The Crisis: A tale of telecoms trouble

For late May, the weather is unusually dull and overcast. But then again the year 2016 has been a dark one. You run your fingers back and forth over the grain of the hardwood boardroom table. A few tiny drops of your own sweat glisten in the grooves, reflecting back the fierce fluorescent lighting. The tension in the room is palpable; the Crisis is all everyone talks about these days.

The Chinese government announced in March that they had stopped buying US Treasury bonds. Widespread panic took hold, with runs on several major banks. The NYSE is now down 75% since January, and the dollar has halved in value. Iranian oil is now flooding the market… if you have euros, roubles or yuan to pay for it.

Now you’re struggling to adapt to a new and unanticipated business reality. Everyone else is too.

The CEO sits down beside you, having presented her grim outlook to the leadership team. She slumps back into her chair, and gazes down at her feet. It’s as if she were wishing for ruby slippers to appear, and her problems to vanish with a single fanciful wish.

Right away you stand up, feeling confident and ready to give your CTO update. Inside you sense the urge to make a wry smile, but you suppress it. This isn’t the moment to be caught smirking, no matter how well prepared you are. The situation is serious.

“Over the last few months we’ve mastered a new (and rare) skill”, you begin. “We’ve leant how to successfully run our network in overload.”

“I did some research last year, and found some (somewhat obscure) techniques and technologies that were originally developed for the military. After all, they have to deal with networks under attack, and you can’t just dial your local telco sales office to order more fibre in the middle of a battle!”

“The assault on our business may be fiscal rather than kinetic, but the problems are very similar.”

You turn to the CEO: “So what we’ve learned is how to safely run our network ‘super hot’ – very close to 100% of its capacity, all the time.”

She lifts her eyebrows, making an ‘oh, really?’ face. “How’s that going to help us?”, she mutters. Unflustered, you move on to explain a less obvious gain, one that’s a market game-changer.

“We also now have extreme fine control over our network and customer experience. When the load goes to (and through) 100%, we can precisely target our resources. So the ‘right’ applications and users ‘fail’ in the appropriate order. Just like in a battle!”

The CFO seems surprised: “Doesn’t everyone have this capability already?”

“Not at all”, you respond. “Until now everyone just threw money at quality problems. Anyone got any spare cash?” Black humour is best reserved for a dark economic days, you think to yourself.

Your pitch starts with the self-evident new reality: your capacity capex spending proposal is zero. (Not that you had any chance of spending a cent, given the Crisis). In collaboration with the CMO, you’ve done your homework.

“By working together we figured out which customers are the ones who are reallywilling to pay for predictably high performance. We’ve also properly characterised our demand by different applications and users, and their real quality requirements.”

“How does that work in reality?” asks the skeptical CEO.

You decide an example is the best way to help her understand. “Well, think of a school”, you explain. “How can we deliver the ‘just right’ resources?”

“We might have one service level for the offices that need to deal with emergency voice calls, and another one for pupils doing foreign language lessons by talking to kids in other countries.”

You’ve clearly got the team’s attention.

“The school office has full resilience and assured performance, whereas the classroom service may go down if the network is stressed. By exploiting otherwise stranded ‘backup’ assets, and scheduling the data differently, the cost of the classroom service is a small fraction of the traditional ‘five nines’ approach. It has most of the revenue, with little of the cost.”

There are nods around the room.

The CMO has been in the business a long time, and is unusually animated: “This new alignment of willingness-to-pay to resource use is a powerful competitive weapon.”

“We’ve eliminated the cost ‘slack’ of over-delivery. We’ve also got rid of the customer experience ‘schlock’ of under-delivery and the resulting churn. For our key voice and data products we’ve developed a new tiered pricing model that separates out the mission-critical uses from the secondary ones.”

Attention returns to you. Now for the finale. “I believe this Crisis is going to put our competition out of business.”

You show the team your new financial model. “Our competitors now have a cost model that is unsustainable in a zero-capex world. Their customer experience management is dependent on ever-expanding idle network capacity. When they go from running ‘cold’ to ‘hot’ they hit a performance cliff, which makes their customer experience disintegrate.”

The CFO leaps to his feet.

“Whoah! Now I see! Our rivals won’t be able to control their customer experience as they run out of slack. So their best customers will churn to us. On top of that, their cost model will be to over-deliver performance to everyone who is left. Yet their revenue model will leave them with the customers who value performance the least.”

He’s got it! So you reveal a bit more of your plan…

“Absolutely! Meanwhile, we’ll prepare to take on those low-end users onto our network with services that have a weaker performance promise and massively lower cost base.”

The head of the M&A team has the look of a hunter at the ready. He is evidently relishing the opportunity to swoop on any rivals who show signs of struggling.

You take a sideways glance at the CEO. She is barely suppressing a wry smile.

“Running networks in overload, you say? And doing it safely!”, she proclaims. “Now, whoever would have thought of that?”.

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