The Future of RA (?)

I was trying to think about on how RA has moved, changed and re-invented itself in the 13 years I’ve now been involved, in some form or another, with RA. To my view there have been some movements and if I look at those, then perhaps I can have some liberty and crystal ball gaze to the future.

The first trend is the emergence of increasingly powerful software tools to specifically identify, address and help manage revenue assurance. There should be little doubt that this has helped RA investigate new areas of revenue streams for potential loss while also automating much RA activity. This can be very beneficial for those new to RA who can draw on this expertise to learn from the experience of the vendor and deploy an RA capability quickly and usually with some financial benefit. The contrast of this is that the maturity of the tool set exceeds the maturity of the RA people, who may miss valuable steps in understanding the underpinnings of RA work and how their business works. The risk is that this can produce an over reliance on RA to be “solved” by the software tool. The greater risk though is that RA is “defined” by the software tool and its capabilities and roadmap and not by the operator. Missing those early baby steps in RA can lead to a strategy that is aligned solely around the technology deployed and is hence, however well intentioned by the vendor, unbalanced.

This is a similar issue as faced by fraud management. In this case, I have seen many operators who struggle to adapt to new fraud types, until the vendor issues a software update, and will argue passionately that because their system does not detect that type of fraud, then it is not really fraud. When the software update though is deployed, it can be thought of as a fraud again.

The leads to the second trend which is the growing number of organisations undertaking services work in the revenue assurance domain. If RA got into the limelight first during the dot.com and tech busts of the late 90s and early 2000s then we should not be surprised that it has been reinvigorated through the latest GFC. The mantra around billing or charging accurately for every event is particularly powerful when revenue growth is limited. But perhaps these service organisations are also seeking to fill a void in the operators where, due to the reliance on technology as above, the ongoing return on investment from RA is not what was expected. But what might this void look like? Firstly, as RA becomes more operationalised into the business, the RA team comprises a greater number of staff whose role is orientated around the RA tool. I’ve mentioned this above already but it leads to a distancing from the real data and business processes and, more particularly, the need to think and challenge conventional ways becomes reduced. This is not unique to RA of course as increased reliance on computing and the automation they provide, means loss of the real experts in a system or process and replacement with defined work instructions that ensure consistency, if perhaps not always quality. You could speculate that this is how RA was able to come into existence in the first place as that level of complete and detailed knowledge held by system owners across the revenue chain was lost. This loss was not just from automation of course but the increased complexity that the automation enabled. The risk from this is that as RA becomes more automated, the room for thinking disappears as reducing cost becomes an increasingly important corporate objective. And so, I expect that we will start to see and hear of an increasing number of examples of RA missing some significant leakage or undertaking poor quality work. In fact, this trend is already evident as I have had vendors indicate to me that when they have done a proof of concept at an operator, they have found leakage that the incumbent RA system missed. By the same measure, operators have spoken to me about an increasing false positive rate, diminishing value of leakages identified and a greater role to alert a potential issue rather than alert, detail and then help in the resolution of these issues. This can only be due to looking for the same leakage day after day, month after month, rather than expanding thinking to look into areas not yet automated.

The last trend I want to comment on is the move from reactive to proactive RA – however that be chosen to be defined. A quote from Fernando Sales (Gerente General de Inteligencia Comercial, Telefonica Venezuela) in a 2009 Hugh Roberts presentation summed this up for me nicely: “the worst thing that I did was to set our [RA] department up as a profit centre – we are still paying the political price for this in our relationships with other business units, particularly IT”. Perhaps the quote does not align to the reactive-proactive issue but on further inspection it suggests to me that the creation of a function predicated around finding and recovering lost revenue can create a short, and even medium term, star but one that burns twice as bright for half the life. As an operator, leakage should reduce over time. Complexity may increase but so should RA operational efficiencies, new products may be launched but so should more effective detection mechanisms, new business models may be introduced but RA should know their own business and where the risks exist. And so, RA that built its business justification on leakage, will find it contributes diminishing returns and so investment becomes more difficult to justify. Looking forward then, I can’t see how any RA function will continue to justify itself on leakage – the question for each operator is how long. And so the move to the “nirvana” of proactive RA, where RA doesn’t have to find loss, it has to prevent it; and as importantly, the prevention of those losses are recognised as tangible and of business value. This is an issue RA must solve.

Against this back drop, it should hardly be surprising then RA people and vendors have sought to reinvent and legitimise themselves in many different ways. This includes aligning to more established functions, extending its remit beyond traditional switch to bill audits, moving into cost domains, moving from reactive to proactive, supporting transformation efforts and seeking creditability through industry standardisation. This post is not about my view on any of these but it is important to think on the motivation and rationale for any extension beyond traditional RA and understand in what direction, sometimes irreversible, this may take both the individual function and the overall discipline. The risk for RA is that it becomes too tool orientated and too operationalised such that it starts making errors (including errors of omission) while all the time returning less value. RA loses its attention to detail and understanding of the business and so become part of the problem not of the solution. Further the standardisation of RA techniques see the gradual removal of the strategic thinkers from RA teams and to vendors, consultancies, other functions or other industries.

Having forecasted gloom, I believe RA still has the opportunity to add real and lasting value but to do so needs to address the following, and probably within the next 12-24 months:

· Developing software tools that expose data and its treatment to the RA function to ensure the end-to-end process is transparent and understood by RA

· Having the different standards organisations, define RA by the work that needs to be done and not by what the tools that seek to address can do

· Defining “proactive” RA and a value proposition that extends beyond financial measures and ensuring this is communicated and understood at the most senior levels of organisation

· Enhancing the alignment in RA between data integrity activities and process improvement to drive root cause resolution; and using tools and techniques already developed in these areas

· Extension of RA and acceptance of its methodologies across other industries to allow cross industry movement of RA people

· Learning by telco RA of how these challenges are met in other industries and incorporating that into best practices

Mike Willett
Mike Willett

Mike is a Partner at Ernst & Young, Australia. He is responsible for enterprise intelligence, helping clients to improve their management and use of data. He can be contacted at: mike.willett@au.ey.com.

 

Mike was previously the Director for Fraud & Revenue Assurance at Telstra. He started his career at BellSouth (now Vodafone) in New Zealand and then moved to Praesidium Services in the UK. Mike graduated from the University of Auckland in New Zealand with degrees in psychology and marketing.

  • Hear, hear!

  • Alan Gonzaga

    I wondering if we have to move from "reactive" profit or leakage based RA to a proactive" cost based and not leakage based RA …

    – For sure leakage based RA organizations know how to justify their investiment (Just take a look into TMF KPI (RL and PM) Model.

    – But what kind of "peformance indicator" should be used to measure proactive RA organizations?

    … Lets assume here that RL has decreased and know we have to deal more with "SIP" than "FAB" people.

    BR

    Alan.