Case Study: Calling the Future into a Telecommunications Company

The Situation

In 1982, President Ronald Reagan spearheaded the deregulation of the AT&T-monopolized telephone industry.  To give AT&T credit, they delivered the only service in the world that had 99.9% reliability:  Landline-based voice communication that traveled uninterrupted via telephone pools and buried cables between millions of telephones.  Their technology was solid, and for more than 80 years, they made few changes to their foolproof system.  And they maintained rigid control by not allowing their customers to own any part of it (except shares, of course).  Not one telephone set in homes, offices or manufacturing plants was privately owned.

Suddenly, thanks to deregulation, competition was invited in, and the industry blossomed with change.  The first major change was that businesses could now buy – and write off – telephone equipment.  Business owners called the AT&T service technicians that had worked in their offices and plants for years taking care of AT&T’s equipment to ask them to find them a system to buy; and once the equipment was purchased, to install it and maintain it.  Instantly, hundreds of local telephone service companies appeared, owned and operated by the men who had worked for AT&T.

Technology entrepreneurs got busy and developed a new technology that out-paced the traditional landline system:  Voice Over Internet Protocol (VOIP).  And while it took several years to take, as we all know, handheld cell phones with far less than 99.9% reliability took over the world.  Business telephone systems went from mechanical systems to IT (Information Technology) systems that the AT&T guys wanted nothing to do with.

One of them was my Dad.  And one of the family legends is the day that my Dad came home from a training course that he had taken his technicians to, where they had handed him and each of his technicians a computer for troubleshooting the new business system technology.  Dad came home and, at 72 years old, and after 28 years of owning and operating the business, said:  “It’s time for me to retire.  I don’t want anything to do with those computer systems.”

After Dad retired, a General Manager was brought into the business; two years later he left with half the customers.  Another General Manager and slash to revenues later, a family member was brought in to see what could be done.

The Problems

  • Technology being sold was dated.
  • Revenues were not covering payroll.
  • Heavy Accounts Receivable.
  • No system sales for nearly a year.
  • Maintenance plans minimal and not many sold.
  • No additional, non-system product lines to supplement system revenue.

The Solution

  • Collect the outstanding Receivables to cover 6 months payroll.
  • Redesign maintenance plans to offer multiple level service plans that offered more complete support to clients; sell them to establish a recurring revenue base to cover a significant portion of payroll.
  • Restructure service charges to cover expenses plus a profit margin.
  • Add new products to the sales offerings, such as wireless headphones.
  • Invest in a new, updated technology business system licensing to one that supports VOIP system installations.
  • Re-brand business to reflect new technology attitude.
  • Heavily invest in technician training and technical support to enable VOIP system installations.
  • Restructure sales process to offer New, Old, and Used technologies as choices for clients with varying cost structures.
  • Add sales responsibilities to technicians job requirements (identifying clients who needed an updated system) with appropriate financial rewards for generating leads.

Finally, look at the long-term scenario.  Two things began to come clear:  The designated heir of the business didn’t want it, and it didn’t look like there would be much left for the heir to take over anyway; the industry was going straight to cell phones and cloud technologies.  In other words, the business, to survive, would need IT staff, not telephone technicians. As is normal when there are major advances in technology over a short period of time, the industry trend was consolidation of the small service companies into the big players (like local pharmacies being eaten up by CVS and Giant Eagle).  The choices became:  (1) Let the business die out; (2) Close it;  or (3) Position it into the new technology so that the customer base and service technicians would become valuable to potential buyers.

The third option was chosen.  After installing Voice Over Internet Protocol systems into three customers’ businesses (with the largest connecting systems between 6 locations and nearly one hundred desk and handheld telephone sets), the business was sold to a competitor, the technicians were installed in new jobs, and that chapter of the family’s life was closed.