CONFIDENTIALBeyondCustomerFacingUnits:TheNextGenerationofTelcoOrganizationKeithCerny,DaveWenner–ATJune9,1997AT/ZXP652-060297CernyRC(A)ThisreportcontainsinformationthatisconfidentialandproprietarytoMcKinsey&CompanyandissolelyfortheuseofMcKinsey&Companypersonnel.Nopartofitmaybeused,circulated,quoted,orreproducedfordistributionoutsideMcKinsey&Company.Ifyouarenottheintendedrecipientofthisreport,youareherebynotifiedthattheuse,circulation,quoting,orreproducingofthisreportisstrictlyprohibitedandmaybeunlawful.WORLDWIDETELECOMCONFERENCEBERLINAT/ZXP652-060297CernyRC(A)PRESENTATIONAGENDA•TraditionalCFU-basedorganizationstructure•Externalforcesandneworganizationalrequirements•Potentialorganizingmodelsandsupportingprocesses•Roleofthewholesaleorganization(U.S.requirements)•Roleofthecorporatecenter•FuturevisionsfortelecomorganizationAT/ZXP652-060297CernyRC(A)ParentcompanyTRADITIONALCFO-BASEDORGANIZATIONSTRUCTUREANDROLES•Marketing•Channels•Repaircenters•Productinnovation?•Understandcustomerandmarketrequirements•Sellproductstocustomersthroughavarietyofchannels•Managerepaircenters•Developnewproductsandservices(?)TelcoRole•Property•Fleet•Legal•Regulatory•ProvideservicestoCFUsandnetworkasrequired•Networkoperations•Productinnovation?•Managewirelinenetwork•Conductnetwork-levelR&D•Developnewproductsandservices(?)SBUs•Wireless•Video•Internetaccess•Etc.•ManagetotalbusinesssystemfornonwirelineofferingsCFUsNetworkSharedserviceunitsOther•International•Platforms•Outofregion•Manageportfolioofotherbusinessopportunities,e.g.–International–Outofregion•Provide“cocoon”fornewbusinessesSIMPLIFIEDTypicalfunctionsincludedAT/ZXP652-060297CernyRC(A)CHARACTERISTICSOFTYPICALCFUSTRUCTURE1.Existenceofcustomerfacingunits(CFUs)andsharedserviceunits(SSUs)2.Some(orall)P&Lauthority/operationalcontrolfortelcoresidentinCFUs;SBUsoperatedasindependentbusinesses3.LimitedoperationalintegrationoftelcoandSBUs/otherbusinesses4.“Two-tier”corporatecenter(i.e.,attelcoandcorporatelevels)5.Focalpointfornewproductinnovationandincubationsomewhereinorganization6.(Insomecases):CFUsandSSUslinkedbyperformancecontracts(degreeofsophisticationvariesgreatly)AT/ZXP652-060297CernyRC(A)PRESENTATIONAGENDA•TraditionalCFU-basedorganizationstructure•Externalforcesandneworganizationalrequirements•Potentialorganizingmodelsandsupportingprocesses•Roleofthewholesaleorganization(U.S.requirements)•Roleofthecorporatecenter•FuturevisionsfortelecomorganizationAT/ZXP652-060297CernyRC(A)U.S.REGULATORYANDMARKETFORCES1.ReliefforRBOCstoenterlongdistance(andcomplementaryreliefforIXCstoenterlocal)2.RequirementforRBOCstoofferUNEs(unbundlednetworkelements)andresoldservices3.Parityrequirementsfornetworkaccess4.Structuralseparationrequirements(e.g.,cellularnetwork)5.Jointmarketingrestrictions6.LimitationsonCPNIacquisitionandutilization1.Entryintolocalmarketbypowerfulcompetitors(e.g.,IXCs,CAPs)2.Customerinterestinintegrationof2ormoreproducts(i.e.,bundling)3.Technologicalconvergenceofexistingtelecomproducts4.Emergenceofnewtechnologies(e.g.,Internet)RegulatoryforcesMarketforcesAT/ZXP652-060297CernyRC(A)GERMANREGULATORYANDMARKETFORCES1.PartialprivatizationofDeutscheTelecom2.Fullliberalizationoftelecommunicationson1/1/983.Mandatedpricecapregulationforretaillocalservice4.Mandated“cost-oriented”pricingforunbundlednetworkelements...
