, how can we actually deliver? If you have never worked with marketing before, how can you help them understand risks better than they can?

This is where integrity plays a big part in what Revenue Assurance does. You cannot promise things you cannot deliver on. You cannot be too greedy and try to do all this at once. These are political and social skills that you develop over time, as well as knowledge you learn about the various departments you work with.

If you don't understand marketing or new product development, you cannot pretend or try to help them. Instead, if you really want to move into these areas, you must be patient and plan and educate yourself. So that when you are ready, you will be able to execute your plan with integrity.

But if that is how you approach these situations, with professionalism an integrity, I find it hard to believe good things will not come of it.

That's why I LOVE Revenue Assurance.

What if Your Revenue Assurance Problem is a Person?

If you work long enough, especially in telecoms, you bump into incompetent people. And I am not talking about people who are new and have not had time to figure things out yet - that I can understand - I used to be one of them! I'm talking about people who have been doing this for a while but still cannot seem to figure it out, and probably never will.

Working in Revenue Assurance Means Meeting All Kinds of People

And again, I am not trying to be unkind about your friend who tries hard and just needs a little more time to figure things out. I am talking about the people you meet doing the Revenue Assurance job - because you end up all over the telco - who you have no idea how they got the job or how they are still doing it.

When it comes down to it, do you really want to work with people who do nothing to add value to your company? Or worse, who make things harder for everyone around them and cause more trouble than do actual useful work?

We Hope For the Best, but Prepare for the Worst

We all start out being generous and kind, and giving people the benefit of the doubt - that is what we should do. But at a certain point, some people just end up being hated by everyone around them, because they don't do anything useful, and just create work for everyone else around them. And especially if you work in Revenue Assurance, you have enough to do without people making your life and your job even more difficult than it already is.

It took me a while to figure it out, but at some point I just realized why there are people like this, especially in telecoms. Telecoms is such a successful industry, and there is so much money everywhere, and so many opportunities for advancement and promotion. So every once in a while, someone stupid gets lucky and falls into a pit of money or gets promoted beyond their ability to do anything useful. And because they were lucky, and do well, they suddenly think they are a genius, even though they're idiots.

Personally, I don't begrudge anyone who does well. If you managed to do well for yourself, that's great, and everyone should be happy for you. But when these people say "I have done so well, I must be a genius," you and I know that is not necessarily true. It could be true, but success is not proof.

Being Lucky and Being a Genius Are Not The Same

The problem is that even though telecoms is such a successful industry, there are times when bad things happen and telecoms goes through hard times. But that is also usually when the lucky stupid people suddenly stop being lucky and start being stupid again. The problem is they cannot figure out why they are not making money or doing well anymore, when the reality is that it is because they are stupid and are not very good at what they do.

And that is okay - it doesn't make them bad people. I've remained friends with people I thought were useless at their jobs. But would I volunteer to work with them again? No.

Sometimes, when things go wrong, these "geniuses" just do not realize that telecoms is about change and new things - so they keep doing the thing that made them lucky the first time even though it's no longer useful anymore. But there are many other kinds of incompetence - and really, you know it when you see it.

So What Can We Do? Who Do We Tell?

Revenue Assurance people see this more often than most, because we deal with so many people in the course of our jobs. The question is, what should you do about these people once you find them, and should you do anything at all?

The answer is very simple. You are not helping anyone by pointing out someone is incompetent. If they really are incompetent, then you are not the only one to realize it. If you have ever tried to tell management about these people, you know it is not useful. They know who is incompetent and who is not. You telling them does not help them. It is not useful.

Why Do Useless People Keep Their Jobs?

There are many reasons why people who are not good at their jobs stay there, and are kept there by management. More often than not, even though they are mostly useless, every once in a while they do something useful.

It is also the case where even though they are useless, at least they are trained and understand the position - and hiring someone new would involve even more problems to get them trained.

Sometimes there is just not enough talented people around for you to hire, or as bad as this person is, the person before was worse.

But make no mistake. As time goes on, because management knows they are not useful, they will very naturally get to the point where they are just more trouble than they are worth. We do not have to do anything. In the end, we are professionals, and deciding if people are useless is not our job.

Patience, and Professionalism

You just have to trust that if there are still useless people around you, management is doing the best they can with what they have. That person will not be there for long, you just have to patient and professional.

The worst thing we can do as professionals is bring negativity into the workplace. People are stupid, that is okay, they won't be there for long. We are also not victims - it is not everyone else's fault except yours - it is not management's fault. We take responsibility for what we do and how we act - no one else can do that for us.

Other people's responsibility belongs to them. As long as we do not create a negative environment around ourselves - resenting other people for being stupid and useless, complaining all the time - we continue to be professionals and focused on delivering value to the telco. That is at least part of what makes us different from useless people - and this is something I am very proud of.

And that's why I LOVE Revenue Assurance.

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.

Do I Need to Understand the Telecoms Business to Work in Telecoms? In Revenue Assurance? Part 1

Too often when you ask people, even people who work in telecoms, if they understand how telecoms make money, they look at you like you are stupid. They think telecoms is a business like any other business, and if you don’t understand how businesses work, you should go take a business class.

At the same time, when you ask if people understand telecoms, they often assume you mean do they understand how calls are made and how the technology works – basically they assume you are asking them if they are a network engineer.

Is Running Telecoms Like Running a Chocolate Factory?

But we have had the experience of talking to high level business executives who come into telecoms determined to run telecoms “like any other business.” I have heard of CEOs who come from running a chocolate company saying they can run a telecom like it’s a chocolate factory. He did not really last too long in that job.

Now that may be an extreme example, but it helps make a useful point. I do not know if businesses really are all the same or not, but I do know for sure that the telecoms business model is not an easy one to understand, and many people who work in telecoms do not often understand it as well as they should.

Of course I am not saying that you cannot transition from another industry into telecoms (I have met many many successful Revenue Assurance professionals who have done exactly that), I am just saying people who end up working in telecoms need to understand how the telecoms business model works.

Really they need to understand how and why telecoms make money. In fact, I am finding it hard to imagine anyone who works in a telco who does not need to know this. More importantly, if you are in Revenue Assurance, not only do you need to know this, you need everyone you work with to know this.  

Often the Revenue Assurance job is so difficult is because the people around you do not always understand how telcos make money - much less the important issues we face relating to revenue. The more people around you understand this, and keep revenue top of mind, the easier your job becomes.

So What is the Telecoms Business Model? How Does it Deliver Value?

So fine, you accept that people who work in telecoms need to understand the business model – what is it already, and how does it work?

Well, first of all, we need to agree that telecoms has value, and provides something that people genuinely want and need – that telecoms is useful. You do not really have a business unless you can do that. But telecoms is absolutely all of these things.

Imagine, that even aside from the enormous economic impact of telecoms – allowing commerce, creating jobs, industries and economic activity – there is also a clear personal value that telecoms has.

I was a foreign student for many years, living far away from home. But because of telecoms I was able to call home. Because of our studies and my job, my girlfriend and I lived for many years on different continents, and the way we kept in touch was by being able to call each other every day.

Are Telcos like Banks? Or Retailers? Neither!

Telecoms absolutely has value, but how do telcos make money? First, telcos are not banks. Banks deliver value by being reliable – they double and triple count things, and have redundant systems on top of redundant systems to make sure everything happens the way they are supposed to. Telcos are not like that.

Telco systems fail all the time. So much so that the main KPI (key performance indicator) for network is Mean Time To Repair (MTTR) – basically how fast they fix all the things that break on a daily basis.

But just as telcos are not banks, they are also not retail stores. Retail stores are all about customer service – someone says hello to you at the door, they help you find what you are looking for, and they make you feel good about what you have bought.

And the reason why they do that is because, most of the time, the goods sold at one retail store are pretty much the same as those sold at another retail store. The way they compete is by offering better service to their customers. Telcos are not like that.

If Telecoms Is Not About Customer Service, Then What is it About?

Now it can be tempting to think telecoms are the same way – that all we sell is talk time/minutes, and the way we add value from our competitors is by being nice to our customers and loving them.

Obviously at this point you realize that if telecoms are about customer service, then telecoms must be really bad at what they do and must all be failing – because their customer service is awful. Like I’ve said before, telcos torture customers for fun.

But the reason telcos still have customers and are incredibly profitable, even though customer service is awful, is very simple – telecoms is not about reliability, it is not about customer service, it is about technology.

And in the next post/Part 2, I will talk about how telcos actually make money off of a technology driven business model, and why helping others understand this is key to the Revenue Assurance job.

But until then, I have to admit that I absolutely LOVE technology, and that’s a big part of why I LOVE Revenue Assurance.