Wednesday, January 9, 2019

Ken Iverson’s Plain Talk

strategy+business, January 7, 2019

by Theodore Kinni

Twenty years ago, in 1998, my agent called and asked if I’d be interested in coauthoring a business book aimed at identifying 21 companies that would lead the way in the 21st century. If you know anything about the vagaries of prediction, you can imagine what a lesson in humiliation that gig turned out to be. (Oh, 3Com; oh, Nokia.) But on the plus side, the project introduced me to F. Kenneth Iverson, a highly successful corporate leader who isn’t nearly as well remembered today as he should be — and whose simple and clear directives from the late 20th century resonate clearly in the 21st century.

At the time, Iverson’s memoir/management exposition, Plain Talk: Lessons from a Business Maverick, was newly published. And he was chairman of Nucor Corporation, which, under his leadership, had come from nowhere to run circles around Big Steel and compete head-to-head with heavily subsidized foreign steelmakers.

Iverson, born in 1925, revolutionized the steel industry. But that wasn’t his initial intent. In 1965, he was a vice president at Nuclear Corporation of America, a profitless company in which he headed a unit making steel joists. As bankruptcy loomed, the board fired the company’s president and offered Iverson the position. “Apparently, managing the only profitable division in the company made me presidential material,” he recalled in Plain Talk. “Although I was just 39 years old, I wasn’t too flattered. No one else wanted the job. It was mine by default.”

Iverson didn’t waste time formulating a grand or complex strategy. He returned the company to profitability by doubling down on what worked: He focused on steel joists and sold off everything else that was losing money. Neither did he have the luxury of pursuing disruptive innovation. He was too busy trying to make money in a commodity business the old-fashioned way: by reducing costs and driving up productivity.

He also invested, somewhat counterintuitively, in vertical integration. In 1968, when the rising cost of bar steel (the main ingredient in steel joists) started squeezing profits, Iverson decided to make it instead of buy it. Unable to come up with the couple hundred million dollars needed to finance a traditional smelting mill, he latched onto the then-emerging minimill concept, in which electric arc furnaces melt scrap iron to make low-cost steel. By 1970, the minimill, which Iverson built with a US$6 million bank loan, was producing more steel than the steel joist business required and became a profit center in and of itself. In the years that followed, Nuclear Corporation of America was renamed Nucor, and it built more minimills and expanded into steel decking, bolts, and sheet steel. Read the rest here.

Saturday, January 5, 2019

Unlocking growth in the B2B telecom segment

Learned a lot lending an editorial hand here:

PwC, January 2019

by Wilson Chow, Rolf Meakin, Mike Lawley, and Joseph Tagliaferro  

In the past five years, telecom operators have recorded an average compound annual growth rate of -0.4% for their B2B activity. The industry’s cash cows are in decline. These include legacy wireline offerings, such as multiprotocol label switching, plain old telephone service and digital subscriber line services. The catch rates on newer internet-based products have not been high enough to pick up the slack. Moreover, the complexity of the industry’s legacy technology, business and operations support systems has stymied efforts to both reduce costs and bring innovations to market. 

Buyers of B2B telecom services are also frustrated with what they perceive as a lack of responsiveness within the industry — a condition that has resulted in a high level of customer churn. Their dissatisfaction is exacerbated by a demographic changing of the guard: more and more buyers have service expectations set by a lifetime of dealing with digitally native consumer companies such as Amazon and Netflix. They expect service requests and delivery to be fulfilled on demand, and they don’t want to do business with telcos that can’t meet their expectations.

The new competitors, attracted by this combination of industry sluggishness and customer unrest, fall into two broad categories. The first includes companies such as Cisco, Juniper and Brocade; they seek to establish direct relationships with enterprise customers. They expect to do this by building a broad base of customers in the B2B market and selling services that overlap with telcos’ offerings, such as software-based VPNs and firewalls. The second group of competitors, which includes companies such as Amazon and Masergy, is seeking to disrupt the industry in a more fundamental way, less bound to established offerings. These companies are leveraging their agility and digital savvy to create new kinds of customer-centric solutions, test them with early adopters and bring them to market at an unprecedented pace — a pace that telcos struggle to match.

Telecom operators know they have advantages, particularly in their networks and long-established relationships with enterprise customers. They know that to better serve existing customers, win over new ones, reverse declining revenues and stymie competitors, they will need a major shift in their capabilities and outward-facing identity. This requires transformation. But knowing the effort and investment involved in transformations, and the high rates of failure, how can telecom leaders improve the odds for success? Read the rest here.