Mike Willett is an Executive Director at Ernst & Young where he leads the Data Risk practice for the Melbourne, Australia office. He has over 13 years experience in the telecommunications industry in fraud management and revenue assurance. Mike is now more actively engaged in other industries undertaking data analytic projects to provide insight and understanding into business process effectiveness and efficiency.
Mike was previously the Director for Fraud & Revenue Assurance at Telstra Corporation Ltd in Australia. Mike was at Telstra for 6.5 years and led the fraud and revenue assurance function in times of great organisational change as Telstra underwent its massive Transformation program. His interest is both in understanding theoretical approaches to improve revenue assurance outcomes but more importantly in how these can be practically implemented to provide tangible and recognisable business value.
He started his career at BellSouth (now Vodafone) in New Zealand and then moved to Praesidium Services in the UK. During his time with Praesidium, he had the opportunity to consult with a number of service providers and vendors around the world and see how fraud and RA is perceived and managed in a number of different operating and cultural environments.
Mike graduated from the University of Auckland in New Zealand with degrees in psychology and marketing. He can be contacted at: firstname.lastname@example.org.
I finally managed to listen to the podcast from the WeDo WUG that Eric posted some months ago. Towards the end, Eric asked me a question along the lines of “with pricing getting simpler, such as all you can eat bundles, what does that mean for RA?”. As I listened to the podcast, I wasn’t convinced with my response, and so this blog gives me an opportunity to add to that answer.
On the WUG, I mentioned that behind the $70 per month, unlimited usage, plan, there would be all sorts of partner agreements that need assurance. There is some validity in this comment and it does bring RA to a margin analysis activity. However, I also think my answer was based too heavily on telco revenue streams as they have been over the last ten years, and not what they may look like in the future.
As I dip into this topic, let me make an assumption that we are discussing here the consumer, mass market customers; as this is most likely to whom these pricing constructs will apply. If so, then the telco that is content to collect $70 per month and essentially act as the “dumb pipe” is not the telco that is likely to survive through the significant disruption that digitalisation of business will bring. Telcos continue to search for new products, new partnerships, and better ways to personalise and improve the customer experience. And this, I feel, is where the new battlegrounds for revenue assurance will emerge.
It’s not the $70 per month that RA will need to worry about as controls on that can and should be automated. It’s assuring the small and incremental spend of each customer, where offers are individually tailored (welcome to the world of Big Data) and purchased in real time, that will make the difference to the winners and losers in the market. Getting that right is going to be key. RA has always played in the crucial 1%s of an organisation’s revenue and it is that 1% that can mark the difference between profit and loss.
I was talking to a finance manager in a non-telco industry the other day and the conversation turned to my life at Telstra in revenue assurance. He seemed very interested in the subject matter and, for someone new to this discipline, he asked very insightful questions about how things could go wrong and what could be put in place to prevent revenue leakage.
Finally, he asked me where the name “revenue assurance” came from in the first place because he argued, that the work I’d just described to him was rarely focussed on revenue. Nothing, he said, is revenue until it is in the financial systems, and yet much of the work I described focussed upstream around OSS and BSS – far away from the financials. This, he argued, is perhaps billing or charging related but not revenue. Next he asked me if I had provided “Assurance” in any of the work I had done. He spoke about what “assurance” means to him, which is a definition that I am more accustomed to now with my current organisation. For finance managers, “assurance” has a more specific meaning associated with the accounting and audit profession and provision of an independent opinion. RA’s more hands on role and the methodologies I’d described didn’t align to his experience of what constituted assurance and working with auditors.
Why this post? Much is discussed within telcos about taking RA to other industries. However, before we do, let’s consider carefully the language we use, as the terms “revenue” and “assurance” when put together already have a clear definition to many people, and it will probably be quite different to what we understand it to mean.
I don’t think it would be too controversial if I stated that (attempted and successful) incidents of customer / subscription fraud increase as sales channels move from stores to telesales and then again from telesales to online.
Traditional explanations suggest that this is related to the increasing difficulties operators have in validating the identify of an individual requesting service. Certainly this explanation has intuitive appeal. If someone needs to present a photo ID document to a sales person in a store, it is a lot easier to check the picture against the person in front of you and the signature on the ID against that on the contract. This may not be possible for a phone based sale, but it could be difficult for an 18 year old to present themselves as a 65 year old. The anonymity of online prevents all this, and so operators often look to enforce some checks at the point of delivery rather than the point of sale. Of course, this sounds fine but research by credit card companies has shown that photos on cards are not really useful, with merchants accepting payment from cards with pictures of animals instead of people and with the signature panel unsigned. So perhaps the traditional explanation does not tell the whole story.
I recently had a discussion with a colleague who explained that dishonesty is easy when distance can be put between the action and the perpetrator. By example, he said that a golfer with a ball in the rough may not contemplate throwing the ball back onto the fairway, but is more likely to kick it back, and even more likely again to hit it back with a club. The reason being, that the distance from the action increases, in that case from the golfer’s hand, to a shoe and then to the club, as a further extension. The trolley problem provides a further example (http://en.wikipedia.org/wiki/Trolley_problem). So what about online fraud…online channels place more distance between the application and the applicant and so makes dishonesty and fraud more palatable to the “customer”. This perspective may supplement the traditional explanation. Payments provide another example of increasing distance correlating to increased fraud. Payments used to be cash, then cheques, then through a card with a signature or PIN, and now its tap and go. All these changes put small but increasing distance between the customer and the transaction and so, my colleague asserts, would leave it more prone to dishonesty and fraud.
So what can operators do? Well I have no silver bullet, but suggest that they consider the distance being created in transactions and dealings with customers, and whether there are ways that this can be reduced, either in reality or by perception.
Back in the late 90s and early 00s, when Revenue Assurance officially acquired the title of “buzzword”, the industry was awash with innovation, crazy ideas and possessed a real edginess. Every different person you spoke to had found a new way that a telco could lose money, and chances are that you would never have thought of any of these by yourself. Vendors were entering the market, all with new offerings and approaches to help tackle the mysteries of revenue leakage. Industry groups were thriving with people keen to get involved and contribute. Let me then ask some questions to challenge whether RA has settled and whether that edge is disappearing:
- has the maturity model seen better days? The maturity model is often held up as what RA success looks like and what should be strived for. However, it seems to built out of what it took to make RA work in large, bulky, incumbants that generated revenues primarily from voice and maybe SMS. Is the alignment of maturity to first centralisation and then decentralisation; and controlled and managed processes, adept enough to allow flexibility in an environment characterised by changing business models, technologies and revenue streams?
- have vendor tools converged to a point of indifference? Fundamentally, it seems RA tools were built on improving reconciliation capabilities – across larger data sets, over more diverse data feeds, to handle more complex business logic, and present results more intuitively. But with advanced analytic techniques being more accessible, should we expect to see more innovation in how we use the wealth of data beyond reconciliation?
- has there not been enough work on measuring RA performance? Methods to calculate quantifiable revenue uplift, coverage of RA activity, controls established, processes decentralised back to operations etc have existed in various forms of acceptance for some time. Targets set on these become “easy” to meet and even easier to argue away if they are not met. Meantime, objectively determining the value of less tangible RA activities, such as those centred around preventative work, are lagging. In scientific fields, great endeavours in discovery are often preceeded by great improvement in measurement. Change what, how, or the depth to which you measure RA’s value and see what opportunity may arise.
- where is all the innovative thinking? This is no way meant to be disrespectful to the many people who spend time and effort looking at RA today. Conference attendances have fallen and annual events are being cancelled – if you ask attendees a consensus opinion, whether true or not, is that “it’s the same people saying the same thing, year after year”. How does RA bring back innovative, disruptive and challenging discussion that provokes wider debate?
So what might RA need? New thinking, new measurement, new uses of technology and new aspirations that challenge and bring out the best in RA practitioners? You be the judge.
Posts on talkRA rightly focus on the life and times of the RA practitioner but for a moment let’s reflect on a primary object of our work – that small 1Kb bundle of joy, we affectionately call a “CDR”.
While RA people may cry out asking what’s next for them personally, think of the CDR. 10 years ago they were front and centre for every fraud and RA manager. Fraud systems obsessed with building interfaces to collect them, while RA systems rushed to reconcile them. We deployed SS7 probes to check their accuracy and verified mediation systems fill with enough complex logic to entertain any CDR passing through on a quiet Sunday afternoon. Each individual CDR could be comfortable that the rated price that it was given would in fact turn, as if by magic, into real revenue. CDRs were important and everyone knew it.
But then it started to change. Fraud managers and analysts wanted more data and information on which to base decisions and while CDRs continued to be needed, understanding the fraud risk of the CDRs together with the customer profile (including subscriber information, payments data etc) became central. Competitive markets drove tariffs lower and plans with included call minutes became popular – essentially to the extent now that, like fixed broadband, the value lost from missing a CDR or rating one incorrectly is rapidly approaching zero. Fraudsters targeted the latest iPhone at the point of sale or split up prepaid packs before our a service was even activated, let alone creating CDRs. And products continued to be integrated into bundles, where the value does not derive from the usage itself but from the recurring monthly charges.
So spare a thought for our friend the CDR, and as you reflect, think also about the time in your day spent worrying about CDRs and all the places they may visit and be transformed by in their journey from switch to bill – is it still the best use of your time to give them such attention?