Lessons on transformation

Perhaps no one since Alexander Graham Bell, with his famous call to Thomas Watson, has led a more radical or intense telecom-related transformation program than Dr. Hossein Eslambolchi, AT&T’s transformation czar until the company was acquired by SBC Communications in late 2005.

Eslambolchi, already holding the positions of CTO, CIO, president of Bell Laboratories and president of AT&T Global Networks, was asked by the company’s board to accept the position, apart from his other responsibilities, in 2003. AT&T at the time was in dire need of transformation, as economic pressures from the dot com bust had driven it to sell off its cable and wireless businesses and caused it to lose nearly $200 billion in market capitalization. With the market for long distance voice services shrinking rapidly, AT&T needed to stabilize its business and increase its capitalization and do it quickly. So while the situation was dire, the mandate from the board was quite clear and certainly urgent.

Transformation on multiple levels

With no clear historical precedents for rapid transformation available, Eslambolchi studied the famous transformations of General Electric and IBM, and then set out to achieve similar goals, but to do it much more quickly.

Over the next three years, the company achieved a series of quite impressive performance improvements:

- Reduction of voice services fulfillment cycle time of 72%;
- Reduction of IP VPN services fulfillment cycle time of 75%;
- Calls per employee increased by 173%;
- Almost 1,200 legacy applications retired in 2.5 years, bringing the total number of systems involved in fulfillment, assurance and billing to 70, with further reductions planned;
- Improved billing accuracy from 12% incorrect billings to 1% -  a $2.9-billion difference;
- An order flow-through rate of 95%;
- Productivity per employee increased by 160%;
- Implementation of an XML-based e-bonding portal used by customers to do their own ordering, billing and trouble ticket submission;
- Specification of new network-based services that would add $5 billion to AT&T’s coffers;
- Consolidation and retirement of 24 legacy networks in 24 months;
- Lowered headcount by 55%;
- Increased revenue per employee by 28%;
- Helped AT&T lead the Tier-1 industry players in the US in EBITDA per employee and revenue per employee;
- Reduction of levels of management from 14 to seven;
- Change in revenue mix from 80% voice and 20% data to 55% data and 45% voice.

These were accomplished through a broad-based transformation program focusing on:

- Customer transformation - including a significant consolidation and restructuring of fulfillment, assurance and customer care capabilities to cut costs, cycle time and improve customer experience.
- Service transformation - the move to a common set of services over an IP core capable of integrating with a broad variety of access technologies and designed to ultimately scale to service a forecast 1 billion intelligent endpoints. AT&T also developed an integrated feature execution environment (including  voice, collaboration, security, conferencing and messaging) designed to deliver new network-centric services and introduced a new concept of service lifecycle management to manage the evolution of services.
- Network transformation - collapse and consolidation of 24 networks using a variety of technologies, platforms and vendors onto a single logical IP-based infrastructure described by a single database of record.
- Cultural transformation - transition to a leaner, more goal-oriented organization and much more nimble decision-making structures and processes.

To accomplish the transformation, AT&T had to overcome a great deal of embedded complexity and focus strongly on defect management. One of the most important efforts was to improve the quality of the data describing the network. AT&T implemented a highly accurate single logical and physical database of records, enabling large reductions in fulfillment cycle times, lower costs and greatly reduced billing problems.

“Concept of One, Concept of Zero”

Key to driving the systems transformation was Eslambolchi’s Concept of One and Concept of Zero. The Concept of One addressed the approach of collapsing a group of systems into one. This concept drove the effort to vastly reduce legacy and redundant systems. The Concept of Zero promoted the move toward zero defects and near-zero cycle time through end-to-end process automation.
Eslambolchi also introduced the Concept of None, a fully autonomic computing environment, which he believed we were close to realizing with today’s emerging cloud capabilities.

Having reflected on the transformation effort, Eslambolchi, who is now chairman and CEO of Divvio, offers the following as his “Top 10 Successful Transformation Initiatives”:

1. Adopt the Concept of One, Concept of Zero and, ultimately, Concept of None: One organization, one system, one process, one solution and one owner.
2. Accountability and responsibility must be clearly established.
3. Establish clear, simple targets and goals: one or two at each level that are tightly linked.
4. Data collection and measurements are paramount, so is documentation.
5. Defect management is the key to continuous improvement.
6. The 80/20 philosophy: focus on 80% of the opportunities to improve and then shift focus.
7. Continuously demonstrate success – success will breed success and build confidence.
8. Expect resistance to change and to be held to high standards.
9. Follow through – don’t expect what you don’t inspect.
10. Know exactly where you want to go, what you want to achieve, when you want it to happen and stay committed.

Eslambolchi believes transformation starts with a focus on customer experience and a few clearly understood goals. He supports TM Forum’s leadership in making this happen and believes it is uniquely positioned to lead the industry in understanding and driving change. He is particularly supportive of the Forum’s Business Benchmarking program that allows providers to compare their effectiveness against their peers.

Rob Rich is managing director at TM Forum Insights Research

This article originally appeared on TM Forum’s Inside Leadership newsletter