Gaining the Edge with Service
After a seven-year hiatus, Taiwan Mobile has reclaimed the title of benchmark enterprise in the telecom services sector. Amid a sour economy and an industry paradigm shift, which strengths helped it topple Chunghwa Telecom?
Gaining the Edge with ServiceBy Benjamin Chiang
From CommonWealth Magazine (vol. 508 )
In CommonWealth Magazine's Most Admired Company Survey 2012, Taiwan Mobile edged out Chunghwa Telecom as the leading telecom services provider. Taiwan Mobile won the crown because it scored much higher than its industry peers with regard to such survey indicators as foresight, innovative capability, customer orientation, and operational performance.
With an EPS of NT$4.16 for the first eight months of this year, Taiwan Mobile is Taiwan's most profitable mobile phone operator.
Value through Differentiation
In economically troubled times the consumer market is getting even more polarized.
"Consumers are attaching more importance to value and innovation," explains Cliff Lai, co-president of Taiwan Mobile. "High-end products give you the most in terms of innovation, while low-end products give you more value."
Over the past two years the telecom industry has lived through unprecedentedly merciless competition as the sector has undergone a paradigm shift. With increasing smart phone penetration, revenue from conventional voice transmission keeps shrinking. Free apps such as Line, which allows free voice calls and free messages via the Internet, further eat away at mobile carriers' SMS text messaging revenue. At the same time consumers keep complaining about the slow speed of service in the mobile Web, which forces telecom companies to make massive investments to expand 3G network facilities.
As number two among Taiwan's three major mobile operators, Taiwan Mobile picked value and innovation as powerful weapons to pull away from its rivals. Lai is preparing to stage a revolution in customer experience by simultaneously revamping the company's outlets and boosting the ratio of directly operated stores.
On Guanqian Road near the Taipei Railway Station, Lai is currently creating a two-story "sixth generation" flagship store that will offer more space for interactive experiences. "Our costs for interior decoration per store have increased by more than NT$600,000," he reveals.
Service quality has become the decisive factor in attracting and retaining customers now that smart phones and tablet computers are in virtually everyone's hands.
In their early stage, Taiwan's telecom companies relied heavily on franchises to sell handsets and mobile phone services.
"But smart phone settings and web connection services are very complicated, similar to a computer, so there is a need for more frontline sales personnel giving speedy service," observes Taiwan Mobile vice president Wang Yu-chen.
Franchise owners are not necessarily ready to go along with the company's emphasis on customer services. Only directly operated stores guarantee that the training and service quality that company headquarters wants are actually implemented.
Taiwan Mobile emerged as a winner because it was fast to identify changing consumer trends, and to react to them.
In early 2009 Taiwan Mobile bounded ahead by massively expanding its directly operated stores, building customer loyalty in the process. "We began to build a directly operated store system more than a year and a half earlier than our industry peers," Wang points out.
This year the company has accelerated its expansion of directly operated stores.
"Right now, directly operated stores account for 40 percent, and that figure will go up to 50 percent within one year. Taiwan's largest chain store operator, President Chain Store Corporation, doesn't even have such a high ratio of directly operated stores," Lai notes proudly.
Sales personnel at directly operated stores have undergone rigorous training at company headquarters. As a result, Taiwan Mobile is able to raise the quality of its telecom services. When consumers, often overwhelmed by the complexity of their smart mobile devices, run into problems, they usually don't consult a manual or call a service hotline.
"They won't call the handset maker's customer service, but will take the phone to our stores. We have become the service frontline," remarks Lai.
Taiwan Mobile's customer service center has built a database containing technical information for more than 100 handset models running various operating systems including Apple and Android. Service staff can readily draw on this resource to help customers fix all kinds of glitches and solve menu navigation problems.
Improved service quality is also reflected in better operational performance.
In the first half of this year 7.4 out of 10 mobile phones sold by Taiwan Mobile were smart phones. This compares to a 6.7 out of 10 ratio for Chunghwa Telecom. The average revenue per user (ARPU) for Taiwan Mobile smart phones stands at NT$1,483 per month, almost NT$200 more than at Chunghwa Telecom.
Efficient Expansion Strategy
During economic downturns, companies must be even more accurate in planning and executing their business strategy to prevent wasting resources.
"Taiwan Mobile's organizational operations are highly efficient and President Lai's power of execution is strong. He is the core figure that links everything from product planning to end user sales," says Jack Tong, North Asia-Pacific Region president at smart phone maker HTC.
Mobile carriers need to put at least several dozen smart phone models on the market per year. Against this backdrop, a key factor for generating profits is accurately identifying star products, quickly selling them and grabbing market share.
"Taiwan Mobile's sales and finance units are very strong at seamlessly collaborating in battle, and they are very fast," is how the vice president of a foreign handset manufacturer describes the situation. In contrast, Chunghwa Telecom has a cumbersome decision-making process that requires many seals of approval before a decision can be made.
This year the HTC J handset became the No. 1 smart phone in Japan in terms of customer satisfaction. "In early August we gave Taiwan Mobile a proposal, and Cliff Lai immediately dispatched staff to Japan to gather market information on how to market the phone. Within a month it went on sale island-wide, and sold in the tens of thousands," HTC's Tong recalls with a laugh. Taiwan Mobile is able to get everything done at one go – from product selection, product positioning, price support and marketing, to boosting sales volume at retail outlets, Tong says.
The economic prospects for next year are unclear. "Making a decision to do or not to do something depends on how accurately you predict the future direction," posits Lai. Taiwan Mobile did not blindly decide to go for sales volume, Lai says, but opted for pursuing better value and innovation for its customers in order to extricate itself from the economic doldrums.
Translated from the Chinese by Susanne Ganz
Chairman: Richard Tsai
Co-President: Cliff Lai
2011 Revenue: NT$81.3 billion
2011 EPS: NT$4.7