Edwin Sim, CEO, Pathfinder Asia Limited & Human Capital Alliance Limited

Ladies and Gentlemen, it is indeed an honour for me to be back here today collaborating with the Economist.

Over my past 15 years in Thailand , I have had the opportunity to observe many companies participate in the Thai economy. Some of these companies are global multi-national corporations, some are large family owned Asian conglomerates. These companies have rode the foreign lead investment boom and export driven years of the late 1980s and the early 1990s; they have overcame the Asian Financial Crisis of the late 1990s; they are now firmly placed to participate in the recovery and growth phases of our economy.

One company which I have observed with considerable interest and one which has indeed left a very strong impression on me is Dtac. Over the past 18 months, under the leadership of the Co-Ceo’s Khun Sigve Brekkle and Khun Vichai Benjarongkul, Dtac has opened up and charted new waters in their management of the company.

This morning, I have asked the Dynamic Duo to share with us some of their experience in re-energizing their company. Ladies and Gentlemen, I am very happy to introduce to you Khun Vichai Benjarongkul and Khun Sigve Brekkle.

Sigve Brekke Co-Chief Executive Officer, DTAC

Vichai and I joined DTAC as co-CEOs in 2002, about one and a half years ago. Rather than the title “A Blueprint For Change Management Success” I would like to call my presentation “The DTAC Way” because I am not sure if everything we have done is applicable for other industries or companies. Some of the things we say may work at DTAC but not for others. So this is not a blueprint for anything other than turning DTAC around a little.

You may have seen that the Thai mobile market has really exploded over the past 2-3 years. Three years ago, there were only 2-3 million subscribers in Thailand . Today, there are 23 million subscribers. DTAC and our competitor AIS both have around 11 years’ experience working in this market but it is only in the last 2-3 years that we have seen true competition.

You can imagine what it does to a company when you have only less than one million subscribers for 9 years and then all of a sudden you are adding almost 1 million subscribers a month. It is a huge challenge. Not only has the market exploded, but I would also claim that the Thai mobile market today is one of the most competitive mobile markets in the world. We have five players competing in the market: ourselves, AIS, TA-Orange, Hutch and Thai Mobile. Very few other markets, even in Asia , see that many competitors in one marketplace. So it is very competitive, not only in terms of the number of players but also the type of competition. You see that this market does not hang behind when it comes to new types of services. It is very advanced and very competitive.
I would claim that currently there are too many operators. I think that you will see that the market will consolidate in some years from now and I also think that we will see a change in the way we compete. We will move away from competing on price and move more towards competing on innovative services.

I would also say that I am really looking forward to a clean-up in the regulatory situation. Today, it is not really fair the way the regulatory system – or rather the lack of it – works. We look forward to the government delivering on its promises about having a regulatory system that will work more fairly for the different mobile operators.

Decline and rise

So much for the mobile market. Now let’s look at DTAC. When Khun Vichai and I were asked to join the company as co-CEOs, DTAC was in quite a challenging position. The financial analysts back in November 2002 said that the company would probably lose its number two position to Orange and become a marginal player. That was 6-7 months after Orange launched their brand in Thailand and everyone saw that they were very aggressive and thought they would probably be very successful. So people said we think Orange will take over the number two position.

I remember the market research we did just after we came in. The findings painted DTAC as a sick old lady. It was not very positive. The share price was down 53%. DTAC is listed in the Singapore stock market and around 20% of our shares are floated. So in this kind of stormy weather Khun Vichai and I were asked to join the company and try to improve it.

We wondered where we should start. The traditional way would probably have been to hire 2-3 well-known international consultancy companies and try to come up with a new strategy, structure and business concept. Then we would have spent 4-5 months thinking about how to turn this negative thing into something positive for the future.

Where should we start? Should we start with a cost-cutting programme. Should we start with a change in the organisation? Should we start with our commercial policy?

The first thing we said was that we are not going to do this the traditional way. This was partly because we didn’t have time. Not only were we already in a very challenging position, but we knew that within two months Hutch would launch as the fourth operator in this market and if we were not able to change around very fast, we could risk not only losing our number two position but also number three. We also saw that internally a lot of people were beginning to lose confidence in being an employee of DTAC. So we saw we had to change things much faster than the traditional way. We said let’s do it quicker, let’s not follow the text-book and let’s do it by ourselves without hiring consultants.

We said there are 1,000 different challenges but let’s focus on the two most important challenges and forget the rest for now.

All about people

After spending some time thinking about that, we found that the two most important things for us were all about the people. It is not about the organisational chart. It is not about the strategy. Firstly, it is about our customers. We have to change the market perception that our customers have and we need to change the position DTAC has as a brand in the market. Secondly, it is about our employees. We have to change our organisational structure, the way we work, and we have to change our organisational policy. If we are able to change the people’s minds externally in terms of our brand position, and if we are able to change our people’s minds internally with our employees, we have a chance. So these were the only two points we focused on in the beginning.

Challenge number one was to build a strategy. We said let’s do this by following the concept that a great company is defined by the fact that it is not compared to its peers. I think we would have made a mistake if we had started looking at AIS or Orange thinking what are they doing better than us. Instead, we said to ourselves forget our competitors. Our competitor is DTAC, not AIS or Orange . If we start every day looking in the newspaper, seeing an ad from our competitor and wondering why didn’t we think of that, this is making it even more difficult. That way, we will lose focus and we will lose confidence in ourselves. So we said let’s compete with ourselves instead.

We said we want to be different. We are not going to be like our competitors. We are not going to do what they are doing. We are going to do this our own way. So we picked these two nice terms from one of the management gurus: karaoke capitalism and temporary monopoly.

Karaoke capitalism and temporary monopolies

Let me explain. Karaoke capitalism is if you go into a karaoke bar and you try to sing Frank Sinatra, the first time it may sound a little funny. But then you take a beer to loosen up a bit and the next time it sounds a little better. After a few more beers, you almost sound like Frank Sinatra; you’re king of the stage. But what are you doing? You are singing a Frank Sinatra song and you are trying to use beer as your tool to sing it better. I claim that a lot of businesses are doing the same. They are trying to copy other people’s songs except that they are not using beer. Instead, they are using words like benchmark and best practice. I think that too many businesses today are focusing on benchmarks and best practices that are just like other companies. Of course, you have to do that also but if that is all you do, sooner or later in a global economy everyone is doing the same. Everyone is almost doing things as efficiently as their competitor and the margin becomes very slim. So we said to ourselves, we are not going to sing our competitor’s songs; we are going to sing our own songs.

Going back to the karaoke club, if you go on stage and sing your own song, yes, it may sound a little so-so the first time, but everyone who sees you trying will admire you for having the guts to sing your own creation. So that was how we started to think. If we wanted to be a little different from the others, we were not going to sing other people’s songs, we were going to sing our own songs.

Then we moved onto the temporary monopoly. In the mobile business, as in many other businesses, it is very difficult to find sustainable competitive advantage because we are buying the same networks from the same vendors. There’s Nokia, Ericsson, Motorola, and so on. We are buying the same handsets from the same vendors and the same marketing advice from the same marketing agencies. We are basically using exactly the same infrastructure and getting more or less exactly the same tools. So for us to do something that our competitors cannot do is very difficult in the long run.

Brainstorming strategy

So we said we are not trying to make a strategy that we think we can live with for years. Instead, let’s look at the temporary monopoly idea. Let’s look at the areas where we can be the only one, if only for one week, or one month. If we are the only one even for this very short period of time, we have a chance to give the brand a feeling of novelty and the chance to have a pretty high profit in this very short monopoly situation. So we started to think that not only do we have to sing our own songs but we have to have a huge focus on innovation. Because if we can come out always as the first with innovative new services, then we can build brand and utilise the temporary monopoly.

We gathered our top management in a hotel and we said nobody is allowed to leave this room before we have created our strategy. There were no consultants there. There was no preparation. Only two CEOs, the management team and some paper to write on. We said we have to do this ourselves and we found that, in our view, the best strategy is the one which all the employees share.

I always do that myself when I go to new companies. I ask what is your strategy and I start by asking the lady sitting at the reception counter. If this lady can answer me in a few words, then this company has a good strategy. Then I ask the CEO, can you show me your company’s strategy. If the CEO has to pull out a document about the strategy, then the company has a bad strategy. If the CEO is able to right away tell me in a few words the same as the lady in the reception then it has a good strategy. What I mean by strategy is something that all the employees have in mind and it has to be very simple, just a few words. So we said that our strategy would also have to be easy enough to memorise.

After we spent 8-9 hours in the hotel room, we came up with four areas where we thought we wanted to be best. We decided to focus on customer service, service innovation, network quality, and distribution. This also said a lot about areas where we do not want to focus or where we do not want to be best.

After we created this very high level strategy, we said that the main strategy is basically just to do things. We have a strategic plan and it’s called doing things. Our experience was don’t waste too much time in making long activity lists and plans. Try to do things and learn from that.

So we had a strategy and wanted to change the market perception. We said to ourselves we cannot compete with our competitors in making nicer TV commercials. We could have been able to hire some nicer presenters but basically it would be the same. We would not be able to compete by using more money on the marketing media so we had to build our brand in a different way.

So first off, we said let’s use the press much more aggressively to build a brand. Previously, DTAC had a quite conservative approach with the Thai press, sending out press releases and doing boring press conferences. We said we want to change that, we want to use the press aggressively to build our brand, not because it is cheap but because we think it is very efficient. We thought that if we can be in the press much more actively, sooner or later that will change the customer’s perception. So we did things like hold a press conference in the ice rink at the World Trade Center to announce a partnership we have formed with Mistine.

So when we hold a press conference, we always try to draw attention to show that we are doing something differently, again creating the press. When we are doing a press conference we always think about a picture first. We ask ourselves what kind of picture we want the press to have the next day. Then we do the story around the picture. Of course, you need to use yourself a little to make this happen and, in fact, we are tying to use the whole top management aggressively to build a brand through ourselves to the press.

A few weeks ago, we rented some Harley Davidson motorcycles and drove around Bangkok to promote our new postpaid product. We did the same thing upcountry. We did this together with our employees because, in my view, creating a brand is not only talking to the customers. You also need to create a brand internally. If we can get our staff – 3,000 something of them – to act the same way as we want our brand to be seen in the marketplace, then we are also creating a brand through our employees. Most of this motorcycle gang came from the accounting department in DTAC. They never normally do things like this and they really thought it was fun to go out and be a part of the marketing of the company and not just a number cruncher. So quite often we take our staff out and let them be a part of the marketing.

Then we invited all our high-end postpaid customers to a party where Khun Vichai was a waiter, going around serving drinks and food. Why did we do this? Because we want to have a human touch. We want our CEOs to talk directly to the customers. That is also how we create a brand.

We think that mobile operators in Thailand today have too much money and we waste that money buying expensive marketing advice instead of using other tools. Look at politicians. If they don’t have enough money when they are trying to promote their policies, they use themselves. They go walking around shaking hands. Look at the prime minister of Thailand today travelling around the provinces. Why is he doing that? Because it is very efficient. If you are able to shake 50 hands every day as the prime minister, then you create your brand. You have people talking about seeing the prime minister today and he seemed like a good guy. We could have sent out a newsletter to our customers but that would not have had the same impact as Khun Vichai serving them with drinks. So use yourself and do the political handshake approach.

For the New Year, we had a Happy Festival at the Rama VIII bridge. We invited everyone to an open party for the countdown and some 180,000 people came to it. We did it together with the local authorities and it was a big event where the DTAC colours were flying high.

Vichai Bencharongkul Co-Chief Executive Officer, DTAC

Changing the brand and the organisation

Job number 2, after coming up with a strategy to try and change the brand and give it a new platform was to start changing the organisation. We asked ourselves what kind of organisation we need to handle these two crazy CEOs.

I remember the first day that Sigve and I walked into the DTAC office as CEOs. We had been executive directors of DTAC for about two years so we were not total strangers to the company. However, we never actually worked in the company. All we had done was attend a lot of board meetings. But the first day we walked into the office we were supposed to deliver a management brief. So all the executives sat in the big boardroom wearing their jackets and ties. We sat down and asked the management to tell us their vision so we could figure out our mission. They must have thought we were idiots. Why would we come to the company with no idea how to run it? At that time we had about 4 million customers but we were in a very challenged situation.

Already we had decided that we were going to have a totally new organisation with two CEOs but how would we divide the work up between the two? The answer is that we never divided it up. We adopted an open style of working together. We share the common interest and goal of driving this company beyond its existing position and just go from there.

One of the first things we did was to take out all the formal organisational structure. DTAC is a 13-year-old company built up during a duopoly situation with two big organisations going head-to-head; the Shin group and the UCOM Group. We had built this big tower and this mobile phone and internet company and we had a lot of hierarchy with a lot of senior people and structure and organisation but when Sigve and I came in we decided that since we have a lot of remodelling to do, we should start by taking down the walls. So whereas there were three guys reporting directly to the CEO, we decided that we would have 18 people reporting directly to us.

We said this is a service company and our assets are our people and the guys who have given us a lot of success are our customers. In a normal company, you build structure around walls. Everything is built around the boss and making sure he is satisfied with the results and so we tend to turn our back on the customers. But if we want to be a customer-focused company, we have to turn that around. Every interfacing point with the customer has to become our focus. So we need to change the way we work. Instead of serving the boss, we need to serve the customer and make that one of the pillars of being best. We need to be very close to our customer because we need to know what they want and we can’t just figure that out on our own.

Customer focus

As I said, we didn’t hire a consultant. Instead, we asked our own people for ideas and we asked them to ask the customer. That way we came up with a new paradigm for customer service. We saw that the customer is very demanding and so we need to build our products around their needs. So we tell our people to think how they would think if they were our customers and look at where the touchpoints are. We don’t think what is the best product for our company and try to sell that to the customer. Rather, we look at what is the best product for our customer and then try to give it to them.

Mobile phone operators tend to think about infrastructure, technology and know-how and then force it on the customer. You spend a lot of money trying to sell your technology with advertising but at the end of the day the customer only wants to know how much it all costs.

So we decided not to be a technology-driven company but a customer-driven company. Obviously, we did something right because within a few weeks of our coming out and saying we were a customer-focused company, everyone else was saying the same thing and it became standard advertising for the market.

When we reorganised we also changed the management style. We didn’t use any textbooks. We respect all that but in a situation like ours we have to be free from the obligation of following rigid ideas. So we developed our own free style.

With 18 people reporting to us, it can be quite a mess but it challenges us to find integrated solutions. If Sigve is challenged by a dealer complaint about customer interface, then he will use the whole value chain under him to fix the problem. I do the same. So we live in this mess but it produces good ideas, good solutions. In fact, we don’t think of ourselves as being unstructured but nor do we aim to be overly neat. We just say we have a different style. Our main interest is for DTAC to compete with itself. It has to be better today than it was yesterday and if not, then we are not good enough.

In practical terms, both Sigve and I get SMS alerts every hour on the status of our network and our sales. This helps us to make sure that we are running a tight ship. It is the best way for our two CEOs to be hands on with the operation because we cannot afford the luxury of sitting back and relaxing while 7 million customers use our service. We have 18 departments, 3,000 people, 400 DTAC franchisee shops, about 1,000 direct dealers and up to 20,000 sub-dealers nationwide. So the two CEOs need to be on the road. We cannot operate from the 30th floor of the DTAC headquarters. Sigve and I frequently travel throughout the country, meeting our people, our customers and other interested parties we have to deal with. We have open lines of communication within DTAC and with our dealers so they can contact us directly. We need to be available to solve problems for them.

We also need to be able to respond to the market within 24 hours. If a competitor launches a new product or a new campaign, by the end of the working day we should have a response. This is quite challenging and you need an organisation that adapts to that kind of style.

We see ourselves not as executives who manage the process but as officers who deal with a lot of people in motion. We have 3,000 staff, 18 senior officials and 400-500 businessmen who are constantly looking for the best deals.

Ship in motion management

To do this we have to create and manage a ship in motion kind of environment. In fact, we call ourselves ship in motion officers and our goal is to try and satisfy everyone’s needs, especially the customer.

As such, we have to be hands on. It is easy to talk about customer focus but if the CEO says I don’t go out into the market and meet customers and dealers, that’s not my job, then what are we talking about. On the other hand, if the CEO, or even the CFO for that matter, goes out into the countryside and puts up a sticker and talks to dealers and customers, then our strategy has real relevance and meaning.

We believe that our brand will be perceived according to the way we act. If we want people to believe that DTAC is very customer focused, we have to ask if we are actively working to improve our customer services?

We also do things with our staff. Our employees are part of our process. In DTAC we promote an 80/20 rule where we allow people to take risks. You can fail 20% of the time but if you succeed 80% of the time you will still be more dynamic and successful than if you played safe all of the time.

Furthermore, when we looked at building our brand, we decided to take the focus off technology in order to allow us to be more customer-friendly.

We took the risk of designing a new logo and changing the colour. By empowering our people, we also came up with the idea of returning benefits to our customers during happy hours that they could pick and this has been very successful. We also introduced a new postpaid package that allows people to pick their own billing cycle.

We could have lost revenue. We could have stuck to traditional methods. But, nevertheless, we allowed our staff to think up new products, many of which turned out to be quite successful.

Sigve Brekke Co-Chief Executive Officer, DTAC

Nurturing talent

After we changed our organisation, we saw that if we wanted to build this more long term we needed to be much better at nurturing the right talents. We can’t just put people in boxes and have them all on the same type of salary packages because we need to develop talents where we can build a long term competitive advantage.

“When land was a scarce resource, nations were fighting over it,” goes one famous quote. It’s the same with talented people, especially in the telecoms industry where we have so many players and such a competitive environment. So it is really crucial that you win the battle over talent. But the good guys really move around, not only in Thailand but internationally. You don’t keep them just by offering them more money or a richer compensation package. The really good guys, on both the technical and the marketing side, require much more than just the standard package.

So we started to focus on how can we get this good talent into the company and keep them. We decided that if our board members were all of a similar stripe, there was no way we would understand the customer. We need different kinds of people on our board to reflect the divers profiles of our customers. So we said we had to stop hiring people based on skills and start hiring on attitude. If you want to change your internal culture, if you want to create a brand, it is very much about emotions and attitude. However, teaching people attitude is very difficult, unlike teaching skills.

With a lot of the people we are recruiting now we don’t even look at their CVs. We are not that interested in their skills but we are very interested in their attitude. Regardless of their background, people can sometimes come together in a kind of club. So we said let’s take our traditional classified ads that list all the specifications such as age and qualifications and just skip it because it didn’t work. Instead, we put an ad in the paper saying we would select people on attitude first and foremost. We said if you have the kind of personality we are looking for, then send us your resume. And we asked them to send their applications to Vichai and Sigve and we would personally review the application. In two weeks we got 600 applications and we reviewed them all – with a little help. A lot of them were very good. When we used to put a full page ad in the classified section, at best we would get 50-60 applications. So we started to recruit on attitude and then train on skills.

Building partnership

We also thought that we would not try to be world class in everything. Instead, we said we would focus on what we think we can be the best in the world at doing and then try to build on other people’s expectations when it comes to expanding things outside our core. So we started to develop an open partnership model. I would claim that we were the first company in Thailand doing this because mobile companies here and elsewhere have tended to do everything themselves. It is very unusual to find outsourcing, to find companies using other people’s competencies.

So we started to say we are not afraid of our brand and we will team up with everyone. The only thing that we require is that the partner has the same type of brand and attitude as ourselves and that they add value to us. So on the corporate market today, for example, we have 15 strategic partners. We have outsourced the sales on the SME market and we have 150 content providers. Even though we are working with all our dealers, we said we need to expand into new areas. So we teamed up with Mistine, selling cosmetics, having 600,000 direct sales ladies working in the market. We teamed up with Nestle ice cream with 30,000 direct sales channels. We were the first to move beyond the traditional distribution of telecom services. Our marketing people said no, don’t do this, you will mess up the brand, lose the focus and confuse the customers. We said, no, we need to focus on our core and use others to expand the traditional way of looking at it. In my view, creating partnerships is very important. We don’t really believe in synergies; we don’t think you can build a business model where you can do everything yourself. We also teamed up with a company going upcountry, rolling out blankets on the ground and showing old action movies and selling simcards to people.

Leadership

“A leader is a dealer in hope” – Napoleon.

The most important thing a leader in a company like DTAC can do today is to create hope. They have to get people to believe in the future and make them confident in being a DTAC employee.

A lot of things we do ourselves. Leading by example is by far the most efficient way of leadership and you can never do that sitting in your office. You need to go out to the market. You can never say that we want DTAC to be a young, trendy novelty brand in the market and we all look all the same. You have to be taking the first step yourself. If you are not willing or able to do that you should probably not be a CEO of that company.

This is a risky thing we did in November as an example of leadership. There is no doubt that DTAC was left behind by its main competitor on network coverage. We had to do something to change the customer’s perception about TAC not having the same signal strength as AIS. So we invited 1,500 people to a huge event in November. There were 200-300 press a lot of dealers and a lot of partners and for 1.5 hours there was only Khun Vichai and myself standing on the stage. There was no show, just the two of us speaking to the audience about how committed the two of us are to change the perception of DTAC in terms of network. We were not only talking about commitment but concrete targets. We promised to roll out four new base stations every single day for 76 months. We are talking about being the best quality service provider in the 10 biggest cities in Thailand in the first quarter and then in another 10 cities by the second quarter. We did this to show the people that, from the top level, we are very committed and that we are guaranteeing this personally. Then we brought up on stage some of our engineers to show that it is not only us but the whole company. This was then followed up with the two CEOs going on TV. We did five commercials and we were on TV 20 times a day for one month because we think that the most efficient way to guarantee our commitment is to do it from the top. Then there is no place to hide. It was very risky going on TV with this kind of commitment. The marketing people said don’t because if it fails, there is nobody you can blame but we did it anyway.

Back then, our competitors were running about twice as much TV budget as us so we had to do things differently. Luckily this turned out very positively. After having done this for about 5-6 weeks it turned out that the TV commercials achieved the highest score in terms of view recall. So being different – not fancy – was really attracting people’s awareness. But you have to take the risk.

We also had a New Year party for 2000 staff in Bangkok . We went on stage and sang our own rap song that we recorded in a studio to our employees. It was the traditional message of appreciation and strategy for the new year but the presentation totally surprised everyone. It broke down the barriers. Before people would be moving away from us in the lift at work. After it, people started to talk to us. They felt that the CEOs had become human.

Conclusion

So after all these high-flying activities, what have we achieved so far? Revenues are up around 40% in one year. We have turned around the business. A lot of press claim that we are the most innovative operators in the market now, not the sick old lady. We got a lot of prizes at New Year. There has been a lot of improvement in our network quality, not only physical improvement but also perception improvement. The organisation is very competent. The share price moved from 50 cents to $3, so it increased six-fold in one year which is quite a lot. We went from US$250 million to US$1.5 billion. But we have just started. The competition is increasing and there is a lot more to do.

However, in my view changing things is something you don’t do once and then finish; it is something you do every single day. The message we are telling our employees now is that the biggest risk is if they are too confident or too successful. We have to challenge ourselves again every day. That is tough because the way that we do it is always to change the target, always to set unreachable targets, to keep people always trying to stretch a little more and trying to be on their toes and solve problems. In conclusion, then, I would say that innovation is not so much about getting new ideas in as getting old ideas out.