Ben Verwaayen: you need to be absolutely focussed on customers, number one, but Alcatel-Lucent was more of a joint venture than a merger

Persuasion

He was "persuaded by some people to have a chat". People being? "Customers, colleagues in the industry, who called me and said: 'You know, Ben, you really should consider.'"
Verwaayen has spent his career in telecoms, but on both sides of the industry. After a degree in law and army service in the Netherlands, he spent 13 years with the local subsidiary of the US-owned telecoms equipment maker ITT, itself later taken over by Alcatel.
In 1988 he joined the forerunner of the Netherlands incumbent, PTT Telecom, now KPN, as president and managing director. Then he swapped back to manufacturing with Lucent, ending up in as vice-chairman of the management board, before joining BT in 2002.
So for 33 years, he had alternated between the manufacturing and service provider side of the industry. He was a European who knew Lucent very well, and he had worked for it in the US. It was natural that people should speculate.
But Verwaayen had wanted to do things outside telecoms after he left BT — especially to work with the World Economic Forum, "a fabulous organisation", especially now when "dialogue between politicians, business and academia" is "really needed".
He expected to spend "a lot of time there" and to do "one or two other things". But he recognised that there was a job to be done in the company, where it was as if "the Americans stayed as one side of the ocean and we stayed at this side as Alcatel", he says.
"The big issue was not personalities per se. It was corporate governance. The American board membership defended the American side; the Europeans defended the European side."
So Verwaayen offered his advice that the company needed a chairman "who understands what it is to be a chairman, and is a real chairman". And the result, not then announced, was Philippe Camus, from the media group Lagadere and investment company Evercore.

The train to Paris

And one Friday in late August, Camus phoned Verwaayen at the World Economic Forum in Geneva. He dropped plans to fly to Marseille to his home in the Lubéron and took a train to Paris.
"I arrived in Paris and they ushered me into a room. I had a 40-minute discussion with Philippe and he said all the right things. He had the 'if you do it, then I do it' kind of approach. After 40 minutes we had nothing to say. We chatted for another half hour, because otherwise it didn't look good. That's what happened."
He didn't get home that weekend after all: he was due to go to Glasgow on the Sunday to join Ian Livingston, his successor at BT. "He's a Celtic fanatic," and Celtic were playing Rangers, its Glasgow rivals. Sadly for Livingston, Rangers won four-two.
And then back from Glasgow to Paris for his new career. "I didn't even time to get home for some fresh clothes. If you take a decision, you'd better do it quick." The official announcement was on the Tuesday.
Step one was a new management team. Verwaayen's new appointments have been "one third, one third, one third", he told GTB — the share of people hired from outside, "a third young people from the inside, a third old hands".
And many have gone. "The company was not doing well. When a company is not doing well, people ask themselves questions. A new guy comes on board — it was obvious what I was going to do."
Well, it probably wasn't all one sided. He undoubtedly told people his views on their future: "I'm not a shy person," was all he would say, but others who have seen him in action confirm that he can be fierce in demanding what he wants.
And he's not at Alcatel-Lucent to make friends. Verwaayen does not have a long-term contract with Alcatel-Lucent, he told Global Telecoms Business. "I'm not making it my career. I don't have a contract. I'm there to do a job."
He outlined his job in the first meetings once he joined, during "a lot of soap-box management at the beginning, to ensure that people have a sense of purpose, a sense of change", and know what they should do: "Please our customers", at first. "Not even please them, but wow them."

Appetite for change

So there is a new management team and a new business model. "In two and a half months, that's a decent amount of change." It would normally take a year, "but given where we are, there's a lot of appetite to do things faster".
Was the merger a mistake? "No, it's not a mistake. It's not a mistake at all," he says. Look at the world market, "and there are maybe four players" that are significant. All of those players have to work in a world where the operators are facing two new, powerful phenomena.
The first is "over the top": the companies such as Google, Apple and BlackBerry "which catch an enormous amount of end-user attention".
Most people "think that they live in that world", he notes — and he recognises that he is a classic example. "I say to people: 'Look at my BlackBerry.'" But the company behind BlackBerry, RIM, doesn't make the investment in networks.
He points to the small letters at the top of his BlackBerry screen: roaming in London, it says T-Mobile UK. "Whoever it is," he shrugs: "And the fact that I say 'whoever' explains the issue. Because T-Mobile and everybody else have to make millions of investment to allow me to sit here and play with my BlackBerry, which for me is a tool of life, and for many people."
But who makes the profit? Not the network operator, suggests Verwaayen. The customers will expect the network operators to deliver the quality, "while they say: 'I'm an iPhone person' or: 'I'm a BlackBerry person', or when I'm sitting at my computer at home: 'I'm a Google person'.
That's factor number one in the new world of Alcatel-Lucent, because the operators "are our lifeline", he says. "We need to help the operators to have a reason, a substantial reason, to differentiate themselves." So that people take note of the small label at the top of their BlackBerry screen: "T-Mobile, or Vodafone, or whoever."
The second factor: People have more impressive technology at home than in the office — reversing the position of a decade ago, he says: "a massive shift that's taken
And people want to move content from one screen to the other. A "screen-to-screen world" will put huge pressure on networks in terms of delivering mobile and fixed access to services.

Three reasons for spending

These two trends — over the top and screen-to-screen — require a threefold action from the operators. There are three reasons why operators spend capex, he adds: one, because the regulator tells you to. Second is cost saving, "crucial in today's environment", he adds. "Number three is to add new services."
Those are the three and only criteria for spending money if you're an operator. The rest is "nice to have", and "in today's environment nice to have is a problem", he says.
This creates a new sort of world for the operator: "How can I serve a customer base much more on the capability level than simply on the box level? Yes, you need good boxes, but a standalone box in a standalone world is less attractive."
For "a one-box company, it's slightly more difficult than it was five years ago; if you're a one-technology company it's also slightly more difficult than it was".
So the future belongs to what he calls "multi-capability companies: there are four left of worldwide significance". Ericsson, Nokia Siemens, Huawei and Alcatel-Lucent. "Those are the companies that can do end-to-end." They're the ones at the core of the industry.
"For my competitors I have just one word: respect." He's not tempted to make comments or comparisons. "I just have respect for them."
But what are Alcatel-Lucent's strengths in this competitive market? This is where, in the days between his appointment and announcing his strategy, Verwaayen was finding some wry amusement in reading the analysts' ideas about what he should do.
"The common language that I always hear" is that Alcatel-Lucent is "good in wireline, but not so good in wireless". But that sort of comment "will lose a lot of its meaning in the new screen-to-screen world", he says.
In his new management structure, he created a new applications software business, headed by Paul Segre, who is also president and CEO of Genesys, a company that Alcatel took over nine years ago.
"We have more than 2,000 software engineers, now combined and sitting together. They were scattered all over the place. Bring them together and that's a formidable force. We have more software engineers than many of the big names in the industry."
The "second important glue" in Verwaayen's repair kit for Alcatel-Lucent is services. "We have a unique service capability." It's headed by Andy Williams.

Nobel prizes

And he continues to run through the company's strengths: "We have Bell Labs: that's the envy of the industry." People at the labs, based in New Jersey, have won six Nobel prizes — all for physics — in 1937, 1956, 1977, 1978, 1997 and 1998. That's more than most countries.
But it's different now from what it was 40 years ago, he says, "and that's a good thing". It would have been wrong if it hadn't evolved.
We are in "very different times". Its work on "the black holes in the universe" should not be the focus today. "The focus today is much more linked to our business but it is still the disruptive group in the company, looking for ideas that other people will call far-fetched. They will get plenty of space to do all the things that in normal times you wouldn't too."
From the depths of the universe he comes back to the breakfast table. "There is a fear that I always had when I was an operator: how do I control the breakfast table?"
He's worrying about the 15-year-old member of the family coming down for breakfast and telling the parents that "you guys are old fashioned".
It is "the last thing parents want to hear", he says. "The parents respond: 'But we bought a computer last year.' And the 15-year-old says: 'That's exactly what I mean.' In that world, the 15-year-old will make the decision — between the service provider and Google, or Apple, or whatever."
And that's what operators are missing. "They very often focus on the head of the family to make the decision. It's certainly not the head of the family that makes the decision. These are the techy-savvy individuals, who can see benefits beyond the obvious."
Operators have to bring "the extra something, the extra wow" into the camp, and that is what the vendors have to deliver to the operators.
That means Alcatel-Lucent has to get it right with the right person in the operator — we use Matt Bross, group CTO of BT as an example. "Matt Bross must see that you know what you're talking about. Then he must see that you can execute. Then he must see that there's relevance to the boardroom" — using one of the three criteria he mentioned earlier, regulator, cost saving or new services. "And then you need the imagination of the technology gurus plus the cold facts of the boardroom table plus the capability to combine those two. That's what you need."
Verwaayen mentioned earlier the thoughts of analysts who were suggesting that the company was relatively weak in wireless. How had he responded and was he addressing it?
"Day two in the office: I made it crystal clear that we go for LTE. Big time. I made it clear that we do it on our own."
What does that mean? "There was a misunderstanding that there was a joint venture in the making with NEC. Great company, NEC." But that was technology cooperation, but this is different, he says. "Make sure the market understands that you see the fourth generation for what it really is."
It is broadband, and "wherever you are you get the same service, with the same security, and the same capabilities", he says. "It is a transition from the voice driven world to the video driven world."
LTE is the long-term evolution of the current WCDMA technology used across the world for 3G mobile services in the GSM family. It is being adopted by an increasing number of operators — including Verizon Wireless, never before a member of the GSM world.
Alcatel-Lucent is "very good in CDMA, we are world number one", but in WCDMA, the current 3G technology, it is "with some of the biggest companies in the world", he says, naming AT&T and China Mobile. But it isn't the number one or number two in these sectors, "and we need to be there".
So how does the company get to that target? Not by acquisition: "I think for now we have acquired enough. Acquiring is not number one on my list."
Since he started, have there been any nasty surprises? His principle is "don't try to repair the past", but "start from today and go forward", he says: "It's very expensive and very unproductive to repair the past."

Email Ben

As part of this he's determined to bring a new style into the company. One significant sign is on his biography page on the Alcatel-Lucent website. It carries his email address: Ben.Verwaayen@alcatel-lucent.com. Are there any other CEOs of multi-billion companies who offer their email address to the world? And who reply.
He also carries two BlackBerrys: one for those work emails, and another on which employees in the company can email him directly. "I get thousands of them. I read them all, every day, and answer them all. It is better than McKinsey. It is an amazing insight you get into the company."
So, no nasty surprises, but he has found "a lot of energy, and when I came in I found that I could hit the ground running, because this is not an unfamiliar world for me".
There are some unfamiliarities: it's a French company, based in Paris, so he's spending "a tough hour" twice a week learning French.
But why wasn't Alcatel-Lucent performing? He offers a sports comparison: "You see it sometimes in football clubs, with great players" who somehow don't perform well together. "All of a sudden, somebody says 'Boo!' and it gels. But I know the people in the industry, and I've been there before, in a crisis. We do €17 billion, and if you can't make money out of €17 billion, you're doing something wrong. It's not money to make money. Cash is not the issue, which is good: it's the ability to make money. We need to do things different. And, guess what, we will."
If a football club does well, it's high in the league at the end of the season. How long does Verwaayen have to perform? "We'll see. Certain things are not done in 90 days."
It is important to regain confidence with the market and with analysts, those who look quarter by quarter, he accepts, "but the confidence of our customers is the most important thing because they provide everything".
At the same time as planning his restructuring of Alcatel-Lucent, Verwaayen has been out meeting customers around the world: 45 in just the first few weeks. "The Americans have a nice phrase for it: you need to be obsessed with your customers." Perhaps, he reflects, that has a different meaning in Europe. "Absolutely focussed," he decides: "Absolutely focussed on customers, number one. You need to be able to translate your customer relationship into a great profitability profile in the longer term and in the short term for your shareholders."
And that needs to be translated "into an environment in which individuals can excel". This is "about technology talent and business talent", and "you need to give them a sense of purpose. And all three elements work together."

No more wild ideas

Meanwhile he wants to keep Alcatel-Lucent clear of what he calls "wild ideas" in the market. "WiMax in Upper Mongolia, with a Middle East wealth fund and a South American operator are probably not going to fly." Alcatel-Lucent is "lucky enough as a company" that it doesn't have much exposure in such markets "for stupidity or whatever: we were too slow to be in that business anyway".
It's business is with "the respected players" and the "footprint is one of solidity", he says. "It may be boring, but it's good. I learned that over time: boring is good." It might not reach the heights of before, "but boring on the slightly lower level is highly preferable over wild, speculative, perhaps worlds. This is just a matter of being realistic. That's where we have to be. We have to be realistic." GTB