Looking for stuff, not just fluff

My first big interview as a journalist was for a telecoms magazine in September 2000. The interviewee was Barclay Knapp, the bombastic CEO of cable giant NTL. I was swayed by Knapp’s youthful charm, his informal approach to interview, and his enthusiasm for NTL. I enjoyed listening to one of the oracles of next-generation business.

All pretty sick-making stuff, especially since NTL was already heavily indebted and overexpansion led the company to file for Chapter 11 bankruptcy protection in May 2002. But Knapp’s charisma was one of the reasons why he and other tech-sector ‘personalities’ managed to raise billions of dollars. It’s also a major reason why such businesses failed, according to a book by journalists-cum-consultants Keith Brody and Sacha Dunstan.

In The Great Telecoms Swindle, the authors argue that Knapp was right to expand NTL’s operations, but his overenthusiasm and lack of experience brought the company to its knees. “The irony now is that NTL should have been a can’t-miss proposition,” it reads. “Britain, for one, was a sitting duck for a canny cable operator. But in his desire to sprint before he could crawl … Just doing well, in the face of Knapp’s business plans, would never be doing well enough.”

The authors blame the telco sector’s problems on an approach to business that was driven by image and marketing rather than sound business practice.

“The business leaders in those glory days – between 1998 and 2000 – turned the focus away from fundamentals and created a cult of personality instead … When we think of Orange we think of innovative branding and the enigmatic Hans Snook … Bernie Ebbers’ (CEO of WorldCom) penchant for cowboy boots and his past vocation as a basketball coach were considered newsworthy at the time.”

If you can forgive the ‘I told you so’ tone of the book, there is an important point to be made. The likes of Ebbers, Snook, Sir Christopher Gent (former Vodafone CEO) and Michael Bon (France Telecom’s former chairman) have all left their companies, or are about to leave. So, can telcos or any tech company be credible if they are seen to still have a style-over-substance approach to management?

Knapp has done much to change his media image since NTL came out of Chapter 11 in January 2003, playing down his reputation as a wheeler-dealer. “It’s not about subscribers, it’s about making money,” Knapp told the Financial Times in January. “I never felt comfortable in the deal-making role.”

Instead, Knapp’s NTL will now focus on customer service and returns for shareholders. He needs to create value and present himself as a fundamentals-based businessman if he is to survive.

One company that also changed its tune was NTL’s main UK rival, Telewest. Its charismatic CEO, Adam Singer, was ousted at the behest of shareholders in August 2002 after the company announced losses of £239m.

Tony Grace, Telewest’s MD in charge of corporate business, says that change was inevitable as the markets and opinion turned. “As the industry is changing focus, so must the executive appointments,” he says. “The focus within technology companies is now on cash flow, performance and return on investment. Flamboyance is fine, as long as it’s coupled with leadership skills and the ability to think clearly under pressure. Over the past year, the performance of Telewest has been centred around an omnipresent cost-focus and an open, honest approach with our customers, staff, shareholders and investors.”

It’s fine being a personality in business – just look at Warren Buffett, Berkshire Hathaway’s sage-like chairman. But Brody warns that companies should be aware of the continuing influence of personality and marketing on the tech sector. “You only have to look at how much confusion there is in the telecoms, especially around the question of 3G rollout and services.

As there is no unanimity, the people who take up the column inches in the press are those who can deliver their own message effectively. They are not the ones who know what is going to happen in the industry. No one knows what is going to happen.”

There are still some personalities out there whose cult of personality is based on business success and not just image – Larry Ellison of Oracle, Steve Ballmer and Bill Gates of Microsoft to name three. But investors, analysts and customers should beware that he who shouts loudest in the technology sector is not necessarily right.

The Great Telecoms Swindle, £12.99, John Wiley.