Leading Turnarounds: How Lucent Fights Back

Rick Miller featured in Success Today magazine, June 2003:

START_QUOTE_30t_smHis friends thought he was crazy. But then, what are friends for but to tell you you’re nuts for taking on the impossible? And that’s what it looked like when Rick Miller went after the top sales job at Lucent Technologies, a company with a once-golden reputation that had tarnished to a dull brown by the time Miller arrived on the scene.

When Miller took the job of senior vice president global sales at Lucent Technologies last May, the once high-flying telecom’s stock, which had fetched $57 in December 1999, had crashed to under $4 per share. By September 2002 it would dip below a buck a share. Everywhere there was a deathwatch, as reporters, analysts and telecom insiders united in whispering that the once glorious company (a 1996 spin-off from AT&T) was not long for this world. “When I joined Lucent, it definitely made a statement,” says Miller, a onetime president of AT&T Global Services who immediately before coming to Lucent had served as president of Opus360, a dot-com that had provided staffing solutions.

“I chose Lucent; it didn’t come after me. I pursued it,” relates Miller. “I saw that this was a company with fundamental strengths. It’s a place where I knew I could make a difference.”

Has he? Not quite a year into his position, Miller says, “You can definitely see the progress. In 2002, our customer satisfaction rating” – based on an annual survey Lucent asks customers to complete – “was the highest in history. We are helping our customers’ bottom lines. We have been very aggressive about getting our pricing in line. When the telecom market turns – and it will – we will be ready. There have been a lot of misperceptions about Lucent and about our sales team,” adds Miller. “I want to change that.”

Miller backs up his words. He threw open his sales team to interviews by Selling Power – and that’s because he wants to get out a loud message: Lucent is going to be a place where hard-charging sales executives make a lot of money, because this is a new company where selling rules. “A lot of people think we’re about technology,” says Miller, who acknowledges that because Lucent’s roots lie in Bell Labs, the company’s technology heritage is rich. “But this also is a company where selling matters. We definitely know that.”

Proof: Every week Lucent CEO Patricia Russo picks up the phone and calls her counterparts at 10 to 15 major customers. Her calls target whales – the companies that most emphatically determine Lucent’s success. But she is not alone. Just below her is Bob Holder, Lucent’s COO, and every week he, too, makes a dozen or so calls. “The rest of the organization can look up to the very top and see the commitment to selling, to building customer relations,” says Miller.

Another key sales agent in the current environment is Lucent’s CFO, Frank D’Amelio. “Whenever a customer raises questions about our future, our CFO goes in and tells our story,” says Vince Molinaro, senior vice president, North America, for integrated network solutions. “We take the viability of our company right off the table, so we can get the conversation back to how Lucent’s solutions can help this customer.”

When there is good news about Lucent’s finances – and the company insists it is enjoying rising revenues and is cash-flow positive – executives are quick to get out that news, to customers and employees alike. “We share that information with people who would be interested,” says Miller, and he well realizes that in a battle for the hearts and minds – of customers and Lucent employees alike – it’s critical to get out positive information.

“We don’t wait for customers to ask,” adds Molinaro. “We background every customer with the facts. This communication has become part of our daily habit.”

Rebuilding a Team

Commitment to selling from the top executives was a start in reviving Lucent’s fortunes, but Rick Miller knew when he came aboard that he had inherited a shattered sales force. The numbers tell it all. At the start of 2001, Lucent had 106,000 employees. Today it has around 40,000. That’s a lot of bodies cut loose, and the sales team suffered losses too. Miller knew he had to bandage these wounds and get the sales force refocused on making the deals that would keep Lucent alive. How would he do it?

“We have gotten smaller but we also now are putting our money on our sales force,” says Miller, who explains that in 2003 he has put strong emphasis on three key programs designed to pump up the sellers.

Recognition. For several years, recognition programs were suspended – Lucent just didn’t have the money to spend on traditional morale boosters. But in 2003 Miller shook lose money to fund programs (such as a winter trip to Scottsdale for high producers) and, probably just as importantly, the company has taken big steps to engrain low-cost but powerful recognition programs into its culture. Such as?

“I’ve personally sent out around 600 recognition letters to top employees,” relates Molinaro, and you can bet that when a personal thank-you comes from a senior vice president, that carries weight. What makes Molinaro’s output all the more impressive: that output was generated in just the first few months of 2003. “We have a lot of great stuff going on in this company, and as executives we are just beginning to say thank you,” adds Molinaro.

Training. In the lowest months Lucent did little training, but Miller has ratcheted that up: “We have doubled the dollars we are making available for training,” relates Miller. How much training will be involved in 2003? Joe Dymond, a sales rep with Lucent’s BellSouth team, says that he personally is looking at 80 hours of training – mainly in selling techniques – during 2003. Many reps will put in the same number of training hours.

“This tells our salespeople we are investing in them,” says Miller who knows the research is plentiful showing that when a sales team is invested in, it feels more valued, and usually that translates into a harder working, more dedicated group.

Compensation. “We have committed ourselves to providing market-level compensation,” says Miller, who indicates that there has been a broad revision of the compensation program for sales reps. Throughout the revision process, says Miller, reps were consulted with the hope of producing a program that would more effectively motivate the sales force. Did Miller hit his target?

From the trenches, rep Dymond indicates, “the numbers are aggressive but realistic. If we bring the customers in, we can achieve our numbers.” Once a rep’s quota is reached, “multipliers” – as Lucent calls them – kick in and the rep can wind up with generous bonuses. Is the program fair? “We always want more money,” laughs Dymond, but he indicates that to his eyes the new Lucent compensation program offers both incentives to sell and rewards for those who close deals.

Kicking It Up with Customers

Miller may have shored up Lucent’s relationship with its reps, but what about with customers? “We are going back to the basics of selling,” says Miller, and to him that means building lasting relationships that lead to sales.

A methodical, patient approach is still Lucent’s way, even amid the current financial urgencies and, frankly, there probably isn’t any way to speed up the process. Telcos (about 40 mammoth telecommunications providers who have been identified by Lucent as their core customer base) just don’t move fast when making decisions involving many millions of dollars and that will shape the future of their networks.

“We do relationship selling, not transactional,” says Tom Moore, director of optical sales on Lucent’s Verizon sales team. He adds, “It can take up to a year to close a sale. Developing relationships with influencers inside the company is critical.”

This is a deliberate sales process that begins when a customer sends out a Request for Proposal to perhaps 10 telecommunications vendors. “If our relationships are solid we may know a month in advance that an RFP is coming,” says Moore. “That can give us a head start.”

Vendors’ responses to the RFPs, in turn, are screened by the customer and some – perhaps three to five – will be invited in for presentations to the customer’s operating managers. “These talks can take one to two days,” says Moore, and, increasingly, Lucent comes loaded for bear. The company now builds into most of its presentations a so-called “business case,” a thick document that minutely details the dollars and cents payoffs of going with the Lucent solutions. In every instance Lucent wants to show the customer where and how its products will make money for the customer because, without that, a sale simply won’t happen in this market, says Moore.

Pass that stage and one more hoop needs to be jumped through: “A few finalists then are invited in to present to the customer’s senior management,” relates Moore, who indicates that usually Lucent will get one hour, tops two, to talk about the business advantages of its solutions to a customer executive team that may include the CEO. “They want to hear how the Lucent solution will better their bottom line, how it will enhance their operational effectiveness, and also how our solution will differentiate them from their competitors,” says Moore.

That elaborate dance, truth to tell, is little changed from how sales were made five years ago. But there are differences. Telcos today are slower to decide – that’s a byproduct of a financially more reticent industry – “and they absolutely insist we spell out the ROI,” says Moore.

In Lucent’s case, it has moved fast to give customers more in its sales presentations – but inside people have a keen sense that they are doing this more with less. “Our teams now are smaller, leaner,” says Pamela Reilly, a rep on the Verizon Wireless Team – and notes that, although teams have gotten thinner, every major customer has a dedicated team serving its needs. For instance, 48 reps are on the Verizon team, and they can call on another 25 specialists – engineers and marketers – as needed.

There may even be a silver lining in the downsizing of Lucent’s teams. “Sometimes I think so many of us visited customers it could have been intimidating. We’re a smaller group now,” says Reilly. She adds that the prevailing philosophy within Lucent now is staffing teams with multitaskers – “We look for people who can sell but who also understand and can explain the technology.” A few years ago, it was more common for a team to include a few engineers to talk the technology and salespeople to do the closing, but now, with fewer people, wearing multiple hats, “the sales process may be smoother,” says Reilly.

A Paradigm Shift

Three years ago Lucent was resolutely a DIY company – if it wasn’t going to happen internally, it wasn’t going to happen, because Lucent did not reach out for assistance. So if there are skeptics about Lucent’s commitment to change, listen up: the company is knee-deep into a paradigm change with a goal of bringing in resellers and partners who will generate“20 percent of our revenue base,” says Molinaro. For a company that has always been 100 percent direct, this is a massive, wrenching shift. But, says Molinaro, “we call this ‘extending our reach.’ We are trying to make the pie bigger.”

As Lucent got smaller, it realized their were opportunities out there that it simply wasn’t pursuing, especially when the prospects weren’t the large telcos that are Lucent’s core customers. But Lucent also realized it could no longer afford to ignore those opportunities. “We decided to create a competitive advantage for ourselves by bringing in partners who can help us sell into new markets,” says Molinaro.

So far the program is in its early stages – with partners ranging from small resellers in Asia to IBM and Accenture in the U.S. – but Lucent expresses deep optimism that this will help pave profitable future paths for the company.

What about panicking already anxious internal sales teams who might see these alliances as further erosion of their income? “We are working hard to reassure our people,” says Molinaro, who indicates that compensation plans are being tweaked to provide assurances to inside reps that outside reps are not stealing sales out of their pockets. “This strategy will let us make sales we probably wouldn’t otherwise have made,” says Molinaro. “People inside see how this is very good for the company.”

Bell Labs

Yet another paradigm shift is enveloping Lucent’s crown jewel, Bell Labs. Nothing else in the telecom sector rivals the sheer brainy firepower of Bell Labs, but this also is a facility that traditionally operated at arm’s length or farther from the selling process. No more. Big changes have unfolded as Bell Labs fights to make itself a cost-effective component of Lucent. “We have a spectrum of activities that helps our sales teams,” says Wim Sweldens, a Bell Labs vice president. “In the past two years, interactions have become much more frequent. The goal is to intensify the relationship between research and selling.”

A tangible demonstration of this new direction for Bell Labs is that key researchers are buddied up with counterparts at Lucent with the aim of seeing where the Lab’s research can help the sales team get meetings and close deals. Sweldens, for instance, is paired with Molinaro, and each quarter they review each customer Molinaro serves and the question, always, is where can Bell Labs help? This involves lots of communication between Sweldens and Molinaro. “We have phone calls and email, and we may get together in person seven or eight times a quarter,” says Sweldens.

Bell Labs also directly reaches out to customers. “With key customers, our researchers will get together with theirs to review topics of mutual interest. This buys us a lot of mindshare,” says Sweldens, who reminds us of the stature of Bell Labs in its industry: “Many telephone companies see Bell Labs as their research organization,” says Swelden.

This is a two-way street, however. “We get a lot out of meeting with customers. Hearing their problems helps us better focus our efforts. We walk away from these meetings with a treasure trove of problems to solve” – and every problem, potentially, engenders a new Lucent solution or improvements in current Lucent products.

Ramping Up for Tomorrow’s Successes

“It’s not your grandfather’s telecommunications industry any more, that’s for sure,” says Gina Johnson, account manager with Lucent’s SBC team. “We have been through a lot of change.”

Listen to Rick Miller, however, and the changes are just beginning for Lucent. “We’ve made a strong start, but there’s more to go,” says Miller who acknowledges that Lucent still has challenging times ahead. But, he adds, every stock picker knows the strategy for beating the market is to buy low when you believe a stock is bound to rise. “That’s what I tell people about my coming to Lucent,” says Miller. “Of course the stock was low. Of course the company had problems. But this is a company with a great future before it. We are going to sell our way out of this.”
– Robert McGarvey




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Corporate Culture and Performance

“The single most visible factor that distinguishes a successful culture from a failure… is competent leadership from the top.” —Corporate Culture and Performance

We are coming upon the 20 year anniversary of the publishing of John Kotter’s and James Heskett’s Corporate Culture and Performance. The lessons in this classic are timeless and particularly applicable for those who lead groups today. Rooted in research, Kotter and Heskett provide a blue-print of what to do to build an organization that can sustain strong performance. They also point out that it is not easy.

“Culture represents the interdependent set of values and ways of behaving that are common in a community and that tend to perpetuate themselves.” The performance engine of any company is their community of employees. Specifically, the books central message is that it is critical to build an Adaptive Culture, rather than a strong culture, to create long-term economic performance. Adaptive cultures expect and embrace change. To build the elusive adaptive culture, the authors offer the following:

Senior executives must display an uncommon combination of personal attributes and actions at the very top of a business. Internally, executives must be self-assured and willing to work for others. Externally, executives must exhibit discipline, confidence and humility. According to extensive research conducted by Kotter and Heskett, senior executives must also act to:

  • Create a sense of crisis and a need for change as they set a new direction
  • Communicate consistently and broadly
  • Display an “outsiders” propensity to embrace change and new ideas
  • Reinforce the importance of innovation
  • Build and maintain an “insiders” credibility
  • Institute a balanced focus on the success of customers, employees, and share owners
  • Establish leadership or the ability to produce change as an important focus at ALL levels
  • Decentralize decision-making where possible
  • Promote carefully and demote when necessary
  • Celebrate early success

At a time when so many of our private sector institutions are not performing well, we would all be well served to return to lessons contained in this leadership classic. The good news is that the paperback version of Corporate Culture and Performance was released earlier this year. Is that perfect timing? As a practitioner of the concepts included in this classic, I can assure you it is well worth the time.

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Great by Choice

On October 11th, Author Jim Collins released his fourth in a series of heavily researched books outlining “what it takes to build a great company,” titled Great by Choice with co-writer Morten Hansen. This particular book focuses on requirements for sustained growth in a business world characterized by uncertainty and chaos. The book also consciously builds on, but does not actively reference, the key lessons in the prior three books. The authors build a case that their conclusions complement the important learning offered in his earlier books. These include:

Built to Last – including a focus on the importance of Values

Good to Great – including a focus on the importance of Insight of Level 5 Leadership

How The Mighty Fall – including a focus on the intense Support required of leaders to Never Give In

In Great by Choice, the authors share the results of a nine-year research effort focused on determining those characteristics of companies that achieve superior and sustained performance in the most unpredictable of market conditions. Central among their findings are the importance of the connection between Discipline and Creativity as part of a concept the authors describe as 10X Leadership. “Of course, it is not discipline alone that makes greatness, but the combination of discipline and creativity. “(pg. 77)

As a total body of work, Collins four studies include a deep dive on a select group of 75 companies. As a resource, Collins’ books are invaluable. While certain themes (i.e. discipline) are woven throughout the four books, as a career academic, researcher and consultant Collins concludes that people can build a great company based on their actions and attributes…even in the most challenging of times. I think Collins is spot on.

Going forward, however, this blog will come from the view point of a career practitioner. I believe there is value in the insights and observations of a career business leader who has spent most of his time on the front line, accountable for results. Based on experience, at times I may disagree with parts of the research offered by others or I may offer a slightly different spin. At Choices & Success we APPLY the best of these concepts to drive results and resilience. From this perspective, I will offer a practitioner’s view of HOW Discipline, Insight, Support, Creativity, and Values can be implemented to drive sustained performance. The devil is in the details.

In Great by Choice, Collins offers the following summary of his research on building a great company: “Indeed, if there’s one overarching message arising from more than six thousand years of corporate history across all our research—studies that employ comparisons of great versus good in similar circumstances—it would be this: greatness is not the matter of circumstance; greatness is first and foremost a matter of conscious choice and discipline.

On that perspective, we agree 100%!

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