Bear On Business

The past three days I wrote about Salesforce.com, Google Groups, and the Blogosphere.  I think the other essential tool will prove to be Facebook.  I know a whole ecosystem has sprung around Facebook and I have a sense that an advanced business should be tapping into Facebook.  Salesforce.com recently announced collaboration with Facebook.

I have not yet developed an intuition as to how Facebook can be leveraged by my companies.  This is something I hope to sort though in early 2009.  If you want to get ahead of me, figure this out and clue me in.

The year was 1998.  I was in my Level 3 office and in walked Don Gips.  My memory is hazy, but Don reminds me that I was the first person he talked to at Level 3.  We were introduced by Bob Allison at Daniels and Associates, which was acquired by RBC a couple years ago.  Bob too reminded me recently that he is the one who introduced Don to me.

I wish I recalled the conversation or at least what I was going through my head at the time.  I do recall that I liked Don immediately and that I was excited at the prospect he would join us.  Remember, it was 1998 and Level 3 were just getting started.  Don Gips was joining us with quite the pedigree.  He was Chief Domestic Policy Adviser to United States Vice President Al Gore, with a focus on technology and communications industries.  He also served as Chief of the Federal Communications Commission’s International Bureau, and as an Executive Manager at McKinsey Company, an international management consulting firm.

Since 1998, Don has been Group Vice President, Corporate Strategy and Development for Level 3 Communications. Besides Jim Crowe, he has been the only early-on senior executive who hasn’t changed positions multiple times.  Throughout my stint at Level 3, I leaned on Don quite a bit.  When I left Level 3, he was the one who introduced me to Columbia Capital, the private equity firm I have worked with extensively since 2004.  Don and I have stayed in regular contact from both a social and business standpoint.

Don, congratulations on your appointment to Obama’s transition team.  We are proud of you.

I was at a friend’s house last week.  I was talking to a group of guys who were all in telecom.  They all read BearOnBusiness and one of them was so daring as to have written a few comments.  I asked them if they read Telecom Ramblings .

"What’s that?", they asked.

"It’s another telecom blog," I said with a tone of surprise.  If they read my blog, how could they not have discovered this?  Given how they like to banter about telecom, why wouldn’t they read this daily?   Silly me.  I assumed way too much.

"Where would we find it?" they asked.  I guess it was not much more than a year ago that I might have asked the same question, though the question left me perplexed.

"Look at my blogroll," I answered.  They responded with looks of confusion.

"Google Telecom Ramblings," I offered and they understood.  I added: "Then you can put it on your blog reader," which lost them.

Here is the point.  Do you want to get ahead at Zayo ?  Figure out what blogs you should read on a daily basis.   Get signed up with a reader–I use Google’s reader and recommend it.  Write comments on the various blogs so that you understand what it is like to be part of the blogosphere.  If you want to really be hot shit, guest post on Sandi’s blog , my blog, or on Envysion’s managedvideoblog.com .

Yesterday’s post pertained to Salesforce.com and why I am driving Zayo to fully embrace it.  I suggested that getting ahead at Zayo is linked to mastery of Salesforce.com.  While I am on the topic, Google Groups is another tool that I want to see Zayo employees master.  Why?

1. It is a powerful tool for organizing work, collaborating with others, and sharing information.
2. Anyone who can build and maintain a great Google Groups site is demonstrating mastery of Internet that is advanced relative to most of their peers.  This is pathetically untrue if you are in a Web 2.0 company, but is unfortunately true if you are in an average telecom company.  Since I don’t want Zayo to be average, I expect that our people will develop this skill set.
3. It gives me visibility into how people are organizing and pursuing their work.   people who want to get ahead should use Google Groups to gain visibility and support for what they are doing.

Are you a Zayo employee?  Do you want to get ahead?  Are you able and willing to learn Google Groups?   If you haven’t used it, the hardest part will be figuring out what it even is.  Until you play around with it, you probably will not be able to understand how it can help you do your job.  If you want to learn it but aren’t sure how to get started, send me a note and I will get someone to help you get started.

We have used it extensively for salesforce automation, but this is not enough.  I am pushing Zayo hard to fully embrace Salesforce.com as a comprehensive tool for service activation and, over time,  much more.

I don’t have a full appreciation of Salesforce.  Why, then, am I being so insistent?

1. It is clear that Salesforce is one of the big winners in modern enterprise software.  It is 100% reliant on the software-as-a-service business model.  It is a subtle yet powerful bridge into cloud computing.
2. The benefit of using Salesforce.com extend well beyond the capabilities of Salesforce.com the company.  A whole ecosystem has risen around salesforce, enabling power users to benefit from development from others in the Salesforce.com ecosystem.
3. Salesforce.com lends itself to Agile Development.  I have a series of posts I want to write about the Agile mentality and how this should be applied to all aspects of business.  So for those who know not what Agile Development means, I encourage you to do some Wiki research.
4. I am frustrated that our organization has been slow to fully embrace Salesforce.com.  By raising the profile of what I expect, it will drive our organization to move fully into this powerful world.

You want to get ahead at Zayo.  Tip #1: Embrace Salesforce.com.

Below is a letter I sent over the weekend to our Service Activation Managers:

With the help of several folks, we made major progress this past week in designing and implementing a process for tracking our install pipeline and actual. I believe this will prove to be extremely valuable to our entire organization in four ways.

First, it will greatly simplify the process in which we maintain a view of our pipeline and installs. This will save our entire organization an incredible amount of time and will reduce stress level and anxiety. Beyond just those directly involved in service activation, it will help those involved in financial forecasting, capital planning, and customer relationship management.

Second, the installation pipeline data will be more accurate and more accessible. Our ability to forecast our financials will improve dramatically, and thereby help us to navigate through the difficult macro-economic environment.

Third, it will provide our sales team with greater visibility to the status of their orders. They will be able to pull up salesforce.com at any time and see what has been installed and, for those orders in the pipeline, when they will be installed.

Forth, those of you who are doing a great job of managing your orders will benefit from recognition. We will quickly learn who has command of their portion of the pipeline and is able to use salesforce.com to communicate this to those who need to know the status of their orders. We will also learn which individuals are struggling—either because of training or workload—and get them the help they need.

I know you all are working extremely hard and are under a lot of stress. I need you to trust me that this tool and process will relieve you of stress and free up time for you to do the real work of managing order activation. However, to get there, you will need to learn a few new skills and, more importantly, develop new habits in your daily work routine. I hope you accomplish this within a few days as opposed to it taking a few weeks. With this in mind, I will send you a follow-up email that will help you get up to speed quickly and make this tool everything Zayo needs it to be. I will also personally be following up with you to see how you are doing with your patch of the pipeline.

‘Twas a hectic and stressful week at Zayo Bandwidth. As I wrote this past week, ZB has been having a few challenges in perfecting the pipeline processes. In my past, I have been known to get a bit impatient. It used to be that my impatience would lead me to get–oh, how would you say—“helpful”? Yeah, helpful is a good word for it. So, in memory of my younger days, I was impatient and “helpful” this past week. It was time to define a more eloquent way to track our installation pipeline.

Salesforce.com was the chosen tool. Our orders are already captured in Salesforce.com during our sales funnel process. So we added a couple of fields—one called Pipeline and one called Installed. We then allowed for the name of the service delivery owner to be assigned to each order and, finally, provided an “install date” field.

Then we wrote a couple of simple reports. The first report was named “Total Pipeline”. The second was named “Gross Installs per Month: MTD Completions + Committed Pipeline”. These reports will tell us 90% of what we need to know on this topic. Provided, that is, the information is accurate.

The beauty of Salesforce.com, if implemented properly, is how visible the information can be. More so, by clearly associating the data with the name of the person responsible for its accuracy, the likelihood of having extremely accurate data increases dramatically. Beginning this past Friday, I will look at these two reports every day. Total Pipeline will tell me each order that each service delivery owner has in their pipeline—and it will tell me what month the service delivery owner expects the order to be installed. As I type this, $879,566 is in our pipeline, of which $226,558 is expected to be installed in October. I can see which orders belong to each service delivery manager, as well as each owner’s total pipeline and how it spreads by month.

When an order is installed, it moves out of the Pipeline and is designated as Installed. When I look at “Gross Installs per Month: MTD Completions + Committed Pipeline”, the first thing I see is what orders are in the Pipeline for current month install. They get captured in this report because the service delivery manager has committed that they will be installed this month—and they show this commitment simply by reflecting the install date in this month.

The second column shows those orders that made it into the Installed stage during that month. The Committed Pipeline and Installed are added together—and this tells us how much we expect to install during the month.

The result of this is hard to convey in words. But the impact is enormous. I will pick this up in subsequent posts.

I had a whole bunch of posts on the topic of churn.  Did you read my long series on disconnects?  The difficult macro-economic environment makes a refresher on this topic an unpleasant necessity.

Given all the calories I expended on this topic, you could imagine my chagrin when we discovered Zayo Bandwidth’s other bust was a time lag in identifying an uptick in churn.  How could this be?

A well functioning churn process has its headlights pointed several months forward.  Churn, more than anything else, can help (if low) or hurt (if high) the near term financials.  This is particularly true in the Zayo Bandwidth business, due to the lumpiness of disconnects.

Many telecom companies have a lax churn process.  Perhaps when things are going well, this matters not a lot.   However, when events go south, a lax process masks this early indicator of what is happening.   Critical months are lost.  Actions that could be taken are not, because the problem is buried in the organization.

Does the company have a service issue?  Does the account management process need to be strengthened?  If related to upselling service, are the overall upselling dynamics well understood or is money being left on the table?  Are competitors stealing business?  Is the economy weakening?  Is it simply the ebbs and flows of lumpy disconnect orders?

The point is this.  If the process is tight, these questions will be asked months prior to the churn actually taking place.  If there is corrective action that can be taken, this is done at the early signs of the problem.  If there is not corrective action, at least the financial forecasts are accurate.

In early August, ZB had sufficient insights to detect that churn between September and December would be higher than in the prior months.  Instead of reflecting this intelligence in the forecasts, it let the forecasts continue to reflect the historical churn rates.  As a result, the senior team had a false sense of security around its 4Q08 revenue.  Moreover, the team did not have the opportunity to diagnose the problem and determine what, if any, corrective action was necessary.

The phase “we learn from mistakes”, though overused, is critically important.  What is Zayo Bandwidth doing to learn from these mistakes?  Stay tuned.

Yesterday I mentioned two forecasting busts at Zayo Bandwidth.  One pertained to the Installation Pipeline.

Let’s start with a definition.  Pipeline is a simple concept.  New orders enter one end of the pipeline at the time they are sold.  They exit the pipeline when they are installed.  They move through the pipeline as the various work steps between sale and installation are completed.  So the definition of the installation pipeline is all installation orders that have been sold but not yet completed.

(Note: another important pipeline is the disconnect pipeline.  As you could guess, the disconnect pipeline is all disconnect orders that have been received but not yet completed.  More on this in subsequent posts.)

In Zayo’s August financial report, the ZB team reported its pipeline as ~$890K of MRR.  In reality, it was only about $660K.  That’s a difference of $230K.  The difference should be zilch.  That is, a well functioning process should never allow for two different views of how much has been sold but not yet installed.

Why is this such a big deal?   $230K of MRR is $2.6M/year of revenue; nearly $2.0M/year of EBITDA and about $2M of success based capital.  Our near term forecasts will be off by this magnitude of numbers. Said differently, a company that has this poor a grasp of its pipeline will have an equally inadequate grasp of its forward-looking revenue, EBITDA, and FCF.  Besides the normal hidden costs of unpredictability, such a company is exposed to a looming disaster.   This is not theoretical–I’ve seen this bring down numerous telecom companies.

The good news for ZB is that it already had processes in place that should have enabled it to be on top of its pipeline.  Therefore, it was fairly straight-forward to ensure the day-to-day processes don’t get detached from the monthly forecast.  However, ZB should take this as a wake up call–how do we ensure something like this never happens again?  We are taking steps now to increase the visibility, clarify accountability, and tighten the processes.  I will cover more about my thoughts on pipeline in subsequent posts.

I preach often about the need to accurately forecast cash flows.  I emphasize that accurate cash flow forecasting needs to be a core competency of companies that I am involved with.  You can imagine my reaction a few weeks back when I discovered that Zayo Bandwidth made two sizable forecast error.

To be fair, these types of errors often happen when integrating multiple companies.  So I guess the errors were understandable.  But given how much focus we put in this area, my frustration that these happened was very high.

The first error involved misstating the size of the installation pipeline.  The second pertained to mis-forecasting the amount of disconnects during the remainder of 2008.  I will discuss each in more detail in subsequent posts; for this post, I will emphasize key take-away themes.

In this blog, I write often about the importance of accurate forecasting.  I know this is a mundane topic to many readers.  Nonetheless, I encourage our employees to take it quite seriously.  Why?  We do this well, we will earn our stakeholders an bountiful return.  Better decisions will be made.  These decisions will be made on a more timely basis.  And problem areas will be identified long before they harm the company.  Conversely, If we are mediocre at forecasting, our overall performance will be underwhelming.

If you are involved with sales or service activation (or churn) in any way, I encourage you to fully grasp how your role fits into this bigger picture.  If you are unsure, figure it out.  Don’t stop until you know.

Understand why I am such a believer in Salesforce.com.  We use this for managing and monitoring the sales process.  I am befuddled why we don’t use it to manage and monitor the installation pipeline, activation, and churn processes. Hint: it is time we re-think this.  Why?  Salesforce, the way we use it, ensures real time visibility up, down, and sideways across the organization.  It also clarifies and reinforces accountability.  More on this later, but this is what I am looking for throughout our service activation and churn processes (and in other areas as well).

Capital and network expense management is part of the service activation and churn process.  This needs to be more tightly linked to the salesforce.com processes and tools.  I am pleased to see some of the recent steps we have taken in this area but we are about to take more.

Do you rely on spreadsheets for any meaningful part of your process?  My extreme reaction for now: if you do, you are old school.  You are doing this because you don’t understand or are uncomfortable with a tool like salesforce.com.  You are doing this because you are set in your ways.   Eliminate (or at least minimize) the role of Excel in the management of your process.  (This is not to say that spreadsheets don’t play a role–but their role should be used to analyze and present financial trends, not to facilitate the process.)

Anyway, this is plenty enough ranting for now.  There will be lot’s more on this topic in coming days and weeks.