Competing in the telecommunications industry is increasingly a world game. Rapid scientific advances are increasing communications speed and blurring the distinction between information technologies and communication technologies—computer companies are in the communications business, and telephone companies are selling systems integration. The old-fashioned Phone Company—once a monopoly in the United States and a government ministry elsewhere—is now subject to forces of competition, through changing regulation or privatization. Few industries as old have been transformed so dramatically in such a short time, and further transformations are on the horizon. The U.S. edge in the telecommunications sector may well depend on the skill with which change—human, organizational, and technological—is managed. Bell Atlantic Corporation was formed in 1983, in preparation for the breakup of the Bell System telephone monopoly on January 1, 1984. It is one of seven U.S. regional telecommunications holding companies (sometimes called “baby Bells”) created when AT&T was required by judicial decree to divest its local telephone operations, ushering in the era of greater competition. Bell Atlantic began with a charter to provide local telephone service in six mid-Atlantic states and the District of Columbia. By 1990, Bell Atlantic was introducing new products and services at a rapid clip, starting ventures and forming alliances throughout the world, and pursuing leadership in the information technology industry of the future. The corporation reported 1989 earnings of over $ 1 billion on revenues of $ 11.4 billion, with 76 % of its revenues from its regulated local telephone business. Bell Atlantic’s vision centers around the creation of the “Intelligent Network,” a computer-driven network capable of transmitting audio, video, and data signals through speedy fiber-optic lines. Calling itself the world’s most efficient telephone company, Bell Atlantic today has the lowest costs among the regional firms. It provides telephone service over 17 million access lines—more lines than any other baby Bell. Raymond Smith, 53, became Bell Atlantic’s CEO in January 1989, adding the responsibilities of chairman of the board in July 1989. Earlier in his career, he managed operations, regulatory affairs, engineering, and finance for AT&T, rising to the presidencies of the Pennsylvania and Delaware companies, positions he held when Bell Atlantic was formed. A year after Bell Atlantic’s inception, he moved to the corporate team as vice chairman and chief financial officer (1985 to 1987) and then president and chief operating officer (1988). He worked closely with his predecessor Thomas Bolger to shape the business concept and to eliminate vestiges of the traditionally complacent, monopolistic mind-set known as having “Bell-shaped heads.” Mr. Smith spoke with HBR Editor and Class of 1960 Harvard Business School Professor Rosabeth Moss Kanter about the CEO’s role in transforming a monopolistic, bureaucratic corporation into one that is both efficient and entrepreneurial. HBR: How did you view the state of your business when you became Bell Atlantic’s chief executive? Raymond Smith: I saw that the way we had been managing all of these years was going to have to change. The problem was clear. The intrinsic growth of the core business would not sustain the company in the competitive global economy of the twenty-first century. “The intrinsic growth of the core business would not sustain the company in the competitive global economy of the twenty first century.” The difficulty of addressing our basic business problem was complicated by competition on one side and regulation on the other. Even our 3 % projected growth rate was subject to considerable, well-financed competition in the most profitable lines. As a regulated company, we owed a subsidy to the local telephone rate-payers, so we were limited in what we could earn in the core business. And the legislation and judicial decree that broke up the Bell System restricted the kinds of businesses we could enter. For example, the Cable Act of 1984 kept Bell Atlantic from competing in the cable television business in our region. How did you think the company could increase its rate of growth in revenues and earnings? We identified five initial strategies. Four of them would sound familiar to many businesses: improved efficiency; substantially improved marketing to protect market share; new products and services; and entirely new businesses operating outside of our territory and outside of the United States. The fifth strategy was one we had to work on right away. It involved regulatory reform that we called “incentive regulation” to allow us to benefit from our own initiatives while protecting the telephone rate-payers. We worked intensively with regulators and crafted social contracts with consumer groups and those most affected by telephone rates, such as senior citizens and people with disabilities. With incentive regulation accomplished, we could concentrate on the business growth strategies. But none of our strategies could be achieved with the company culture in place after the breakup. So I had to focus on the culture first. What was wrong with the culture? The company had grown out of a long-standing monopoly, with the centralized organizational structure and culture of a monopoly. In the old Bell System culture, no operating company could introduce a product of its own. The way a small work center in a small town in Pennsylvania would operate was mandated by the central staff. There was no strategic planning, no product development, no long-range planning in the operating companies. It was all centralized at AT&T. What was the consequence of that? The operating companies had an implementation mentality. They did not understand the initiative, innovation, risks, and accountability necessary to meet our business goals. Managers were held accountable for implementation of a process or practice exactly as it was written, not for the end result. Managers simply could not imagine rewriting a process even if they knew a better one. They were maintenance managers, not business managers. When I told those same managers that we wanted improved marketing, new products, and new business, it was a mental shock. We had no experience to draw on. And the ways we were accustomed to operating impeded our ability to achieve our goals. How so? Cross-departmental competition raised costs and prevented new initiatives. This problem was a consequence of our heritage. The old Bell System was like a great football team with the best athletes and the best equipment. Every Saturday morning, we’d run up and down the football field and win 100 to 0 because there was no one on the other side of the line of scrimmage; we were a monopoly. Being human, the football players found their competition inside the team. This sometimes resulted in lowest common denominator solutions and substantial inefficiency. Despite dedication and hard work, it often took more resources to get things done than were ever really needed. “Cross-departmental competition raised costs and prevented new initiatives.” The conventions of behavior grew out of cross-departmental competition and were very parochial. There was no true unifying concept to rally around. I represented my department, you represented your department, and we behaved as if we were opposing lawyers or political opponents. When did you begin to see that this kind of behavior had to change? In the early 1980s, when we began to see real competition. Tom Bolger, my predecessor as CEO, and I agreed that we needed a new culture to support our business strategies. Where did you start? We started by articulating the values of the corporation. I was personally involved, with another officer, in the design of seminars in which 1,400 managers spent half a week to think through our values and state them clearly. At the seminars, a draft was handed out for discussion. These managers were actively engaged in editing the document word by word. New categories were suggested; eventually, “teamwork” became “respect and trust.” I attended virtually every seminar and met with the participants for five or six hours a week. Ultimately, we agreed on five values: integrity, respect and trust, excellence, individual fulfillment, and profitable growth, with a paragraph of description explaining each. What happened when the sessions were completed and the statement of values was published? Not enough! It became very apparent to me and to the managers involved that we needed to move from general statements of values to concrete behaviors and work practices, or what we called the “conventions” of day-to-day business life. So when I became CEO, I announced a ten-year transition to a new way of working together. Every corporation today is full of rhetoric like “it’s time to change” or “we need a new way” or “we want to get rid of bureaucracy.” What did you do to show people that you meant it? The Obligations of Leadership by: Raymond Smith As Bell Atlantic executives, we have the special obligation to provide an ethical leadership that goes beyond our departmental or subsidiary goals. We have the obligation to: Participate in the development of the values, purpose, goals, strategies, and corporate positions of Bell Atlantic and communicate our endorsement to all of our employees. Provide vigorous input into corporate decisions while maintaining a clear focus on Bell Atlantic’s interests. Work diligently to see that decisions important to Bell Atlantic are made in a timely fashion. Dissent or escalate problems or decisions when we believe Bell Atlantic’s interests are not being served but enthusiastically support the final decision once it has been made. Obtain the necessary information to communicate Bell Atlantic’s values, mission, goals, strategies and corporate positions to all of our constituents. Define our roles and manage our organizations in a manner that will support the goals of Bell Atlantic while meeting our local obligations to employees, customers, and communities. Support and encourage local proprietorship, pride, and accountability within the framework of Bell Atlantic’s goals and objectives. Look beyond our groups or companies to encourage teamwork and integration among the Bell Atlantic family of companies. Encourage innovation within our organizations and share the benefits of that innovation with other Bell Atlantic units. Find creative solutions to the inevitable disputes that arise from sharing resources among the various Bell Atlantic groups. Avoid short-term expediencies that will be detrimental to Bell Atlantic’s long-term strategies and objectives. Create an environment for individual initiative, growth, and development. In brief, Bell Atlantic executives are the role models of the corporation, obliged to demonstrate constructive teamwork and be exemplary representatives. We lead the planners, strategists and implementers of the Bell Atlantic plan. With our employees, we show the Bell Atlantic Way. One of the first steps I took was to engage the senior officers in a serious examination of our obligations to the corporation. I personally prepared a list of 12 specific guidelines. In a series of day-long meetings, I suggested to each of the top 50 people in Bell Atlantic that they had broad corporate obligations that went beyond their departmental responsibilities. There were arguments and debates about the obligations, but in the end they stood. It took a year to get the required understanding and commitment. We made quality a corporate imperative in our 1989 strategic plan, designing a Quality Improvement Process using the Baldrige Award criteria and starting our own Quality Institute. We developed an organized program of internal communications for all employees outlining our obligations to each other, the opportunities ahead, and the need and reasons for change. We called this the Bell Atlantic Way. What is the Bell Atlantic Way, and why did you think you needed it? Simply stated, the Bell Atlantic Way is an organized, participative method of working together that allows us to get the most out of our own efforts and maximize our contribution to team goals. The Bell Atlantic Way includes the conventions of daily behavior subscribed to by all of us. In a large business, the most important determinant of success is the effectiveness of millions of day-to-day interactions between human beings. If those contacts are contentious, turf-oriented, and parochial, the company will flounder, bureaucracies will grow, and internal competition will be rampant. But when employees behave in accountable, team-oriented and collegial ways, it dramatically improves group effectiveness. The Bell Atlantic Way isn’t limited to a list of dos and don’ts, but it does seem to boil down to a few specific behaviors. For example, the plaque on my desk says, “Be Here Now.” That just means that it’s important that I listen and be totally involved in any discussion we may have. I’m not looking over my shoulder. I’m not taking phone calls. I’m not doodling or having side conversations while you are making a presentation. Bell Atlantic Reaches Out: Emerging World Alliances North America California Sun Microsystems (1990) workstation support, Eastern regions Illinois RR Donnelley (1988) directory graphics joint venture Massachusetts Digital Equipment Corporation (1990) expert system sales Connecticut Deloitte & Touche (1990) Expert systems development Virginia American Management Systems (1989) systems integration joint venture [Bell Atlantic’s traditional U.S. telephone district = New Jersey, Pennsylvania, Delaware, Maryland, Washington, DC, Virginia, West Virginia] Europe Belgium Bell Atlantic-Europe headquarters (1989) France CGI Informatique (1990) U.S. Local Area Network support with CGI-USA Spain Telefonica (1988) cooperative marketing, installation of operating support system Germany Siemans and IBM (1987) Intelligent Network product/market study Czechoslovakia Czech & Slovak Posts & Telecommunications Ministry and US West (1990) cellular mobile networks and packet data networks Norway Norvans (1990) bid for secondary cellular licenses Italy Olivelti (1990) third party computer maintenance; installation of operating support system Netherlands PTT Telecom (1988) installation of operating support system bid for cellular license Asia Korea Korean Telecommunication Authority (1990) cooperative activities Taiwan Directorate General of Telecommunication (1990) agreement to join in a broad range of activities South Pacific New Zealand Freightways, Fay Richwhite, Ameritech (1990) New Zealand Telecom purchase In such a large corporation, how do you get people to operate by these codes of behavior? With the help of consultants, we designed forums to introduce the Bell Atlantic Way to 20,000 managers. The officer group, roughly 50 people, attended first. Then the officers acted as executives-in-residence at forums for the rest of the managers and supervisors. Most of us have been through the sessions two or three times. We teach the conventions, we don’t just talk about them. Each one is impressed on forum participants in experiential exercises that help us examine ourselves and remind us of our obligations to each other. And our responsibilities don’t stop at the end of the forum. I’m spending a great deal of my own time in the field meeting with employees and talking about the Bell Atlantic Way. Each of the officers has developed departmental programs of reinforcement and support back on the job. Why is it important for you and the other officers to spend scarce executive time on this, involving yourselves in a personal way? We must ourselves model what we are asking others to do. We call this “the shadow of the leader.” We are asking people to change their behavior, to accept a new set of conventions for working together. And I try to provide reinforcement in every way I can. For example, I always wear my Quality button to impress colleagues with my rabid dedication. It serves to remind us that we have a very special obligation to support those who are supporting the corporation. It took about a year for top management to internalize the concepts of this change, to recognize it, and to begin to support it fully. Now changes have started to accelerate. We’re seeing as much change every three months as we used to see in three years. What are some tangible signs of change? The language is changing. The decision process is changing. People are becoming more accountable, more team-oriented, and more effective. For example, our budget process is no longer bitter and contentious. It’s still painful and always difficult, but it’s much less of a hassle and never personal. There has been remarkable improvement among the top 400 people of the company who decide on budgets, projects, priorities, and resource allocation. As corny as it may seem, managers will now open sessions saying, “We’ve got to break the squares today,” referring to one of the Bell Atlantic Way games—meaning we’ve got to compromise here, break out of thinking about only our own territories. We may know that the corporation has to reduce budgets; so we all must give something up for the good of the whole company. In the old culture, if I contributed resources for the good of the corporation, I’d lose the support of my own group. Now it is no longer acceptable for someone to say, “I’ve done my bit. I’ve met my goal. I’ll sit back until you meet yours.” It’s not acceptable to complain to third parties about the boss or the company or some other department. Someone who does that is likely to be asked, “What did they say when you told them?” One manager said that bitch sessions used to be the social event of the week, but now they’re no fun. We expect people to accept accountability for results. How do you get accountability? We had to make sure that our reward system encouraged people to focus on results consistent with larger business goals. The first step was to base compensation on corporate and team results as well as individual results. Today the corporate performance award is a much higher percentage of compensation than it was in the past. It used to be zero—or such a tiny percentage that it never meant anything. Now the award has a long-term as well as a short-term component for a growing percentage of managers, and it is worth more than a few bucks. It’s also flexible; the definition of team can include local groups as well as the whole corporation. A significant factor in an individual’s performance evaluation is whether they have also contributed to the overall team goals. Our team goals include customer service. We look at the customers’ attitudes through telephone surveys—whether or not they feel we are conforming to their requirements 100 % of the time. We must reach a minimum level of performance on customer service measures before there are any corporate incentive awards. Our reward and appraisal system is not perfect, but at least it is getting better. However, even the best evaluation system will not produce the desired behavior unless people understand our business problem and our strategies. Learning the Bell Atlantic Way The learning sessions begin with a discussion of Bell Atlantic’s business situation, but then they depart from tradition. Facilitators guide participants through a set of group exercises that demonstrate the benefits of using the Bell Atlantic principles and help them gain insight into their own attitudes and behaviors. Exercises such as “breaking the squares” and “finding the blue chips” (originated by the Senn-Delaney Leadership Group) have become the basis for Bell Atlantic symbols and language. Breaking the Squares Objective: To demonstrate the importance of compromise and of giving up personal success to help the team achieve a larger goal. The exercise: Teams of six people are given a variety of puzzle parts and instructed to assemble the parts to make six squares so that each team member has one completed square. The parts can be put together in 57 different ways to make 5 squares, but there is only one way to make 6 squares. What happens: Some members of the team can quickly assemble a square while others search for a fit. There is a tendency in those who finish early to hang on to their own squares, saying “I’ve got mine.” But in order for the entire team to meet its goal, people must be willing to break up their finished squares, trading parts with the rest of the team until everyone has a full square. Application on the job: “Breaking the squares” is used as a shorthand expression for the need for each person to break away from advocacy of narrow, parochial interests to see what he or she can contribute to the good of the larger group. To invoke the need to break the squares is to signal an issue demanding compromise. Finding the Blue Chips Objective: To demonstrate the importance of understanding priorities and then focus effort on high-priority tasks. The exercise: Two teams compete, through a designated representative, to pick up poker chips arranged on a table in front of them. There are white chips close to the participants; red and blue chips farther away. The representatives have one minute to pick up chips—the only instruction they are given. At the end of the minute, the team scores are tabulated: white chips are worth 1, red chips 10, and blue chips 1,000. What happens: Since white chips are the most accessible, players tend to gather more white chips than others. When the scoring is announced after the round, participants complain that they were tricked. Then they realize that it was their responsibility to ask about any differences between the chips so that they could assess relative value and set priorities. Application on the job: Blue chips printed with “Bell Atlantic Way” are distributed as reminders. Blue, red, and white are used as shorthand designations of the importance of tasks. If someone is working on a “blue-chip assignment,” others are expected to know that such an activity takes precedence. At planning meetings, people might talk about “focusing on the blue chips.” Do your employees get this basic business information? Now they do, but that was not always the case. As I traveled throughout our company before becoming CEO, I found that very few people really knew what we were trying to do as a company. Sometimes they understood the departmental objectives, and certainly they knew their own objectives, but most people had no idea how to put their day-to-day work life into a corporate context. Actions of the corporation such as the purchase of a new business or the consolidation of an operations center were often a mystery. How did you clear up the mystery? My senior officers and I wrote out what we thought was the basic business problem we were trying to solve. We added the specific strategies to solve it, the departmental goals, and finally the individual objectives that were the employees’ contributions to the goals. Then we shared it with everyone. This was somewhat new. The notion of intellectually engaging all of our employees in the solution of the basic business problem was so different from the past that we had to communicate clearly and personally. So we asked the 400 top people in the company, the key managers and communicators, to understand the overall strategy totally and fully, internalize it, and go forth and share it with others. There was a brief hiccup in the company while this idea was absorbed, but then it took off. You were also giving top managers a big kick in the pants. You were arousing them to action. Shouldn’t they have known the strategy and been communicating it all along? I don’t think of it that way. From my first day on the job, I should have made sure that we were all on the same wavelength. I didn’t realize that everyone wasn’t behaving like a CEO and thinking about the basic corporate problem all day long. When 99 % of someone’s efforts are engaged in getting a departmental job done, the broad goals of the corporation begin to fade if they are not constantly reinforced. As the head coach and teacher, I hadn’t really taught the game plan or the course well enough. So I went on the stump, enlisted the aid of a number of others and spread the word. Now the top 400 certainly know our business problem. They know our purpose, vision, and strategies, and how they fit together. Because the top 400 talk about this, thousands of other Bell Atlantic employees know it too. They can translate their personal and departmental objectives to those of the company. This makes it easier to deal with the tough realities we face. What are the tough realities? We had to eliminate jobs to get our costs in line and reduce wasteful bureaucracy. This is one of the biggest culture shocks we faced. People used to join a Bell System company with the expectation that they’d be taken care of from cradle to grave. We’ve tried to do two things to cushion the blow. The first is to level with people. We tell them about the problems in the United States—the troubled companies and the layoffs, plant closings, and ruined careers that come from complacency. We explain that this is the way life is in a competitive world. Wishful thinking won’t bring back the old world of no change and total security. In U.S. business today, the understanding of the real world is vital to survival. In our industry, for example, we have a choice of having a larger number of low-paid employees who will be subject to layoffs, or we can have a smaller group of well-paid, efficient employees with security obtained through hard work and providing customers with more value than they can get elsewhere. The second thing we do is to try to make stressful changes like downsizing in a participative manner. We eliminated one whole level of management, and we did it by involving the employees in the decision. We had no overall template for the organization, the way the Bell System did in the past. We allowed each organization to eliminate the level it wanted the way it felt was appropriate. After all, almost any organization will succeed if the people feel empowered, are recognized for what they do, and understand the purpose of their jobs. The idea for this initiative came from New Jersey Bell. The officers thought they could run the business more efficiently if they eliminated a management level, but they wanted to leave the choice of which level to the departments. The departments examined the situation and made the right decision. It worked so well, we made this a Bell Atlantic-wide effort. People in jobs that were about to be eliminated participated in the discussions. Naturally, they were not enthusiastic about cutting their own jobs, so in practice the decision was left to the boss. Still, the “soft” aspects of the organizational change—appreciation, recognition, sharing—were given as much importance as the hard side of reducing the head count. Was work eliminated along with the level? The criticism of downsizing in many companies is that the people are gone, but the work remains. Unfortunately, that’s true. We saw no way to eliminate all the work first. We reluctantly concluded that we had to reduce the force and then empower the people to eliminate the rest of the work. On the first day of the new organization, some groups had only eight people to do the work load of ten. But the individual departments were empowered to create the organization they thought would be most efficient. They worked hard to eliminate those activities that were least important. That sort of prioritizing can’t be done by some superstaff. What made you believe that people who had been accustomed to following central mandates would be effective at setting priorities? People were able to do this because of what they learned from the Bell Atlantic Way. An important part of change is moving from a culture in which people are handed procedures to follow mindlessly to one that helps them make tough choices. This is a difficult process and we’re still involved in it. It requires guts and a lot of honest communication. In the seminars, we play a game with poker chips. The blue chips are valuable; the white chips are practically worthless. Participants learn that it is vital to understand priorities and know what those priorities are based on, such as the goals of the corporation and not just the goals of the subgroup. The blue chips mean First Things First—priorities. I carry one in my wallet as a reminder. How do people feel about being involved in a tough restructuring process? In our regular employee survey, workers cited our downsizing as one reason for improved morale. They told us that although resources are very tight, Bell Atlantic is now a much better place to work. They said since some of the disaffected, cynical people have left, there is much less time for bureaucracy. What else are you doing to reduce bureaucracy? We are determined to revolutionize staff support, to convert a bureaucratic roadblock into an entrepreneurial force. “We are determined to revolutionize staff support, to convert a bureaucratic roadblock into an entrepreneurial force.” Large staffs that are not subject to bottom-line pressure tend to grow and produce services that may be neither wanted nor required, and their allegiances generally lean toward their professional positions rather than toward their clients. We had to do something to change this. Three years ago, when I was vice chairman and the staffs reported to me, I decided to place the control of discretionary staff and support expenditures in the hands of those people who were paying for them, that is, the profit centers, the bottom-line groups. We also had to eliminate duplicate staff groups at corporate headquarters and in the operating companies. Our approach was to create small profit centers within the staff groups, called client service groups or CSGs. For example, the training department became the Training and Educational Services CSG. The accounting department formed the Accounting Operations CSG. How do the client service groups work? They sell their services both to the corporate headquarters and to the operating companies. Each year, CSGs develop a budget and an array of products or services based on what Bell Atlantic clients have committed to fund, plus approved amounts for ad hoc or unanticipated business. They have to meet market tests, providing the same value as any outside organization. The CSGs’ total annual expenses must equal anticipated revenues (billing credits) from customers. The goal is to break even. CSGs market their services continuously through items in internal publications, CSG newsletters and brochures, 800-number hotlines, and exhibits at trade shows. The Training and Educational Services CSG publishes a 370-page catalog of offerings. The Information Systems Professional Services CSG heralds new software, programming possibilities, and applications in a regular newsletter. CSG account managers stay in touch with customers to learn about their needs, answer their questions, facilitate provision of services, and forecast demand. Monthly bills from the CSGs to customers itemize specific services and costs in detail, helping clients to understand and control these costs. The profit-center customers have to follow a few simple rules. They must give the client service group an opportunity to bid on a project, formally or informally. If the internal organization wins the bid, they use the internal organization. If an outside company wins, they can use the outside firm. But they cannot create their own media group or their own business research group. We want no internal competition. What happened when you introduced this major structural change? First of all, it was believed that the client service groups wouldn’t work. In some quarters it was considered a dingbat idea that would go away. Still, the first year got off to a pretty good start. The second year brought a budget crunch and nearly destroyed the process. The budgets of the client service groups were cut by the central financial staffs without the clients’ agreement. This is absolutely counter to the rules we devised. It wasn’t done surreptitiously, just out of misunderstanding, but it happened. The new groups called foul, and we did some damage control to restore their budgets. There were also cases in which individual departments tried to form their own support groups under different labels, under different names. In the third year, there is no question that the client service groups are working. What results are you getting? Market pressures are keeping the client service groups at a reasonable level. Expenditures for discretionary staff services are generally flat, while other corporate expenses have gone up. Because of pent-up demand, some CSGs have seen their budgets increase; for example, internal clients wanted more operations support programming. But the Business Research CSG encountered a substantial decline. The most important fact is that spending for discretionary staff support activities is now controlled by the clients. That’s changed the whole nature of staff groups. Not everyone is totally comfortable with this yet; it is much more fun to set a budget based on your professional opinion and let other people pay for it than to compete for resources. The idea is so different that it is very tender and will require careful cultivation. “Spending for discretionary staff support activities is now controlled by the clients.” I see great progress in attitudes and behavior. We put on one of the largest technical expositions in the United States to let our vendors like AT&T, IBM, and Siemens show us their stuff. Last year as I was walking through it, I was astonished to see the Medical CSG selling its services. I turned the corner, and there was another client service group hawking its wares. Both were selling back to their own company as vigorously as any vendor. Because they have to do the work of selling their services to their clients and all the additional accounting, the groups are learning to be business managers. They are slowly becoming more entrepreneurial. Are other people at Bell Atlantic acquiring entrepreneurial skills? We are committed to identifying potential corporate entrepreneurs, training them, and developing their ideas into new businesses. We do this primarily through our Champion program. The Champion program arose from one of our companies, Chesapeake & Potomac Telephone, and we spread it across the whole corporation in 1989. The program provides seed money, guidance, and training to potential entrepreneurs who propose new products and services. People at any level can make proposals. If projects are accepted, their proposers can run them. And they can invest a portion of their wages in the project, in exchange for the prospect of a piece of the action when their product has been marketed. Are you getting results? In the first year, 36 Champions were accepted into the program. In 1989, 39 were added. By late 1990, there were about 33 products and services in the pipeline, several of them near the commercialization stage. Projects include Creative Connections, a line of designer phone jacks; Emerg-Alert, prerecorded emergency messages targeted to latchkey children and the elderly; CommGuard, a package of backup phone services in case of a system breakdown; local usage information services for all lines in a Centrex system; and a do-not-disturb service. Champion’s most noteworthy success is Thinx, new software so innovative that its creator, Jack Coppley, was one of five finalists for Discover magazine’s award honoring engineers and scientists making technological breakthroughs. Thinx is an intelligent graphics program integrating data with images to help users explore relationships visually and apply data or calculations automatically. Jack learned about Champion when he attended a meeting introducing it in 1988. At that time, he was a budget manager for the network services staff, but he was intrigued by the opportunity Champion represented. Some of Jack’s initial ideas were rejected, but his software idea was warmly received. After going through the steps to test the idea and develop the business plan, Jack became head of a 20-member team that worked out software glitches, chose the Thinx name, and designed packaging. The product was unveiled at Comdex, a large trade show, in November 1989. Jack came home with triple the number of customer leads he had anticipated. In September 1990, Thinx hit the market and received rave reviews. Champion has now become an actual revenue source in our strategic planning process. That’s the ultimate testimony of importance in a corporation—a business plan with dollars of investment and targeted returns. In five years, we expect annual revenues of over $ 100 million from Champion projects. My question when I first saw the 1995 projection was, “Is this hope or smoke?” I was told that the figure was conservatively stated! There are potentially thousands of great, innovative ideas in a company our size. The Champion program encourages people to take responsibility for acting on them. How do the internal cultural and operational changes you’ve described translate into advantage in the marketplace? We were always an efficient company, but our new approaches are breaking new ground. Our management process provides another major differentiation factor in world markets. When you match our track record of efficiency and quality service with a state-of-the-art understanding of how to manage large, technologically complex organizations, you’ve got a terrific package. The most efficient communications networks in the world don’t come from just modern switching machines but from computer operating systems and skilled technicians that operate them—all working in an empowered, accountable organization. This forms an excellent launching pad for new businesses. Our systems-integration business, for example, is a natural evolution of that theme. It began as a computer-maintenance business with relatively low margins. But it has evolved into the largest independent field-service business in the country, adding products and services and moving up the value chain to application software, disaster recovery, system operation, consulting, and so on. Championing New Business Ideas Bell Atlantic’s internal enterpreneurship program, Champion, develops profitable new products and services based on employee ideas and efforts. The program encourages employees to develop skills they might not use in their regular jobs, especially entrepreneurial, risk-taking, market-driven behavior. Playing the Champion Game 1. Start Here. Employees submit revenue-producing ideas to the Champion program staff at the Bell Atlantic Intrapreneurship Division in Mayland. They complete a self-selection process to determine their skills, motivation, and enthusiasm. Supervisors, professionals, and middle managers and eligible. 2. Learn and Test. If the ideas are accepted, the newly-minted Champions may devote five hours per week of company time to the project (and any amount of their own time). They are trained in market analysis and entrepreneurial techniques and given budgets of up to $ 1,000 each to test the marketability of their ideas. 3. Pause for Screening. After three months, Champions submit “business opportunity assessments” of their ideas to a committee of selected senior managers. Champions receive awards of up to $ 1,000 if they have done thorough marketing studies. 4. Design It, Try It. If the ideas pass the screening stage, Champions are loanded to the New Business Development Group for six months, where they are trained in how to develop a business case for their proposed products. Then they conduct trails to determine if the proposed products have market potential. 5. Go to Market. If the products are introduced on the market, a business team is formed. Champions may become project managers for up to three years, leaving their previous jobs. 6. Invest and Win. Champions may invest 10 % of their base salaries in the product for three years, receiving 5 % of the product’s net revenue for those years instead of individual performance awards. At the end of this period, Champions move on to other assignments. You have a very strong vision for what the information system linking the world will be in the future. It’s probably the most important vision in our corporation. I think it is the major contribution that Bell Atlantic will make to the United States. We see the Intelligent Network changing not just our company but changing civilization. The Intelligent Network means virtually unlimited memory and logic, instantaneous transport to anywhere in the world, providing intellectual linkages between human beings. These links are equivalent, in my mind, to the revolution of the printing press or perhaps even writing or speech. In the near future, a telephone conversation could start in English at one end and be heard in French or Japanese at the other. Information will eventually go to wherever a person is—at home, at work, in a car, or strolling in the park. What steps are you taking to realize this vision? We are building the Intelligent Network for the service area in the Bell Atlantic regulated territory. We have introduced 30 new technology-based services, more than any other regional company. We are leading in deploying the nervous system of the Intelligent Network, Signaling System 7. We’ve added massive computer capacity and will have a million miles of fiber-optics transport throughout the territory in the next few years. The computers hold extensive database information about customer needs and wants. Fiber optics allow a signal to travel 10,000 times faster than copper wire. By being focused in the transport and use of information, we realized the capabilities of the Intelligent Network. Our densely populated territory allowed us to visualize and build these kinds of links easily. We concluded, perhaps before others, that this network architecture was a revolutionary way to provide intelligence. We coined the term “Intelligent Network” and began to sell it to our counterparts. The Intelligent Network is a new notion that came out of our search for distinction, our search for a future. The whole world has now accepted it. How is Bell Atlantic gaining the resources and capability to realize the Intelligent Network vision worldwide? We recognized very early on that we needed strategic alliances. We’ve formed partnerships with Siemens, IBM, NTI, and others, including big companies, small companies, and government ministries. Partnering is a very serious business in Bell Atlantic. Some companies seek strategic alliances because it seems like a good idea in theory or it looks good to be associated with prestigious partners. But often the overall goal of the alliance is lost in the process. Substantial investments are made by large corporations, but little top management attention is given thereafter. Predictably, the local bureaucracy sets up prickly barriers and mousetraps to prove that the new joint venture partner doesn’t really understand the business and is an enemy, not a friend. We can’t afford to make that mistake because alliances are too vital for our growth plans, especially outside of the United States. The international field almost always calls for the formation of consortia because of the scale of investment or the preference of governments for local participation. We had to have partners in every one of our investments. To make sure we are working with our partners effectively and building on their capabilities, we have had to develop a culture of tolerance, listening, and intellectual curiosity, not intellectual arrogance. How did you develop that culture? Once again, we turned to the Bell Atlantic Way. A year or so ago, we gathered together 75 people involved in our international business, from lawyers to salespeople to the head of the international business unit. We included all the officers and me. We went through experiential training, exploring attitudes, and making behavioral commitments. We identified the real purpose of international expansion, which was not to get things “on the board” or “to score” but to produce solutions to the business problem. We wanted long-term investments in our field that would have acceptable risk profiles and higher growth rates than we had in our core business. We worked on how individuals could commit themselves to assist the new effort, to produce real results, not binders, reports, or smoky projections. In the past, those kinds of understandings were attempted through a memo or at best a brief meeting. No real interaction, no joint understanding, no commitment, no internalization. New activities were launched without any serious preparation. In your quest for a more entrepreneurial culture, have you had any personal setbacks? My biggest personal setback was self-inflicted. In my first year as CEO, I was intensely frustrated because people didn’t immediately understand my notions of empowerment, accountability, and teamwork. I finally learned to be less impatient. How did you come to change your own behavior? A lot of the impatience was coached out of me. One of the aspects of the Bell Atlantic Way is that everyone has an internal coach; mine is Anton Campanella, our president. Somebody said the reason Campy and I got each other as coaches is that no one else wanted us. There is a certain amount of truth to that. Coaching is not seen as the least bit corny or unusual in our company. Once a week one of us will ask, “Can I coach you on something?” In the past, I’ve never been able to do that comfortably. I was never able to do it without it being unnecessarily evasive on the one hand or unnecessarily unpleasant on the other. Now the process is acceptable. It is group sanctioned. It is the way we’ve decided we’re going to work together. I really know we’re doing well when I walk into a room of people and they are discussing a project with tremendous excitement, a project that is going to move our corporation ahead significantly, and I’ve never heard of it. That is a wonderful feeling.
