589. Gerd Schenkel, How to Analyze a Telecommunications Company

Show Notes:
Gerd Schenkel discusses his experience in creating new telco businesses and how to analyze a telecommunications company. Gerd has spent over 10 years as a consultant and 15 years as an executive in banking and telco. He aims to make a differentiation in consulting work by bringing together both worlds. Developing a Telco Company Gerd spent six years at Telstra, Australia's incumbent telco, and three years as the CEO. He talks about his experience there and moves on to his first experience at creating a business which was for National Australia Bank, where he launched a digital bank called EuBank. He later worked as the CEO of a digital team and was tasked with building a telco division. Gerd discusses the creation, development and success of a telco project. He talks about launching a project, what it requires, and what he learned through the process, including accepting and meeting a 10-week launch deadline. He talks about key learnings from his time there, managing the team, product pricing, and making the process of developing and delivering a product simple and effective. A Telstra Broadband Brand Success Telstra's internet broadband product was competing with its parent company's product, but the difference was not in speed or quality. The brand and marketing strategy was more about the connection to the local exchange, where the availability of ports was crucial for competitive dynamics. A former Telstra employee and artist was hired to help develop the brand. The team knew they would need to market locally, and in some areas, they would spend more money. However, they turned this limitation into a positive, creating a brand story called "Belong." The name "Belong" was about belonging to the local neighborhood, and the advertising would be with local shops. The brand was launched with white lists, indicating that the product was only available in certain areas. The name "Belong" was part of the "local connection" concept, and the bank "Eubank" was launched to create a national brand story. Challenges Faced by Telco Startup Gerd discusses the challenges faced by a startup telco, Telstra, in complying with specialist regulations. The telco license had provisions for executing government and police directions, which were not widely known and not widely discussed. Our team was unaware of these requirements until a dedicated Telstra person contacted us about it. The team found a solution by flying a UK-based technician to install the necessary technology in exchanges. Gerd explains that, in terms of regulation, startups can do all their work upfront, but there are always unknowns and unexpected issues that need to be addressed. Flexibility and agility are essential in finding creative solutions, as demonstrated by Telstra's experience. Customer Service, Operations, and Billing Gerd shares an example of changes made to billing, and communication at Telstra. He explains that pro rata was a major cause for complaints due to the high cost of first bills. He talks about costs involved in rolling out a new billing system and how they chose a low-cost platform and how this solution cost them nothing and was immediate, meaning no complaints or phone calls. Gerd emphasizes that the mindset should be on the customer side, focusing on providing the best possible service and experience for customers. Gerd also mentions that Telstra had to configure routers with customers' accounts, which was impossible. They found a solution that was cheaper and more efficient, saving them $3 each. This resulted in no phone calls or track roles, and customers were happy. On the Moving Home Process The conversation turns to the redesign of the moving home process for Telstra, which had a negative NPS of perhaps minus 50 and a churn rate of 85%. The process was outsourced for decades and was a nightmare for customers with multiple products and separate tech stacks. Gerd suggested that they started with a small percentage and then rolled it out to everyone. They used their control of channels to impose a better process, routing website orders wherever they wanted. They then convinced call centers to enter orders on the website instead of the internal system, resulting in a reversal where the website became the internal interface for employees. This principle was also applied to mobile phone ordering, resulting in faster and easier ordering for all employees. Gerd explains that importing these mindsets into Telstra was harder due to the bigger scale, complexity, and politics involved. However, the benefits were 100 times bigger in terms of cost, with savings of 40 minutes per mobile order. He now works for a telco in North America, applying similar mindsets to their operations. The Business Model of Telecommunications Companies Gerd discusses the business model of telecommunications companies, particularly telcos. Telcos spend billions of dollars on infrastructure and technology, which is then used to make...