Once the management team steeped itself in the world that was the deployment of the UMC, we moved on to a visioning process. This was the idea of changing what our business was into what we wanted it to be. I do this today with a number of clients and help them re-imagine their business. In fact, this is what coaching is all about.
For AFC, it was set of choices about what else we were going to do in our business. We were profitable and had a lot of cash on our balance sheet. We wanted to choose a future for ourselves that led us to maximize the shareholder value and we considered 3 things:
1 – Move up to the Tier 1 carriers as an Access Product vendor
2 – Expand into other areas of the Tier 2 and Tier 3 Carriers in the US
3 – Dramatically expand our business Internationally as an Access Vendor
Now, the answer was rigged by our prior work with potential buyers. They wanted us to do choice 1, but to get full buy in we worked all 3 with the full Executive Team. The pluses and minuses of each are where we went.
Choice 1: The good news was that we were not at a 0 position inside SBC or Verizon. We were at 0 in BellSouth and so no way near term to change that. We concluded that if we were to go down this path we would have to change our product lines. It was clear that the UMC was not likely to displace Litespan anytime soon in the DLC business. We knew we could keep the pressure on Alcatel, but it was going to be a marginal increase in business at best. We also knew that our relatively high gross margins for an Access Business would be hit, but thought the volumes might be able to maintain net margins.
Choice 2: Here we had a great channel and a position as a trusted advisor. Also due to limited scale, the customers could demand only modest discounts. The challenge here was that the smaller carriers spent more of the capital budgets on the existing busines than anywhere else. So, top line growth would be challenged. We also would have to get into areas that we did not have expertise in which meant a likely increase in Opex.
Choice 3: The challenge here was both technology and channel. At this point, it was clear that wireless was the focus of most carriers outside the US. AFC had essentially no position within wireless. Our customer base internationally was limited and it was unclear what the best method to grow the business was.
So, in the end we chose to become a Tier 1 vendor. The expansion of the IOC business had more appeal than International, but in the end we chose neither. I want to point out that these are CHOICES. These decisions are not forced on you. You get to make the decision on what you are going to do. We did make a lot of changes in the short, medium and long term. Those will be what I talk about next week. To start with is a topic I call, “The Goal that saved AFC”.
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