Archive for May, 2009

Mark Graham Brown wrote a succinct little business savvy book called Get It, Set It, Move It, Prove It. 60 Ways to Get Real Results in Your Organization. The book contains a number of short chapters neatly summarising basic business issues or mistakes made by organisations in its attempt to achieve its objectives.

One such chapter is on the use of benchmarking as a way of obtaining ideas for business improvement. Tongue in cheek, he refers to a benchmarking trip as an opportunity to go somewhere warm and fun while you tell your boss you are doing a benchmarking study.

The idea of a benchmarking study is that you get some great ideas for improving processes by studying other companies that perform with much greater efficiency or at a lower cost that you do. Benchmarking should then be a way of shortcutting process improvements by letting other companies do the trial and error until they hit on an approach that works.

While I read this book I looked for the application to Revenue Assurance. Brown lists a few shortcomings of benchmarking which I believe are equally valid in our industry and it would be interesting to hear what our readers, who have participated in the TMF and GRAPA benchmarking studies, think about these common shortcomings in the context of furthering the RA standardisation effort.

  • Well run businesses are inundated with requests to do benchmarking, so much so that one particular car manufacturer started asking money for benchmarking tours and ended up making more money from the tours than from manufacturing cars;
  • Many companies who add themselves to the benchmarking databases are a legend in their own minds only. They volunteer information to others but are actually so outdated and generic that it is a total waste of time to review what they have to offer;
  • A lack of focus and preparation. Benchmarking should focus on a singular goal and process. Once the process has been identified, a plan for selected the comparison data should be done. The outcome of an unplanned benchmarking study would not contribute to the organisational learning as you would realise after the field trip that you miss vital info or may even have selected an inappropriate partner against which to benchmark;
  • Thinking that you have to benchmark again a large and well known company instead of a small company that actually do things differently.

When I read benchmarking reports I do not always understand what was benchmarked. I would think that we would like to take X and compare it against a number of sources to determine if X looks and feels the same when compared to others. I can see from the benchmarking questions that X is implied but it is not explicitly stated or described/labeled as X.

What is the expected benefit of being benchmarked? Many companies are looking for the perfect role model against which to benchmark themselves in the hope that they would learn how to do the job. Very often they do not have an idea what should be done and how. The exercise is seen more as a hunt for free advise, templates and how to. If they find a company against which to compare themselves, what benefit is there to the comparison company and how many companies end up training or guiding the benchmarking company? Is this still considered benchmarking?

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Lee Scargall, fellow talkRA author and Director of Enterprise Risk Management at Qtel International, joined me for podcast 6. We talked about a topic of increasing importance: how to deliver revenue assurance across international groups. Fewer and fewer telcos are run as stand-alone entities. Economies of scale has made it harder and harder for small national telcos to match the profits of large international groups. Cost reductions and efficiency savings increasingly drive groups to build scale by expanding overseas. At the same time, group-level executives see revenue assurance as vital to ensuring shareholder value is maximized in each national operation. I cannot think of anyone better placed to give advice on revenue assurance in groups. Lee was recruited to Qtel, the Qatari operator with ambitious plans for growth and international expansion, and tasked to implement their group function for risk management, revenue assurance and fraud management. He joined them after performing a similar role across the disparate overseas subsidiaries of Cable & Wireless. You can hear Lee’s frank advice about how to manage group revenue assurance by listening or downloading the podcast from talkRA. You can also hear and subscribe to the podcast using iTunes, meaning all future episodes will be downloaded as soon as they are available.

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Walk around Britain today, and you sometimes see old houses with recesses in the walls. They look like they should have windows in them, except there is no window. The space is the right size, and in the right place for a window, but they are bricked up. They are reminders of a time when Britain had a ‘window tax’, a tax where the wealth of a man was measured by the number of windows in his house. You can imagine the kind of reaction that provoked, with two small windows costing double one big window. Governments are always looking for different ways to tax the people. At one time, the Russian state generated 40% of its revenues from a tax on vodka. Public toilets in France, Italy and Romania are still named after Roman Emperor Vespasian, who taxed the collection of urine. There are still many stupid taxes today. Almost half of the states in the US have laws to make people pay tax on illegal drugs. Not surprisingly, most illegal drug users also dodge the drug taxes too. A few weeks ago, talkRA colleague Lee Scargall reported on a crazy suggestion to introduce a tax on SMS messages in the UK. I laughed it off, but I laughed too soon. Although there is no signs that such a bonkers tax will be levied in the UK, there is a serious proposal to introduce just such a tax in the Philippines.

Of course, the Philippine authorities are trying not to call it a tax. It will be a ‘fee’ of perhaps 5 centavos (about 1 US cent) per text. The fee will be used to pay US$30 million for metering devices, to check that the Philippines government is getting all their money. You can read about the story here, here, here and here.

The Philippines are the highest per capita users of SMS in the world, so a penny a text must seem like a great way to raise cash for the government. With US$30m at stake, there must be some vendors out there willing to tell the Philippine authorities what a good idea the scheme is, and how they are right not to trust the telcos. US$30m does not sound like the kind of number picked at random either, so somebody must have had a few sly conversations with possible suppliers. Money talks, but whoever is whispering sweet nothings about extra money from telcos, the Philippine government should turn a deaf ear.

The window tax was a bad tax, even though it was simple. That is why we no longer have it. It tried to make money from the richest, but counting windows is a poor way to work out who is richest. The same criticism applies to this text tax. If the Philippine government wants to tax telcos more, then they can just pass a law and take more of their profits. Taking money direct from revenues just ducks the question of how those revenues should be spent. The Philippines benefits more in the long-run if the telcos invested in infrastructure and services. The employees of telcos benefit if they are paid well and have job security. Profits come after costs like investments and the pay received by staff. Taxing profits does not punish businesses that invest or reward their staff well. Taxing revenues does. Taxing revenues is short-sighted, and discourages expenditure on infrastructure and on employees. One way or another, telcos who carry an extra tax burden will either charge the consumer more to compensate, or they will spend less on providing current and future services, or they will generate smaller profits. If customers end up paying more, then the text fee will be an extra stealth tax on them. If investment or pay falls, that hurts customers and the economy too. And if profits fall, then you end up in exactly the position you would have been in if you had just put a bigger tax on profits to begin with, except you wasted US$30m on a lot of extra technology to do it.

In the end, the only sure-fire winners in the Philippine scheme would be overseas. An overseas business will get the contract, because the technology will need to be imported. Whichever supplier wins the deal, the taxman in their country will be taking his slice. But back in the Philippines, somebody is paying for a lot of unnecessary equipment.

Despite the recent crisis, there is only one sensible place for governments to be looking for money, and that is in banks. Whether a telco makes money from SMS messages, voice or from the food sold in the staff canteen, that money ends up somewhere. Audit the company’s numbers, trace the money, take what is owed – that is how a tax system should work. Money comes out of the telco customer’s pocket and ends up in a bank somewhere. It does not just disappear. Looking for that money by poking around a telecoms network or interrogating a database would mean asking the taxman to run the telecoms business, instead of just taxing it. A good telco will turn all its network usage into money, and the taxman will take his share of the money. A bad telco will fail to turn all its network usage into money, meaning there is less money for the taxman too. But the taxman is not going to help himself by trying to interfere in a failing business. Even a greedy taxman is never going to be better at running a business than a greedy businessman. And even if the taxman did help the telco to make more money, it would be because customers were previously underbilled, or because the telco was engaged in fraud. If customers were underbilled, then the result is that customers will pay more, which is exactly what the politicians are promising will not happen. On the other hand, if the problem is internal fraud within, or by, the telco, then network data will not help. Any good RA practitioner should know you do not find hidden cash by trying to do a usage reconciliation – you do it by tracing cashflows. Trying to reconcile cash to usage would be a massive (and probably inconclusive) distraction from the real goal. Usage reconciliations are good for finding leakages nobody knows about, not for finding cases where real money is being hidden. A good auditor does not need to know about a customer’s usage just to tell if the money the customer spent has gone missing within the business being audited.

The text tax is a sneak attack – a confused and confusing attempt to raise taxes whilst pretending that nobody has to pay for them. Either it steals from customers whilst hiding behind the telco, or it involves governments invading telcos and telling them how to run their businesses. Neither is a credible or sensible way to increase public funds. It is a bad idea all round, and is seemingly inspired by a lot of confusion between the principles of auditing cashflow (something the taxman has a reasonable right to ask questions about) and auditing business performance (definitely not the job of the taxman in a free society).

Thankfully, it looks like the Philippine customers are less easily confused than the Philippine authorities. It is reported that consumer groups are angry at the proposal. Good for them. That stands as proof that you do not need to spend US$30m just to understand what is really going on…

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A few weeks ago we reported that Israeli revenue assurance vendors cVidya had secured a new US$5m credit line from venture lenders Plenus. Now it seems like cVidya might be looking for more venture capital funding. The Israeli Venture Association’s High-Tech conference is an event where technology businesses get to network with potential VC backers. The 2009 event is scheduled for May 19, and according to the program, cVidya will be presenting. Good luck to them – it would be interesting to see what they use the money for…

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While I still have plenty of cleaning up to do on the literature review, I am finally arriving at planning the fieldwork of the study, which made me reflect on discussions I had with a number of people on the standardisation of revenue assurance. I don’t need to add GRAPA’s drive in the certification of RA personnel to point out that there is an obvious movement toward standardisation or the implied assumption that by some miracle, standardisation actually already occurred.

MTN Group is on a drive to standardise technology across its operating units (OU’s). According to Deidre Ackermann, group CIO, ‘consideration must be given to how an organization implements operating models for achieving the efficiency that they seek but that does not stifle innovation or speed to market’. Add to this a healthy dose of diverse cultures and physical locations in their footprint and one can appreciate her challenge. Dr Ackermann is under no illusion that using a standard framework such as NGOSS, modeled and implemented will not solve the problem. She acknowledges the fundamental business practices that must change to comply with standardisation and that this change is not only affecting technology but business processes as well. MTN’s drive is on the total of its systems but lets just consider its RA technology across its footprint.

Do we mean standardisation of RA tools with the inclusion of all its new requirements or are we addressing the process of RA as well? The literature reviewed for my study provided some insight into the process of RA, which contributes to my list of plenty of clean up still to do. There are a number of white papers or magazine articles that propose a basic process of RA execution. A generalisation of these sources would culminate in, Identify, Prioritise, Correct, Follow up.

However, this is at a level 3 business process. What happens at levels 4 to 6? If we maintain that standardisation goes to operating model level only or at best, the adoption of an industry standard, which proposes a best practice at level 3, are we still driving standardisation? We have adopted Six Sigma….but implemented Two Sigma because that is all we could afford or managed to achieve.

In theory I agree that standardisation will benefit the organisation. One can create Centres of Excellence and I would be very surprised if the RA Maturity assessment did not show a marked improvement but have we considered the cost benefit ratio? A few thought leaders discussed the concept of RA being part of Risk Management and several people supported the concept of only doing something when the benefits outweighed the cost. What is the financial and emotional cost of driving such standardisation?

Now assume that there is industry agreement that we will drive standardisation to its nth degree. How do we approach it? Do we select a sample of organisations which we believe are doing RA right, document what they do and implement that at others? If it is sample based, how big a sample and what are the characteristics we consider for inclusion in such a sample? I have a distinct vision of Noah counting the animals two by two. Can we drive the standardisation of RA independent of the standardisation of technology and implied operating models? We can simply ask GRAPA to promptly issue certificates of process standardisation being achieved and demonstrated.

Leadership is concerned with the ability to give guidance within the constraints and boundaries of the objectives to be achieved. The “what’ is important. ‘How’ is a function of execution against that ‘what’. As long as the business ‘what’ has been achieved, does it really matter how it was done? Unless of course the ‘what’ could not be achieved. If in the MTN scenario the drive to have Centres of Excellence and recognition of skills and people empowerment become the ‘what’ objectives, then the ‘how’ would certainly include something close to a level 4 or 5 standardisation.

I am not sure we are all clear on the degree of cloning we are proposing.

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