More from Sonoma County

On the Sonoma County front, some big changes are happening.

The Graton Resort and Casino is set to open next week. This was an $820M project and will likely have a huge impact on us locally. This is said to be the largest casino in California and the closest to the Bay area. This has been a highly controversial project and will continue to be so. I plan to visit the casino over the Thanksgiving Holiday. My son has a break from school and I think I owe it to myself as a resident to see what it is. There are already plenty of TV ads running for the opening. I have no idea of what will ultimately come out of this, but this is one of the huge changes to our local economy.

Speaking of changes in May 2014 Sonoma Clean Power will start serving residents. Again, I have no idea how this will work. Most people are supposed to see little to no difference in their lives. They will still get their bill from PG&E, but over time residents will get their power from this local agency. People will have the choice on how green the power they choose is. If you live or work in Sonoma County, then you should visit sonomacleanpower.org for more information. I am aware that some businesses are looking at this as a way to generate some revenue by selling solar power. For some that might make a lot of sense.

One change I am making myself is that I am going to work on being certified as a Green Business! I will do this in conjunction with the Green Business Program of the Sonoma County Economic Development Board. I was at an event last week called Saving Water: Business to Business that allowed me to meet lots of folks in the Water Agency and EDB. I figure its time to do what I can in my business. I will let you know what I find out along the way and my progress. Thanks to Kevin Kumataka at the Sonoma County EDB for explaining the program and encouraging me to participate!

I have been going to lunch with many friends and colleagues lately and my favorite place to take them when I can is the Culinary Cafe at the Santa Rosa Junior College. Some of you know my son is in that program. The school is built around this restaurant that serves lunch 3 days a week. It is a good school and I can vouch that the food is great! If you can, this is a way that you can help the students and the school. Reservations are recommended and the cafe is only open when school is in session.

Finally, I would like to let everyone know that I am holding a Sales Workshop in Rohnert Park at the Doubletree on 11/22. This is an all day event and is based on the work of well known author Brian Tracy. If you know anyone that needs this, please forward this along or let me know! Feel free to contact me for more details or go the following link to learn more. https://www.eventbrite.com/event/8404400789

Jim Sackman
FocalPoint Business Coaching, independently owned and operated by Jim Sackman Business Coaching
http://www.jimsackman.focalpointcoaching.com/
We focus on your business – Time, Team, Money, Exit
Coaching, Sales Training, Web Marketing, Behavioral Assessments, Financial Analysis

Where the UMC didn’t work….The early days at the RBOCs

Yesterday, I talked about where the UMC shined in the early days. Now I plan to talk about where it didn’t work: The RBOCs.

I want to be very clear about one thing. The intent here is to show how Clarity and Focus can shape a business. If you go back to my history piece, you will see it was not original intent of the UMC  to win the IOC business. The fact that it did was excellent news and after initial wins became a Focus for the company. That is very much the history of AFC. We trolled for success. When we found it, we doubled down and worked that success for all it was worth. That nimbleness caused issues, but also growth and excellence.

The history of AFC with the RBOCs starts with both Ameritech and Pacbell. Both companies ultimately approved the UMC for use. Both were acquired by SouthWest Bell Telephone (SWBT) which is now AT&T. These acquisitions made these approvals moot and we had to start over again with what was then known as SBC. There were lots of issues with both approvals, but I want to focus on the strength for the one market (the IOCs) and how it was viewed by the RBOCs.

The RBOC market for equipment is different than the small carrier market. They traditionally have product categories that support specific services. These are deployed in cookie cutter models throughout the RBOC territories for whatever service needs there are. There are different deployment models, but individuals in the field are not permitted (generally) to go outside their models. Why do this? It makes the network uniform. This means that services tend to be robust and simple to expand. Training, sparing, provisioning, engineering, servicing are all known within the system. These are not anywhere near as important to the small carriers as they are to the big ones.

Now the RBOC’s got hold of “Any Service, Any Slot” (AS/AS) and emasculated it from a financial standpoint. I want to be clear, this is not a fault of the customer. This is a fault of not understanding how the customer might use the product and helping them build models that they can use. The RBOCs built systems with Common Control Shelves. Much of the time these were mostly empty, so space and cost was wasted. The value of AS/AS was low to them. They wanted to deploy the UMC as a Next Generation Digital Loop Carrier. They had standard models to compare it to from competitors. In the way the RBOCs build product, much of the efficiency that drove business in the small carriers was gone.

I used to say that the UMC was the anti-Litespan. If Litespan did something in a given manner, the UMC tried to do it in the opposite way. The RBOCs loved Litespan and so the UMC was not really a cup of tea for them. Both products met the relevant standards set forth by BellCore. For those that have never seen these books, they listed hundreds or thousands of individual requirements to meet to be considered acceptable for deployment. Almost no product met all of them 100%, but many came very close. The fact that these exacting specifications could be met by products that worked so differently should tell you something about creativity and differentiation.

Eventually, the UMC did succeed in the RBOCs through FiOS and became approved at SBC under Project Pronto. It is funny that I have never met anyone who knows how AFC became a Project Pronto vendor. I recall the SBC (as it was known then) Press Release about Pronto. AFC was named as a vendor and we were as surprised as anyone else.

Tomorrow I will post some North Bay items. Back to this story on Thursday with some discussion of International.

Jim Sackman
Certified Business Coach, FocalPoint Business Coaching
http://www.jimsackman.focalpointcoaching.com/
We focus on your business – Time, Team, Money, Exit
Coaching, Sales Training, Web Marketing, Behavioral Assessments, Financial Analysis

The Early UMC – Why did it work?

So, I wrote a bit of a history lesson about the UMC-1000 (hereafter known as the UMC). The first movers for the product were the smaller Independent Operating Companies (IOCs). The point of this blog is to talk about why this worked. This will lead to why the product failed for years in the RBOCs and then to why it finally won there. This will be part of a series on why the UMC won and lost in different arenas. I hope that you find this helpful to find out how this worked and how AFC reacted around it.

I recall Kevin McClain telling me that the “product sold itself” in the smaller carriers. For IOCs that were not already AFC customers about all he had to do is show up to win. There were lots of reasons for this. I want to focus on one very major product feature that made it popular with the small carriers: “Any Slot, Any Service”. By strict truth, this was not accurate. Each 120 line shelf had 26 slots and only 22 of these were “Universal” slots. But those 22 slots were truly universal until near the end. On top of that there was only one kind of shelf in the system so Any, Any, Any was true across the board.

Before I move on, I need to describe the competitive systems. They were almostly exclusively somewhat fixed in their capabilities. By that they had the notion of a “Commons Shelf” and a “Line Card Shelf”. So to put together a system one needed a minimum of 2 shelves. With the UMC, this could be done with one. On top of that, there was the 48 line shelf that was really half of a shelf. One other piece of information that you need to know. We did a study of the number cabinets shipped by type and found that well over half were 48 and 120 line systems. This means that they were single shelf. You can see right away that in these small systems that the UMC had a huge cost advantage over its competitors.

To jump ahead a bit to the RBOCs, the focus there is on larger cabinets. This is because the bulk of the population in these companies is Urban and Suburban. So, this ability to deliver a system that was very cost effective at low population density was not as important. I will come back to this in the next article about the RBOC failure.

So, there was something else about “Any Slot, Any Service” that was more like a promise. The UMC began to absorb other products that provided wireline access. This included things like D4 Channel Banks or HDSL products or Pairgain products. The customers began to realize that if a new type of capability was required that AFC would make a blade that would allow customers to deploy this out of the UMC. For these low density deployments, these more specialized capabilities were one or two at a time. To deploy them out of a UMC was more expensive per port than what it would be out of a dedicated product. But at low take rates, the absolute cost to deploy another specialize box did not make economic sense.

What I am hoping you are beginning to see is a pattern. Compared to dedicated or high density products built for large carriers, the UMC was simply much cheaper than the alternatives for the small carriers.

One last “Any Slot, Any Service” item. This also meant that cards that were normally supposed to be placed in Outside Plant Cabinets could be placed in Central Offices and vice versa. This might not seem like a big deal but what it allowed is that high cost services could be brought back to a central location and still offered over a wide area. The classic case for this was ISDN. Carriers had to pay huge upgrade fees for the rest of their infrastructure to offer ISDN. With the UMC, they could service ISDN everywhere through the UMC and bring the service back to a single office where the Class 5 switch had its ISDN upgrade.  There were many other places where configuration allowed lots of cost savings for smaller companies.

Now, there were many other ways that the UMC was organized to save smaller carriers money. I hope this outlines a single thread through the product and there were many others.

To lead into what challenges this created at large carriers, I hope you recognize that this meant that there was a huge number of possible product configurations. On top of that, there were several product categories that the UMC covered: Digital Loop Carrier (DLC), D4 Channel Bank, Fiber Multiplexer, Digital Subcriber Line Access Multiplexer (DSLAM), and Optical Line Terminal (OLT). Large carriers bought different products for each of those different applications. For the UMC, that meant a different approval for each application against different economic and technical competition. Each of these products followed different standards and I think this another topic for yet another blog post later!

Jim Sackman
http://www.jimsackman.focalpointcoaching.com/
We focus on your business – Time, Team, Money, Exit
Coaching, Sales Training, Web Marketing, Behavioral Assessments, Financial Analysis

A success story – the UMC-1000

Yesterday I promised you to talk about the old UMC-1000 (now known as the Tellabs 1000). There are lots of reasons for this, but the one I want to emphasize here is how successful it was. Advanced Fibre Communications (AFC) was founded just about 20 years ago today in 1993. I joined AFC in April of 1997 and that year we had $317M in revenue, which has made it the fastest growing Telecom Equipment start-up of all time. AFC was based around a single product platform, so clearly this product did something right. In this blog post, I will connect you with the history and a bit of what it did right.

Originally, the plan was to build a simple platform to help the reconstruction of the former Yugoslavia after the wars there in the aftermath of the fall of Communism. Since the product had so much success in North America. people are surprised to find that internally it works on European voice standards. The UMC quickly spread in the small telco space taking market share away from other products. There was significant business in the early days outside the US, especially in China. There was some large carrier business in the US especially with GTE (and this would help greatly later). AFC was able to get approvals from Pacbell and Ameritech. These were both taken over by SWBT (which became SBc and is now AT&T) but the acquisitions of these firms killed any business. At about that time, AFC went through some major internal upheavals (missed quarter, CEO left) and struggled for a time.

The company recovered through the CLEC bubble and the introduction of a completely new managment team. AFC did not intentionally get a lot of business from the CLECs but Winstar did become its largest customer at the time. SBC did select AFC as a Project Pronto vendor, but nobody is quite sure how or why. When the CLECs went away, two vendors (Nortel and Marconi) publicly announced exits of the Access Business. Most customers, in particular Sprint LTD, picked new primary vendors and AFC won the vast majority of that business. This allowed us to stabalize the top line revenue and keep the company moving forward.

It was clear that the Telecom Equipment space was going through a disruption and we came to the conclusion that we needed to make AFC a Tier 1 carrier vendor (read RBOC and I talked about this in the post about Tellabs). We pressed on the existing business at SBC, but it was clear we were not going to displace Litespan. We tried two other approaches. We bought AccessLAN with the idea of having a large scale DSLAM that could be an IP DSLAM. We started skunks works in both VoIP and FTTH awaiting changes in deployment technology.

If anyone has followed the space at all, they know that the idea that propelled AFC to the next level was the work on FTTH. The Verizon FiOS win combined with the purchase of the Marconi Access Unit converted AFC from a company that had about 20% of its revenues in Tier 1 carriers to 65% almost overnight. One thing that people forget (and search the Light Reading archives if you want to find how big a shock these things were) is that Alacatel was penciled in for these wins with virtually no hope for any other competitors. In a span of about 12 months starting in mid-03, AFC went from the number 2 player by a large amount to Alcatel to the number 1 player by about the same amount. This was a combination of planning and being ready as well as some amount of luck.

So, if you look at this what went right often was the mistakes or changes in other companies. AFC was also planning for changes and ready to adapt when needed. All of that was part and parcel to the success, but along the way the product was matched to the market needs and that made Sales work. Each of the market wins was for a different reason and I will explore them separately in a future blog post.

The UMC is still going although its glory days are clearly behind it. 10s of millions of people use this product every day. At least 12 different times the product has been copied in 4 different countries. The product is clearly imperfect and anyone that has worked on it can tell stories about that. Now that I have given you a bit of background I will connect this to the first customer base and how it met the problem that those folks had. I will also talk about why this same success was a problem in the Tier 1 customer base.

Jim Sackman
Certified Business Coach

FocalPoint Business Coaching
Coaching, Sales Training, Web Marketing, Behavioral Assessments, Financial Analysis

Change Your Business – Change Your Life!

Back to Feature, Benefit, Outcome (FBO)

Today, I am returning to my business blogging with a couple of other notes…Tomorrow, I plan to talk about the Advanced Fibre Communications and that may have some historical interest.

Last night, I was at the gym and another member was talking about his computer becoming infected by a virus.  I chatted with him and he was unaware of the seriousness of this.  Between chats with his IT guy, I made sure that all the data on his computer could be corrupted.  The only way to be sure that the malware was gone was to return his computer to bare metal.  I think he got the point after our conversation.

But returning to my previous business topic, I was talking about problems or dissatisfaction as the starting point of a customer presentation.  After that, if you look at Gleicher’s formula you then have V for Vison and F for First Steps.  That is where you need to head next.

The presentation needs to make clear what the Outcome for the customer is when adopting your solution.  The problem that they are suffering from is eliminated or mitigated and their business and their life is improved because of this.  Remember, you need to put this in terms that matter to the customer.  You will then have created a linkage.  This linkage is between the problem and the solution.  The customer will then link this to the outcome that you paint for them with their solution.

Done correctly, this will lead them to the 3rd part of Gleicher’s Formula – First Steps.  This is where you begin to talk about your solution in any detail at all.  Before this point, you are only discussing the customer situation.  The very first step is adopting your solution.  But before you describe the solution in any detail, it is important to position the product in a broad context.  This helps the customer understand how the solution will fit within the company.

Next week, I will outline how to line up features into this presentation and really get to the detail of a product or service solution.  Tomorrow, the UMC!

Jim Sackman
Certified Business Coach, FocalPoint Business Coaching
http://www.jimsackman.focalpointcoaching.com/
We focus on your business – Time, Team, Money, Exit
Coaching, Sales Training, Web Marketing, Behavioral Assessments, Financial Analysis

The End of Tellabs

Today’s Blog is different than the other’s I have posted. I am going to talk about the pending sale of Tellabs to a Private Equity Firm for $891M. Given that the revenue of Tellabs should be about that this year the sale is about 1x revenue. On top of that, Tellabs has over $500M in cash. That means that the sale is between 1/3 and 1/2 of current revenue. Not a great price.

Light Reading has full coverage of this and there was a bit of speculation about whether there might be a counter-bid. Tellabs has publicly said that it has talked to over 30 companies so it seems that there will be none.

My time at Tellabs was a mixed bag. I had a great experience while I was at AFC, but Tellabs was nowhere near as rewarding. There were some great people I met, but I thought many of the plans that were set forth made no sense and I said so.  That made me unpopular on a regular basis.

But I thought what I would post about, was how AFC ended up getting an offer from Tellabs. I don’t recall the exact date, but it must have been in late Q1 or early Q2 of 2001. I know we had already found that Winstar was going bankrupt and that Tellabs was cancelling all their orders associated with Cablespan. AFC would be okay, but we had just lost about $80M in annual revenue from those two sources. John Schofield and I were in Keith Pratt’s office. The telecom world was coming apart around us. Keith was refering to Telecom as a “Toxic Wasteland”. People were very happy that we had hedged our Cisco position at $65 a share at that point. Earlier they had been blasting us for it.

The three of us sat around and pondered the future for most of the afternoon. We reached a consensus that our customers would consolidate and that would cause a consolidation in the Telecom Equipment market. We came to the conclusion that AFC was too small to play in a world dominated by major vendors. The conclusion was simple. We needed AFC to grow very quickly or sell it. From that point forward, that was our mission.

I created a list of 7 companies that were potential buyers of AFC. We excluded the Chinese and Japanese from our list. The Chinese would likely be a challenge politically and the Japanese seemed unlikely to purchase a firm of AFC’s size. From there, we sent John on a road show to meet the 7 CEOs and see what the possibilities were. The answer was clear: “AFC is a very nice little firm, but we only care about Tier 1 revenue and you have very little of that.” So, our strategy became clear. We had to convert AFC to a Tier 1 revenue firm.

We ran a strategic planning process later that year with the idea of getting the rest of the Executive Staff on board with that plan. In retrospective, this plan succeeded wildly. When Tellabs bought AFC in 2004, we had gone from 20% to 65% Tier 1 revenue. Later that percentage went even higher.

When the FiOS win and the Marconi Access purchase became public, things got hot on the M&A front. In the end, we had only 3 companies actually take any kind of look at AFC. Siemens dropped out early as they ran into the scandal that had many executives arrested. Cisco took a purchase to their Board, but I suspect that is when they decided that Scientific Atlanta would be a better deal for them. Tellabs made and offer and most of the rest of that story is very public.

We had anticipated that an AFC/Tellabs combination was too small and the company would have to either buy more or be bought. I understand the plan that Krish had in place was a sale to Ericsson. My understanding is that Mike Birck thought the price was too low. Too bad, the combination would have been right for Tellabs. And here it is now.

Jim Sackman – former CTO of Advanced Fibre Communications
Certified Business Coach
http://www.jimsackman.focalpointcoaching.com/
We focus on your business – Time, Team, Money, Exit
Coaching, Sales Training, Web Marketing, Behavioral Assessments, Financial Analysis