It’s time for AAPT to get serious. The company’s acquisition by Telecom New Zealand has raised its sights to aggressively challenge industry giants Telstra and Optus. The company is focusing its attention on carving out a significant slice of markets dominated by its much larger rivals. New CEO Jonathon Stretch knows what he wants: He told the Australian Financial Review in August he’s out to “kick heads”. Since then, he has hired a new CFO from his old company AT&T and recruited Bob Hennessy as chief information officer.
According to the AFR’s profile, Stretch sets great store by IT-supported customer service systems – sentiments Hennessy echoes. Within two years at AT&T, Stretch led system change to deliver all AT&T products through unified customer care, help desk and billing systems. That is now AAPT’s target.
“I feel AAPT has gone through the aggressor growth phase, the cost-cutting to stop the waste has been done and now it’s coming into a third era that is about making the assets, and I don’t just mean infrastructure, it’s also things like call centres and billing systems, work in a unified way,” Stretch told the AFR.
There is certainly a job for the new executive team: Telecom NZ said in May declining revenues in Australia had “moderated” after year-on-year revenue declined 10 per cent for the third quarter. However, AAPT continued to churn customers and lose revenue in the fourth quarter as it sought to move from commodity to higher value markets.
Hennessy – four months into his time at AAPT – has worked through the IT ranks at organisations such as BHP and Westpac. He says in order for AAPT to make the transition from newcomer to mainstay, he must preside over a change in the way the company conducts itself and manages its assets.
“It’s the move from a pretty ad hoc growth mode into a more traditional corporate discipline as an organisation,” he says. “If you think about how success was defined a few years ago when we were growing, it was all about revenue line to give people confidence to have a share price that would continue to run up. Whether you made money or not was almost secondary, now it is about profits and all those traditional old things that post dot-bomb everybody started noticing again.”
Hennessy says the company has had a dramatic turnaround in the past couple of years, with a concerted effort to formalise the structure. Capital has been centralised, prioritised agendas of work have been drawn up and increased discipline around corporate governance has been driven through. As a bigger, more mature organisation, Telecom New Zealand had high demands in terms of governance and such discipline has greatly enhanced AAPT’s ability to look forward in a more cohesive way.
“There was obviously a lot of work underway when I first joined and, to be honest, the lists were far too long with not enough traction around far too many things,” says Hennessy. “A lot of the work went into corralling the things that were underway into some program streams to achieve better visibility, better communications management, better sense of all the moving parts so we can manage outcomes better.”
AAPT identified seven main program streams including billing, provisioning, enterprise information and managing credit controls, and brought together all the development and systems affecting each area. A clearer view, he reasons, leads to an environment much more conducive to strategic planning.
Hennessy can certainly be described as one of a new breed of chief information officers. He has the traditional responsibilities of internal technology projects and keeping operations running, but is also firmly engaged in product development and external customer-facing functions. He describes his knowledge of purchasing telco products in previous roles as one of the methods in the madness behind bringing him to AAPT.
Whereas in many organisations the chief information officer will be aware of their organisation’s competition but not have direct influence in the contest, Hennessy is right in the middle. Chief executive officer Stretch pledged to get into selected markets like small business and kick the heads of Telstra and Optus and, for this to happen, Hennessy’s market judgment will be crucial.
An area AAPT will look to differentiate is through IS-related products, which will be built and delivered to market out of Hennessy’s IS organisation: A possible move into firewall management is one example. He sees the possibility of work done internally being spun out commercially as an exciting angle on his role and is particularly enthusiastic about identity management.
The commercial drive required for his role was a major attraction that brought Hennessy to AAPT in the first place. Creating opportunities and building credibility with prospective customers has become a responsibility he enjoys. He believes chief information officers in general have become far more commercially oriented in recent years and the sales edge does not make him feel uncomfortable when talking to his peers.
“I am having to learn a bit about needs-based selling approaches, because we’re trying to build relationships with other CIOs that lead to interest in what we offer,” he says. “It’s not my style to be an overt salesman and, ultimately, that is not my job, but the converse certainly cannot be true, I can’t be out there in charge of the direction of this technology and looking like a goose commercially.”
AAPT has a realistic view of its place in the market and Hennessy concedes that going head to head with either Telstra or Optus without differentiation would see only one loser. A vital area for AAPT is customer service; the company is targeting specific segments in the market and seeking to gain a reputation for superior service standards, and that can often come down to technology reliability and innovation.
Hennessy says the tactic is to track back through the customer process and find out what, if anything, has annoyed them. Often this will be broken processes, slow lead times and the creation of repeated work and lag times for customers.
The technology backbone behind this organisation is at a stage in between what was required to get a new business up and running and what is required to sustain it. This will be developed incrementally over a three-year period, with two major realignments categorised as architectural intent and structural partitioning.
“I hold that the architectural intent is the technology translation of your business strategy, so it matters. By holding to the key principles around the way you want the architecture to be, you are building the future capability of the business. So the architecture is king to me, in terms of the way we are going to inform our thinking,” says Hennessy.
He intends to pool the applications carrying out functions in the same area, and remove functionality from areas like billing systems, which currently do more than just handle billing.
The structural partitioning includes areas such as web services, which is being ushered in, with new applications being brought into areas like billing to solve problems that have arisen with expansion.
Like other new entrants that have grown quickly from nothing, AAPT does not have a scalable billing capability. Hennessy stresses the need to create a more streamlined process with much greater automation. The key is to avoid a cost base that grows in proportion to the revenue.
“It will be a migration over time with the key issue being that it is necessary change, it does not piss off customers and it builds new product capabilities back into the organisation,” he says.
“This is not a wholesale change. I think those mega program ideas are fraught with risk. There is a littered highway of failed big program missives all over the world. I don’t believe in them and am far more interested in incremental change to a vision.”
Hennessy also suggests AAPT can steal a march on its rivals, thanks to its New Zealand connection. He believes the thinking in New Zealand telecomms is two years ahead of Australia. He has staff in New Zealand looking at the transformation programs and seeing what can be reapplied in Australia.
He explains the size of the New Zealand market means Telecom has had to learn how to leverage in new marketplaces against multiples of their population in an affordable way for that population. Without giving away details of how he intends to trump the competition, Hennessy says there are some innovative possibilities that could result from the convergence of telecommunications services.
Threats and values
“The real threat is if we don’t move beyond traditional telephony as an offering. If we end up just working out smarter ways to provide that cheaper, it is a game that the big guys can play and probably kill us in,” admits Hennessy. “But, if we innovate with technology and strategy into segments of the market that like to deal with us, then we can succeed against those guys; we just have to do that in a focused way.”
In keeping with his evolved chief information officer role, Hennessy talks about market success when evaluating his own performance and insists external displays of confidence, such as Stretch’s comments about kicking heads, reflect the mood of the organisation. It reveals a desire, he says, to get the punchy atmosphere back that was lost in the past couple of years when the traditional profit values were being nailed down in processes.
He is also adamant, as part of a newly compiled executive management team, the changes he is putting in place must be judged over an extended time frame.
“Business is competition and so lively competitive language is reasonable; there is irreverence about the way we seek to portray ourselves, which I think is appropriate,” says Hennessy. “I want to be judged over a three-year run, so that incremental changes have taken place. I think there is too much preparedness to declare victory from interim results and I think it is a few years before you really cement a place in a market – and that is what I will evaluate, rather than success of individual technology projects.”
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