Best Practices for Quality Management in the Telecommunications Industry

1. Best Practices for Quality Management in the Telecommunications Industry ENSE627/ENPM647 Spring 2004 Guangming Zhang Graciela Piedras Rowin Andruscavage

2. Presentation Outline • Telecom Market Overview • Network Evolution • What is Quality? • Malcom Baldrige categories • Vision for the future • Lessons learned • Conclusions

3. Looking at the telecom past… The business climate used to be like a ship on a calm sea.

4. Then, Challenge came by… • Rapid time to market with shorter development and life cycles • Very well-educated, technically excellent, multicultural work force • A growing body of de facto global standards • A customer base that may have little or no experience with the product or technology • A marketplace that is willing to accept innovative solutions to problems they may not yet know they have • New Competitors – CLEC, ISP, ASP • New Technology Solutions – VoIP, MPLS, QoS but you need backwards compatibility w/ legacy systems • Blind Faith in the Stock Market • Unrestrained Spending • Globalization (Mergers and Acquisitions) so highly competitive

5. 1.5 1.25 1.0 Revenue ( $ in trillions ) .75 .50 .25 0 2001 2002 2003 2004 2005 Worldwide Communications Services Revenue Steady Growth in Voice Revenues, Volume MOU Offset by Price Compression, Increase in Advanced Data/IP Revenues CAGR >50% IP VPN, VoIP, Hosting/Content, Wireless Data Emerging CAGR 16% ATM/Frame, X25, Internet & Broadband Access Data CAGR 12% Wireless CAGR 4% Local, Long Distance, International, Voice Source: ABN Amro, Cahners In-stat, Dittberner , Telecom Next Strategy Group Source: Motorola, QuEST Forum

6. 300 $276.0B $268.0B $257.0B $243.0B 260 $232.0B 220 180 140 Revenue ($ in billions) 100 60 20 0 2001 2002 2003 2004 2005 Return of Steady Telecom Growth Overall Steady Growth, Increased OSS Importance, Within Segment Dynamics Define Growth Opportunities Other: Fiber optic cable, submarine optical, non-core ancillary OSS: Network & systems, Software ops, customer care, billing, support systems Other OSS Cable MSO Wireless Wireline Source: ABN Amro, Cahners In-stat, Aberdeen Group, Dittberner, Telecom Next Strategy Group

7. Evolution of Voice and Data • Mobile Continues to Be the “Killer” Application – We Expect 50% of 2010 Telephony Will Be Wireless • New Technologies Add Capacity for Voice and Data and Differentiation Opportunities for Carriers for integrating networks • Data Will Be at Least 20-25% of Mobile Industry Revenues by 2006 vs. an Estimate of 6% in 2002 $ Value of Mobile Services 2002 (Estimate) 2006 (Estimate) Location-Based Services3% Web Services 6% Web Services 2% E-Mail and Messaging4% E-Mail and Messaging 16% Source: Yankee Group Voice 75% Voice 94% Quest Forum, Brussels December 2002 Source: Motorola, QuEST Forum

8. 1200 1000 800 600 400 200 0 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001e 2002e WirelessGlobal Cumulative Subscribers (in millions) Source: PCS and GTSS – Global Marketing Operations

9. 1XEV-DO IS95A IS95B 1XRTT 1XEV-DV UMTS TDMA IS-136 EDGE GPRS 14.4Kbps - 64Kbps - 144Kbps - 384Kbps - 1.4Mbps - 2Mbps - 5Mbps Technology Migration Paths 2.5G CDMA TDMA GSM 3G 2G 3G 2.5G 2G GSM 900 GSM 1800 PCS 1900

10. The Benefits of Integrating IPv6 Large Address Space Enhanced Security The Ubiquitous Internet “Plug-and-Play” Enhanced Mobility Enhanced Performance

11. TelecommunicationsIndustry Needs • Interoperability • Tackle resistance to change • Cover the areas of more potential to grow. • To have a supportive Regulatory environment • To offer “cost-effective” solutions, in particular, integrated services • Differentiate the offer and the quality depending on the customer. • Control the operative costs and have structures to maximize efficiency. • Capacity of investiment. • To partner with others as required. • To offer: Security, Availability, Reliability

12. To be a key force in the global telecommunications industry to improve the quality of products for customers through the collaborative efforts of service providers and suppliers. quality collaboration

13. Quality Is ... • More than a collection of tools • A state of mind • Linking processes to financial results “You don’t have to do this, survival is not compulsory.” W. Edwards Deming

14. High Business Performance Business Excellence Models Business Results TL9000 Adders ISO 9001 Quality System Maturity Performance Driven How to compare quality models? Industry Synergy Certification Benchmarking Best Practice BEM + BEAM Guidance • European Foundation for Quality Management (EFQM); • Malcom Baldrige • Demming Price Beam: Business Excellence Model Low Conformance Driven Source: QuEST Forum

15. ISO 9001 Fundamentals: • Supplier quality assurance: the driving motivator • Consistency of process and reduction of variety as business objectives for standards. • Documentation of work and training of employees as key delivery methods of consistent performance. • Corrective action and problem solving as approach. Why is not enough? • Weak on quality improvement / costs and customer-supplier relationships • Customer only sees certificate; no levels • Too much supplier discretion • No cost-based metrics / benchmarking • Does not encourage whole-business registrations • ISO 9000 is non-prescriptive

16. What Is TL 9000? • TL 9000is a common set of quality system requirements and measurements designed specifically for the Telecom industry, encompassing ISO 9001 and other best practices • TL 9000 Quality System Requirements • Hardware, Software & Services Best Practices • TL 9000 Quality System Measurements • Well-defined Comparable Measurements

17. Why Baldrige? • Systematic approach to provide an operational definition of the total quality approach to business management. • Demonstrate superior business results over time • Provides validated, leading-edge practices • Defines a model for high-performing businesses • Helps companies enhance competitiveness • Baldrige criteria are non-prescriptive.

18. And, Six Sigma... • Six Sigma is a disciplined, statistically-based approach for improving business performance: removing defects that occur in the products, processes and transactions, decreasing the cost of operations and goods sold, and increasing satisfaction of ultimate consumers. • Six Sigma is highly prescriptive! • Fundamentals: • Business problems require multivariate solutions to eliminate multiple causes and factor interactions. • Cross functional problems tend to be multivariate. • Customer requirements and process performance are the keys for defining sustained performance.

19. Sustain gains and document the process. Identify key business areas of concern. ISO9000/ TL9000 Baldrige Award Six Sigma Eliminate the critical source of variation. Future of Quality? • Future quality management systems will combine the best of all systems: • ISO 9001 as a lower specification limit; • Malcolm Baldrige National Quality Award criteria as a target for achievement; and • Six Sigma as the integrating method.

20. 1992: BA, NYNEX & GTE each adopt Baldrige 1996: GTE Directories wins Malcom Baldrige Award 1997: First Telecom Mega-Merger -- Bell Atlantic & NYNEX form new Bell Atlantic; Adopt Quality Policy based on Baldrige 1997: New Bell Atlantic participates in development of QuEST Forum. First Inaugural meeting held Baltimore, Maryland - 1998 2001: Quality Integration establishes portfolio of Business Improvement Enablers 2000: Bell Atlantic and GTE merge to form Verizon; Quality Policy updated to include ISO 9000 2001: Verizon Corporate Sourcing Launches TL 9000 Registration 2002: Quality Strategy introduced: Registration for TL 9000 begins across organizations. Corporate Sourcing receives Registration Example:Anatomy of the Quality Efforts and changes of Verizon Source: `Verizon, QuEST Forum

21. 1. Leadership Requirements... • Involvement • Communications • Outcome Driven Process Focused • Provide Stability • Reward And Reinforcement • Involvement: • Coach People To Make Their Own Decisions and Achieve Goals • Spend 50% of Time On Top Priority Items In Full View Of Your Team • Communications: • Listen • Be Approachable And Accessible • Broadcast the Agenda • Encourage Debate “In The Room” • Be Enthusiastic

22. Best practices for leadership (1) • Have a constancy of purpose and create a sense of urgency • Use executive meetings • Use quality methods and tools • Visit customers • Ensure promotion criteria reflect quality values • Be open in surfacing problems • Define values that are concise and well-focused • Communicate values often using various media • Ensure senior management demonstrates the quality values

23. Best practices for leadership (2) • Define management roles and responsibilities for quality • Reward management behavior as well as results • Promote cross-functional cooperation • Conduct annual quality planning at every management level • Measure employees’ perceptions of the gap between espoused values and real values

24. 2. Strategic Planning • Select benchmarking priorities according to critical success • Emphasize analysis that correlates market position with the company’s objectives, plans and actions. • Connect analysis to decision making • Focus on changing fundamental business capabilities • Encourage openness and negotiation • Conduct effective reviews

25. 2. Strategic Planning • Develop a systematic process for managing and improving • Select goals that fit the business • Focus on few annual objectives • Ensure that annual objectives are readily measurable • Predict the impact on business results.

26. “Lucent has a responsive, experienced services team with an in-depth knowledge of BT’s technology infrastructure and market.” Meryl Bushell Chief Procurement Officer BT Group "We felt when choosing Lucent we were picking a company that had both a wide range of experience, a quality background, and somebody that we were happy to be able to bring on board…” Brian Burleson Chief Operating Officer Priority Telecom A services company is built on its reputation Example: Market Differentiation of Lucent: Quality &Customer Service Excellence Services Satisfaction (Global) Scale 1-10 7.80 7.51 7.60 7.33 7.32 7.29 7.52 7.56 7.24 7.40 7.12 7.10 7.09 7.37 7.20 7.19 7.00 7.09 7.07 6.80 6.93 6.88 6.60 6.40 3FQ01 4FQ01 1FQ02 2FQ02 3FQ02 4FQ02 1FQ03 2FQ03 Lucent Competitive Average Source: Lucent Customer Sat Survey

27. 3. Customer and market focus (1) • Quality Improvements • Cost Improvements • Data Security • Confidentiality of Data Source (Submitter) • Confidentiality of Data • Security of Data • Integrity of Data • Reliability of Data • Availability of Processed Data (in report form) • Uniform Measures / Standards

28. Customer and market focus (2) • Maintain continuous contact with customers and suppliers through data interchange. • Emphasize key points of competitive differentiation. • Continuously refine information and its infrastructure • Make key information visible • Include all stakeholders • Benchmark companies outside the industry

29. Customer and market focus (3) • Understand what customers want • Invest in systems and logistics to support customer-contact • Empower customer-contact people • Set standards for all aspects of customer interaction • Make it easy for customers to complain and provide quick follow up • Reduce uncertainty and risk

30. Customer and market focus (4) • Correlate customer satisfaction results with internal measures of product and service quality • Draw comparisons with world-class leaders, not just direct competitors • Use every listening post.

31. Network Reliability TheattributethatcorrelatesHIGHESTto CustomerSatisfactionRELIABILITY • Higher Customer Sat • Lower Churn • Higher Sales Network Reliability (NO DOWNTIME)

32. Managing Network Reliability • Determine the Appropriate Measurements – Requirements – Objectives • Establish Data Collection Systems • Analyze Performance • Share the Results to Bring about Awareness • Take Steps Towards Improvement • OSI model - different quality goals distributed between different levels of communications stack: • Physical layer: high S/N ratio – need quality components • Link layer: low bit error rate via encoding • Network layer: quality of service (QoS) guarantees • Transport layer: error detection & recovery

33. Examples:

34. 4. Measurement, analysis and knowledge management (1) • Develop a specific set of criteria for screening out • evidence that the information was built with a plan, rather than being something that just evolved over time • Measures has to be developed for all business drivers and goals. • Consistency of measures across business units. • Include measures of cycle time and productivity or efficiency.

35. Measurement, analysis and knowledge management (2) • Include measures of customer satisfaction, process and output quality. • Conduct research to identify correlations between satisfaction measures and financial performance • Most of the time in review meetings should be spent analyzing results rather than simply reviewing them. • Company should use data to make decisions and solve problems.

36. Motorola’s measurements • Data is categorized as: • Performance (ex. cost of sales, on-time delivery, share of market,annual sales growth) • Operational (ex. cost of quality, customer problem solution and view of quality) • Metrics are shared using Motorola Compass Knowledge Sharing System. Process for benchmarking other companies

37. Plan Act Do • Identify process • Clarify measures • Verify performance • (Re)define process • Report lessons learned • Monitor performance Check • Define improvements • Get comparative data • Set goals • Apply improvements • Verify meets requirements ST procedures • Indicators are selected by time sensitivity • There is only one source of data to avoid errors. • The built-in improvement cycle ensures that the data, and use of information are continuously updated to meet user’s needs. • They hold periodic operating review meetings to draw plans for improvement using Plan-Do-Check-Act.

38. 5. Human resource focus • HR Organization • Matrixed between functional & IPT leads • Functional spheres of expertise mapped to processes; should overlap with others • Communications tools • Human nodes are decision makers in net centric operations • e-mail, PIM collaboration, IM, & other infrastructure • Management & Technical Proficiency • Representation in industrial consortiums, conferences

39. Examples:

40. 6. Process management • Online configuration-controlled process docs • Store and employ best practices • Change board • Continuous improvement • Example: Standards process (RFC, sample implementation, adoption, certification) • Example: CMMI continuous improvement of regulations, standards, deployed hardware, software updates

41. 7. Business results • standard/proprietary format acceptance, adaptation, rejection • market growth / market share • trouble tickets, incompatibility reports • adherence to evolution plan

42. Vision for tomorrow • Few global standards • aligned measurements • industry wide application • allowing benchmarking • capability to tailor to cover specific needs • open • supporting business excellence • Future of Telcom Industry is on Services • A services company is built on its reputation... Service Quality

43. “Top 10” Lessons learned 1. Leadership Commitment - Unshakable commitment is critical to success- Create a vision and values statement 2. Cross-functional teamwork and benefits- Cross-functional teamwork in tackling the white spaces 3. Consistent communications and information- Took great pain to explain - Use organizational primes to close gaps identified through Gap Analysis 4. Pride- A lot of work and a lot of fun

44. “Top 10” Lessons learned 5. Focus on what you do- Organizational readiness must reflect what you actually do otherwise everything will fall apart under intense scrutiny 6. Learning and leveraging best practices- Huge learning opportunity - Develop Training requirements and schedule 7. Focus on linkages- Focus on individual categories is not enough 8. Demonstrated Results- Maturity and performance of deployed processes MUST yield demonstrated results over time

45. “Top 10” Lessons learned 9. Select a total quality management model - Integrate strategic quality goals into the corporate strategic planning process, develop an organization structure to implement it, establish a design team to tailor quality process implementation and prepare a communications plan for quality. 10. Constructive dissatisfaction & continuous improvement - The biggest and most consistent source of improvement is driving an ongoing constructive dissatisfaction of our current performance and a passion for continuous improvement. Benchmark operations against world class quality companies.

46. How to ensure lasting change • A committed unwavering and highly visible leader • a well articulated vision, values and business focus • a strategic emphasis on direction and education • personal responsibility and accountability • an accurate, reliable and timely measurement system • effective means of communication • a systematic way of designing, implementing and leading future changes • a commitment to be persistent and flexible based upon what the environment dictates

47. Links/references • 2004 Baldrige National Quality Program Criteria for Performance Excellence http://baldrige.nist.gov/PDF_files/2004_Business_Criteria.pdf • Zhang, Gunagming; Quality Management in Systems, The Commercial Press, 1998 • Draft ITU-T Recommendation X.805 (Formerly X.css), Security architecture for systems providing end-to-end communications http://www.ietf.org/IESG/LIAISON/itut-sg17-ls-x805-end2end-communications.pdf • QuEST Forum (http://www.questforum.com • AT&T Batting 1000 (ISBN 0-932764-23-1) • Juran, Joseph M.; Blanton, Godfrey A.; Hoogstoel, Robert E.; Schilling, Edward G., Juran’s Quality Handbook, Fifth Edition, McGraw-Hill, 1998.

48. Thanks for the attention Q & A