For the second year running Charlie Thomas, CEO of RA firm Razorsight, has been named one of the ‘Smart 100 CEOs’ in the Greater Washington region. The Smart 100 list is compiled by Washington SmartCEO magazine. You can read the press release here.

Razorsight is a revenue assurance and cost management vendor based in Virginia, USA. Thomas joined Razorsight in 2004 and became CEO in 2005. Razorsight announced improved revenue figures for 2009 but the business is best known for the USD 4.5m payout following a 2008 court judgement that Razorsight stole software code from rivals TEOCO.

This is part two of a two-part review. See here for part one.

Carving into the meat of KPMG’s latest RA survey, there were some telling figures on the estimated leakage suffered by telcos. Whilst the report headlined that 54% of telcos estimated that leakage (excluding fraud) was greater than 1%, I found it more interesting to think about the other side of the coin: that 46% said leakage was 1% or less. This implies that the median leakage is close to 1% and that typical claims of ‘average’ leakage are exaggerated. Hopefully this is a sign of progress and increased sophistication with several aspects of RA maturity: measurement, coverage, detection and prevention. With only 15% of telcos estimating their leakage is over 3%, a whopping 85% were claiming leakage to be 3% or less – which should help to put an end to the scare tactic of claiming that 5, 10, 15 or even 20% leakage is the norm. The leakage numbers reported in KPMG’s survey are reminiscent of the findings in the TMF’s benchmark study. The TMF report stated that the average measured leakage, excluding fraud, is 1%. One interesting quirk in KPMG’s report is that it says “leakage estimates by senior management were higher than estimates provided by RA function heads”. What would explain this? RA Heads should be the people with the most data and hence likeliest to be accurate, so after years of brainwashing, have senior executives finally changed from being complacent to being fearful of revenue loss? Might it be that RA heads now underestimating leakage, justifying the perception of year-on-year improvements thanks to their work? Or do senior managers take a broader view of what should be counted as leakage?

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This is part one of a two-part review. See here for part two.

KPMG recently published their 2009 survey of telco revenue assurance departments. You can download the report from here. The report is reasonably balanced and contains messages both good and bad. Even the report’s title, “Progressing or Preserving”, hints that the onward march of RA is far from inevitable. I find this encouraging, as it suggests that a healthy dose of realism has come back into fashion. But with this report, there is more going on underneath the surface that the report writers care to admit. Read on to understand why…

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Many years ago I was contracted to do process re-engineering at a government department. Somewhere during this time I became involved in an ISO certification exercise for this particular department. Not having had much experienced with ISO implementations, I asked the project manager to explain to me in brief terms what ISO quality standards were. He responded with “document what you do and do what you have documented”.

That has pretty much become my motto for Revenue Assurance, and much broader really. This pertains to anything that should be documented. Business rules, business processes, system flows, system rules, you name it. Very often these are not documented which means we all do what we think we should, or are capable of doing given the uncoordinated chaos between systems and departments that is most often the norm.

It becomes difficult to assign and monitor KPI because you are not working from a known and agreed factor. Much like yelloware: firm enough to touch but not solid enough to hold. I have seen many first stabs at KPIs and these are based on gutfeel or general common sense things we should measure. These KPIs were not scientifically determined or based on any maturity index of the department or function’s capability and/or capacity.

I have recently spoken to a number of junior level staff, both in the RA field and other industries and disciplines on the topic of defining KPIs for their business functions (such as procurement and SLA Management) and their individual performance (how are they performance managed against the job’s KPI’s).

I was astounded to find that both the HR people I spoke with (1 was senior) did not see the relevance of the continuous string of interconnection between the organisation structure; to the job role (stating the role objective in context of the strategic and tactical plans); to defining the job outputs (those core responsibilities that would add the execution view to the strategy); to the KPIs to measure and manage the contribution to the organisation. A Balanced Scorecard was some academic thing that resides with the Head of Department and does not filter through to the job description. That means the performance management chain is broken.

I also found that all KPIs discussed with me assumed a process maturity of between 3 and 4. In other words, it assumed the processes involved in producing the output to be measured, or support processes to enable the output, are all in defined and managed mode. I did not find one KPI that was aimed at establishing a capability, as you would assign for a level 1 or 2 maturity. Needless to say, those poor individuals with these sky-high targets did not have the basic doing capability in place let alone the measuring and reporting capability. For some reason organisations assume that building the infrastructure and processes with which to run and grow the business are either in place or relatively easy to just do as part of the overall job.

It was quite alarming to realise how few individuals thought their personal KPIs had any relevance to any measurements that might be in place for specific financial or service related work they may be involved in. This I would put down to not speaking to an individual who had both a set of KPIs used for annual performance management as well as measurable and reportable work tasks, typically the stats you would find in a call centre, help desk or RA. The Customer Service and RA people I spoke with did not have a Balanced Scorecard and those individuals with a BSC don’t work in an environment where objective performance measure are taken.

I have seen this in telco and have tested it now at 2 Banks. Same mindset. There is a disconnection somewhere, a fragmented view on this complex whole we call an organisation. Yet, come financial yearend we are back to drawing up the new BSC because last year’s failed.

Am I seeing a connection where there isn’t one or have I just not seen this implemented anywhere?

Podcast: Play in new window | To download, right-click and save/download link

Podcast 11 is dedicated to the topic of managed services - services which might have been performed in-house but are instead delivered by an external supplier. It is a topic that gets considered from time to time by telcos wanting to improve their revenue assurance and fraud management, although it is not so common to see initial conversations progress to completing an actual deal. Indian firm Subex is a market leader in supplying revenue assurance and fraud management software, and also earns a significant chunk of its revenues through managed services for those functions and others. I asked them to talk with me about the current status and future potential for managed services. Vinod Kumar, Subex’s Group President, joined me from India, and Des Rehinsi, their Director of Sales for Managed Services, joined me from the UK. We talked about the reasons why telcos opt for managed services, the factors that drive competitive advantage in this market, and their expectations for future sales from managed services. You can listen to the full podcast at talkRA.com, or by subscribing through the iTunes store.

Again, I have been far removed from the TalkRA world for some time. The reason this time around is quite interesting and I couldn’t wait to post it. The last 7 months had me working with a team on optimizing the approach to Revenue Assurance in terms of “indicating” to the analyst the key areas for improvement. The TMF already has quite a good set of KPIs, but as I’ve mentioned in one of my earlier posts, some of the Telco’s in the APAC region of the world have highly specific areas for monitoring, some of which are far too atomic to apply TMF KPIs to.

The problem that lay before us was to setup a framework and not a point indicator to the leakage. Towards this end, the shining knight said “Tally Ho” and set forth to discover the “Holy Grail” of Revenue Assurance - The Key Performance Vector (KPV). As I’m sure most of you know, a vector has two components - Magnitude AND Direction. What I wanted to do was try and see if the existing set of KPIs could be converted into KPVs. At this point, via the magic of intuition, I can see quite a few eye-brows going up and a few mustaches being twirled at the thought of “Yet another metric?!?! RA loves the metric system more than UK”.

The reason behind the KPV is what I would call a Goal Cascade (GC). The intent of the Goal Cascade is to enable the various sub-sections of the RA team to be aligned with the highest level RA goal of the organization. For example, when a Telco says “0.4% leakage is acceptable to me - anything beyond it calls for discussions with HR”, how does the analyst know the weightage of his/her function to that 0.4%? Furthermore, how should he/she interpret the functional KPI? The KPI definitely does highlight the true state of affairs at that moment, but is it in need of further improvement or should the analyst call his mates and nip down to the local pub for a pat on the back?

The Goal Cascade is an engaged activity where the trickling of the Key Goal to the various sub-sections of the RA team is cohesive - and trended over a period of time. Now comes the kicker. The KPV is not a “In-point-of-time” indicator. The KPV is the second derivative of the KPI magnitude trended over a period of time - its not exactly the second derivative, but that is the closest generalization. The KPV actually involves quite a complex formula taking into account multiple factors. If you hate mathematics as much as I do, you’ve probably fallen asleep at this point. However on waking, the end-result of a KPV is an in-line representation of

KPV = magnitude(from the KPI) +functional performance up/down+alignment percentage to Key Goal

The KPV is not mean’t to replace the KPI. The KPV is an extension of the KPI itself. The KPI builds structure in a vast science (Einstein used to wonder about two things - the boundary of the universe and secondly, the boundary of Revenue Assurance - of course I am joking). KPV come in useful when the RA team requires a synchronized view of KPI aggregation.

I would love to hear your comments on the concept - have I finally gone bonkers, or do you see value in this as well?