MGT 875 Change Management Paper

Xiao Geng A44302296

Contents
MGT 875 Change Management Paper .................................................................. 1 Terminology ............................................................................................................ 2 MGT 875 Change Management Midterm...................................................................... 5 1. (1) (2) i. ii. iii. 2. (1) (2) i. ii. 3. The Company and SWOT Analysis .................................................................... 5 The Company.................................................................................................... 5 SWOT analysis .................................................................................................. 7 Strength:........................................................................................................... 8 Weaknesses: ..................................................................................................... 9 Opportunities and Threats ............................................................................. 10 Analysis basing on Collins prospective ........................................................... 11 Success and Hubris ......................................................................................... 11 Flywheel and Silver Bullet .............................................................................. 13 Flywheel ......................................................................................................... 13 Silver Bullet..................................................................................................... 14 Analysis basing on Kotter ............................................................................... 18

MGT 875 Change Management Final .......................................................................... 22 4. (1) (2) (3) (4) 5. (1) (2) (3) 6. Structure and Changeability .......................................................................... 22 Structure......................................................................................................... 22 The Environment ............................................................................................ 26 Non-External Focused .................................................................................... 28 Changeability ................................................................................................. 30 Human Capital ............................................................................................... 34 HR System....................................................................................................... 34 Reward and Promotion System ...................................................................... 36 Human Capital ............................................................................................... 39 B2Chang Organization ................................................................................... 41

Terminology
1. 2G: second-generation wireless telephone technology 2. 3G: third-generation wireless telephone technology 3. Traditional Business: the fixed phone and related Internet business, wireline based 4. Mobile Business: the mobile phone and related wireless business, wireless based 5. GSM: one interface standard in 2G era, most widely used worldwide 6. CDMA: one interface standard in 2G era 7. WCDMA: one interface standard in 3G era, GSM based 8. CDMA2000: one interface standard in 3G era, CDMA based 9. TD-SCDMA: one interface standard in 3G era, pursued by Chinese government 10. TD-LTE: a testing 4G network, TD-SCDMA based 11. Personal Terminal: products facing end user, like PC and cellphone 12. Web2.0: the next generation of Internet emphasizing on information sharing, users interactive, Ex: Facebook, iStore, YouTube and P2P file sharing protocol 13. Cloud Time: more Internet service basing by high speed data exchange, more personal terminal functions will be transferred into online services, which requiring an higher level of network capacity 14. SP: service provider, the rising power in 3G and Web2.0 era 15. CP: content provider, the rising power in 3G and Web2.0 era 16. iOS: iPhone Operation System
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17. PON: Passive Optical Network, enable a single optical fiber to serve multiple premises reduces the amount of fiber and central office equipment required compared with the traditional point to point architectures 18. DPI: Deep Packet Inspection, a form of computer network packet filtering, enables advanced network management, user service, and security functions as well as internet data mining, eavesdropping, and censorship.

The names of companies in this article are fictitious, while everything else remains absolutely factual.

MGT 875 Change Management Midterm

1. The Company and SWOT Analysis (1) The Company
China Antonius is one of three telecommunication companies in China with a history over 100 years and experienced several times reorganization. The predecessor, China Caesar, could be tracked back to late nineteen century, which was telecommunication branch of State Post Bureau till 1994. After that, China Caesar became an enterprise independent from government. At the same time, the former China Antonius was established. In 1999, China Caesar was divided into China Caesar (only ran traditional business) and China Augustus (only ran mobile phone business). In 2002, China Caesar was, again, reorganized (divided and merged) into China Caesar (ran business in south China) and China Caesarion (ran business in north China).

Before this reorganization, China Caesar had established an empire in this industry and most admired company in China. But, after that, China Augustus replaced its emperor position taking the speedy development of mobile phone industry until now. And China Caesar began to fall, due to the decline of traditional business and forced restructure.

In 2008, the entire industry experienced a momentous restructuring, which modeled the situation today. All the existed four main operators and other small
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operators were merged and divided into three companies. China Antonius GSM mobile phone business units combined with China Caesarion formed todays the China Antonius in 2009. Hence, after the restructuring, there are totally three telecommunication companies in China, which are China Augustus, China Caesar and China Antonius (Exhibit 1), running the whole business of this industry, including traditional business, voice call, texting, 3G network service and Internet access etc. Exhibit 1:

1. Traditional business 2. Mobile business

One thing must be emphasized is each reorganization was dominated by the Ministry of Industry and Information Technology and its formers, not any of these companies. This kind of strong government interference along with the government bureau predecessor modeled the distinguishing features of the whole Chinese telecommunication industry.
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First, the business model, culture and strategy of these three companies were highly similar, inheriting from the same predecessor. Therefore, the management of the entire industry still cannot get rid of the traditional bureaucratic hierarchical government structure, thought the companies began to set up the modern enterprise system. For example, the CEO of each company is at the level of governor of province.

Second, all the three companies are still state-owned enterprises, lacking of independency in momentous decision makings, such as potential acquisition between each other and the interface standards carried by these three companies (will be illustrated below).

Finally, although there are competitions between these three companies, they are still monopolizing the entire industry. More specifically, the government ruled the three companies must use different air interface standards in both 2G and 3G network. For 2G network, China Augustus and China Antonius use GSM standard, the most widely used standard in the world, however, China Caesar uses CDMA. For 3G network, China Augustus can only use TD-SCDMA, while China Caesar implements CDMA2000, and China Antonius carries out W-CDMA. Hence, for the customer, as well as supplier, each company monopolizes its own technique-based segment. Also government inference kills the probability of new entrants, which further enhances this monopolizing situation.

(2) SWOT analysis

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The restructuring was taken during the telecommunication industry shifting from 2G era to 3G era. China Caesar and China Antonius want to catch this star to challenge China Augustuss domination, while China Augustus will not allow them to touch its forbidden area. For China Antonius, there are both positive and negative factors lying both inside and outside the company. i. Strength: The most magnificent strength of China Antonius in its directors eyes comes from its exclusive W-CDMA standard. Due to the exclusive, China Antonius is already in the monopolizing position through the whole supply chain basing on this standard. On the one hand, it has unchallenged buyer power to its suppliers, such as Ericsson, Siemens, Nokia, ZTE and Huawei, etc. On the other hand, China Antonius needs not to worry other new W-CDMA competitors, and charges a relative high price from customer to maximize the profit. (China Augustus and China Caesar are doing the same thing as well). From the technology perspective, the W-CDMA is the most mature 3G network in the world. It is the fastest one which enables the largest amount of 3G services. Also, W-CDMA updates directly from GMS standard, with an over 95% domestic coverage and the lowest transformation cost, providing highest service quality. Also, China Antonius cooperates with 169 operators from 87 nations, which covering an over 70% network worldwide. This cooperation will give China Antonius superiority in global business.

Another significant strength is the traditional business units. The traditional business is based on the fixed phone and related Internet business. Due to the feature of fixed phone, the initial infrastructure investment is huge and costs time. After over 100 years development, the former China Caesar has built up a fixed phone network through entire China. After the reorganizations, China Antonius inherited all network in north China, with a natural superiority which the other two cannot match. Meanwhile, Internet is running into the Cloud Time. As a result, traditional business will be re-invigorated again. ii. Weaknesses: Although China Antonius has the strengths above, it is the weakest one among the three companies currently (Exhibit 2) due to the historical reason, whatever in the customer base or core business geographic array. (China Augustus inherited the largest customer base from former China Augustus and China Caesar occupies the richest provinces of China as its core business area from the reorganization in 2002.) Exhibit 2:
Company1,2,3 Subscribers (Billion) 3G Subscribers (Million) 3G Subscribers Growth Rate (%) 3G Subscribers Growth (Million) Total Revenue (Billion $) Total Revenue China Augustus 0.61 3.505 69.3% 1.435 39.20 8.8%
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China Caesar 0.11 2.149 74.9% 0.920 18.84 11.7%

China Antonius 0.18 2.394 70.3% 0.988 16.38 23.1%

Growth Rate (%) ARPU4 ($) Net Profit (Billion $) Net Profit Growth Rate (%) 10.97 9.61 6.3% 8.18 1.52 10.2% 7.34 0.40 -5.6%

1. The data is from the interim reports, 2011. 2. The exchange rate from US dollar to Chinese Yuan is $1=6.38 3. The growth and growth rate are calculated by (data in interim reports, 2011- data in annual reports, 2010)/ data in annual reports, 2010 4. ARPU: Average Revenue Per User

From the table we can clearly see each company was at an amazing growth rate, especially in 3G related metrics. China Augustus had an overwhelming leadership among all threes currently and in the foreseeable future, with the largest customer base in the world, and highest revenue and profitability. Moreover, since TD-SCDMA was the standard launching by Chinese government, China Augustus will have more political superiority in the future. Meanwhile, basing on geographic strength, China Caesar also had a higher revenue and ARPU. And the economics of scale began to drive profit growing at the fastest speed. China Antonius did show a stronger trend with a 23.1% revenue growth rate, which shocked everybody. But, it also performed worst at ARPU and had an only negative profit growth rate. iii. Opportunities and Threats There are two great opportunities presented in front of China Antonius. The first and foremost, in directors eyes is the shift from 2G to 3G. The other opportunity is Cloud Time, rooted in traditional Internet business (the first and foremost in my eyes). Due to Web2.0 and Cloud computing, the requirement of PC is reducing, while asking a
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higher level of network capacity to transfer the larger and larger data packages. Also, because of the infrastructure superiority, this opportunity is more exclusive for China Antonius than 3G, especially in north China.

The essential of these two opportunities is the same. The operator of today and tomorrow is no longer the service provider (SP), but the link between service providers, content providers (CP) and customer. These role shifts requires operators to lead the change, not only establish partnerships, but built the stages, manage the communities and make the game rules.

Yet, both Cloud Time and 3G are a great opportunity as well as threat to China Antonius. Once China Antonius cannot build a flywheel as a foundation to support the development in new era, there will be no other comparable opportunities in the foreseeable future. And we already saw the fierce race among the three companies in Exhibit 2.

2. Analysis basing on Collins prospective (1) Success and Hubris

The current China Antonius is far from success and everyone in the company knows that clearly. However, the urgency is wasted by the leadership, who failed to solve the discord inside.

There are two main forces in China Antonius currently because of the reorganizations. One group is the staffs from former China Antonius, called Antonius group. The other
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is staffs experienced China Caesar Empire, who have served this company when it was still a part of State Post Bureau, so called Caesar group. Since the leadership failed to deal with conflicts between the two groups, these problems are the biggest issue inside China Antonius.

Because the new company is called China Antonius, and Antonius group does have higher average executive level than the Caesar group, they have a sense of superiority, thinking they are the first class employee. However, since the former China Antonius was never a relevant company from establishment, the Antonius group of people wants to be relevant once, and value this unique opportunity so much. Hence, there is urgency among this group.

Caesar group experienced each forced restructure as victim (became an added part of the new titled Caesarion and Antonius). They are lack of belongingness. Moreover, they also feel they can never get the deserved promotions (this is the fact, despite not that severe as they think). Hence, this group feels panic, concerning about their positions, incomes and worry about the next big change. However, because they experienced China Caesar Empire, this group also has a strong pride inside, and wants to rebuild the glorious time via this opportunity. Therefore, the panic with the pride drives them a fierce urgency to change this situation.

In sum, none of those groups has hubris as Collins said due to the current condition. At least, none one wants to keep the bronze metal forever in three players.

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(2) Flywheel and Silver Bullet

From the statements before, we can know that even there was a flywheel once, it has gone with the three reorganizations within 10 years. And China Antonius is catching the 3G silver bullet. i. Flywheel The vision statement of China Antonius is Innovation & Service Leader for Information Life, which finalized only one and half years ago by a consulting company. Unfortunately, the full vision does a hundreds page book delivered to every office of China Antonius as our textbooks said. From the finalization till now, there were only no more than five meetings to communicate that vision among middle and higher level managers and only one meeting to state it to basic level employees. The average communication time of the each staff in the past one and half year was lower than six hours. Therefore, we can reasonable believe vision is never rooted into staffs daily work, and failed to deal with the inside discord.

Besides the failed of vision, there is also no long term strategy as well. China Antonius only makes a Three-Years Moving Plan yearly. Each year, it makes a plan for the next three years, details the plan of following year and sets up the general goals for the second and third year. In the following year, the company will, first implement the detailed plan made in last year, then, make a new Three-Years moving plan, which again, detailed the plan for the following year according to the general second year goals made in the former one. Therefore, the Three-Years moving plan is
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actually a one-year based plan. In this plan, China Antonius forecasts the future development of both entire industry and company. Then, it mainly decides the goal of network coverage, and ways of updating techniques, improving service and keeping innovation for each segment. Then, each branch around China makes its own plan by multiplying the total number from the Three-Years Moving Plan with its own weight. Again, every department does the same calculation to make its yearly plan. Hence, there may not be over interdependency, since every level department depends on its weight mainly, which in turn, depends on the plan.

Therefore, there are only tactics and goals in marketing, in sales, in procurement, in partnership and other aspects, but never general long term strategy, to picture the roadmap of the next decade, or the following thirty years, to provide a path to realize the key words in vision statement. Thus, the vision is simplified to growth only, and direction of growth is randomness.

Because of the randomness, China Antonius actually did not do a good job in growth either. 70.3% growth rate of 3G user seems fairly good, but the growth rate of entire 3G market in first half 2011 was 71.1%. China Antonius was still behind the market growth. And do not forget, it was the only company losing profit. Hence, it is hardly to say China Antonius is really growing, and no to mention growing faster than others. ii. Silver Bullet

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The decline in profit was also partly due to catch the 3G silver bullets with no clearly strategy.

In 2008, China Antonius set up a goal of 3G network coverage, which must be finished at the end of 2010. Each branch had its own weight to complete the costly arms race of coverage. Beijing is the one of the two most important battle fields in China for every company. And to China Antonius, Beijing is also the forbidden city, where could not afford to lose. In the Beijing branch, the commander of this

battle was from Caesar group, and he built up a coalition with members mainly from this group. If we view this battle as a short-term win in a long run, it fulfilled the first five steps as Kotter said in the book. The leader was charismatic enough, the vision was straightforward (to live or to die), the strategy was clear, the communication was sufficient, with no obstacles from upper and supports from lower. Those conditions with urgency of Caesar group helped Beijing branch finished the impossible mission and stocked the entire company. At last, China Antonius finished the goal of the arms race nationwide.

Nevertheless, this race was a typical example of catching silver bullet. The goal of coverage came not from the marketing prediction (but there was marketing forecasting), came not from the general strategy array, came not from sales force capacity, but from how the coverage rate closes to 100%. As a result, the financial

reports in those years were even more terrible than this first half. The cost of procurement, installment, maintenance and relevant sales force reinforce were
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amazing. The profit was negative, and the newly established capacity cannot be fully used at least in the following 5 years. China Antonius won nothing but the percentage at the reports.

When China Antonius was busy in catching up the silver bullet, it lost the timing to build the flywheel.

First, the discord above was still tripping the company.

Second, China Antonius did not fulfill the vision which to be the Innovation & Service Leader for Information Life. It does not mean China Antonius did nothing. Actually, it did a lot. In mobile business units, China Antonius built the partnerships

with retailers, terminal manufactures, SPs and CPs to set up channels and attract customers. In traditional business units, China Antonius allied with leaders in banking, insurance, securities, automotive and airlines, as well as government branch to build up electronic office platforms. As to the Innovation, China Antonius is mainly working on iOS applications, mobile operation system and IPTV.

But those actions are only means a lot when China Antonius puts them into a general strategy, utilizes them as steps to realize the vision and sets them as a foundation of core competency to nourish the long-term growth. The vision statement and related roadmap never appeared in the directors report and the whole financial report.

At the same, there are strong evidences showing the other two competitors are building their flywheels. In their directors statements, they pointed out their future
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directions and the roadmaps clearly, aim to differentiate themselves from each other basing on their unique strengths.

The industry leader, China Augustus started to build the Chinese application store, Mobile Market, from 2009. Due to June 30th, Mobile Market has 86 million registered customers, 0.89 million active developers and 260 million application downloads only in the first half, 2011. China Augustus has already created a Chinese App store. Also in 2009, it launched Wireless City campaign to take the leadership of Internet for Things. Till now, over 130 cities in 25 provinces have signed cooperation agreements hosting government web portals, energy management programs, intelligent traffic control and digital communities via its network. Meanwhile, China Augustus dedicated in innovation stably to set up an international standard in 4G era and support its Wireless City. It was testing its TD-LTE 4G network in 6 cities around China and introduced Global TD-LTE Initiative allying with 24 mobile operators worldwide to take forward the global commercialization of TD-LTE.

Unlike China Augustus, China Caesar rooted its future on its traditional business. Its strategic positioning is clearly, to be a LEADER of the intelligent pipeline, a PROVIDER of an integrated platform and a PARTICIPANT in content and application development. The first positioning is entirely traditional based, while the others are more wireless based. To be a provider and participant, China Caesar just develops partnerships. But to be a leader, China Caesar knew it need to build the flywheel by updating its traditional fixed-line network basing on PON technology. This updating
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can provide sufficient capacity to Wi-Fi network, IPTV business and DPI technology. And these actions aimed at its Broadband China, Fiber Cities project (similar to China Augustuss project, but fixed based and more resident-oriented). In the IPTV business, China Caesar has already supported its main suppliers became the top companies in this industry, while owns the customers more than 10 times than China Antonius. One Chinese DirecTV is rising.

After the comparison, we can see the essential of each company is always the same, which is update capacity, enrich the service. But China Augustus and China Caesar are building the exclusive flywheels to realize it, while China Antonius is doing it by catching the silver bullet. And none of its works mentioned above is exclusive from the others. Maybe the only exception is the electronic office platforms, which comes not from the silver bullet.

3. Analysis basing on Kotter

(The questions which already illustrated above will not be contained in this section.)

Although China Antonius kept reorganizations in the recent decade, it still does not have any change experience as we defined. The true change should be inner driven aim to make a significant improvement, by a long time hard working, and rooted in the spirit of the company once succeeded. From this prospective, none of the three companies has this kind of change. Also, from the statements above, we can assert China Antonius is not a 21st century, and may be a company of middle 20th century.

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However, for China Antonius, current situation does make the change easier. First, the urgency level is high. Second, the employees are used to changes, and want to change this condition. Now, China Antonius has a vision, begins to find the path to build flywheel, and starts to learn how to differentiate itself from others basing on its own strength. However, the only resistance, so far, slowing down this process is the leadership, since it failed to implement the works below.

First, the leadership should build trust between the two groups of people via vision communication. During communication, leadership can set up the scent of safety and belongingness to Caesar Group. Also, it must implement a fair HR system to put the right people in right places. If necessary, the leaders should convince Antonius group to make some sacrifices, when there are right people from both groups to build the trust.

Second, the leadership should make a clear positioning basing on current situation, like China Caesar did. Do not dream to challenge China Augustus in decades, do not be that confident on the traditional business, do not stare at the star while starving the cash cow. The leaders need to know the paths and schedule the process to be Innovation, Service and Leader in its vision, need to know what China Antoniuss flywheel is and how to build it. Then, let the staffs fully accept them.

Third, the leadership needs to design the proper metrics set (Exhibit 3) to make sure the vision is translated correctly into feasible daily duties. The metrics set can help China Antonius recognizes and fills the gaps between vision and employees
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understanding, as well as diagnoses and cures mistakes in executions early. As a result, China Antonius can measure itself by health, not growth. Exhibit 31

1. This Exhibit is quoted from Using the Balanced Scorecard as a Strategic Management System, By Robert S. Kaplan and David P. Norton, Harvard Business Review, 2007.

Forth, the leadership must restructure the company and set up a structure upon functions, not on geographic. They should learn what the customer-oriented company is and how to build the channels to the market.

Finally, the leadership should retrain their people how to be a professional employee not a government officer, how to development their own metrics along with the companys, how to executive the vision and build the flywheel by daily works, and so on.

From the arms race case, we can see if there is a powerful leadership, the staffs are willing to fright. However, only the leadership implements the steps above, can China
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Antonius begins to build the flywheel to develop the true core competency, which makes it unique in the industry. If the leadership fails to do that, all China Antonius needs to do is waiting another reorganization.

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MGT 875 Change Management Final

4. Structure and Changeability (1) Structure
Since the State Post Bureau predecessor and state-owned fact, the current structure of China Antonius is highly bureaucratic, which just a copy of Bureaus of Chinese government with some business titles, like president or director. The chairmen of the board from all three operators have the same executive level with the vice ministers in government and the next desired promotion for them is the minister of Ministry of Industry and Information Technology. From this prospective, these three operators are still not independent enterprises.

In China Antonius, there are total nine levels from chairman to the lowest salaried employee. The chairman has the single highest level in the company followed by eight second high level presidents (one president, six vice presidents and one Chinese Communist Party representative) (Exhibit 4). Those nine people construct the board of China Antonius. However, unlike the board of most companies which is full of C-titled officers, there is only one Chief Accountant, in the board. The rest members have no functional titles, such as COO, CFO or CMO. Also, Chinese state-owned companies have a unique feature, so shared by China Antonius as well, which every member in the board must be leader of Chinese Communist Party within that company with a Party title and there must be one representative in the board,

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who only deals with Party affairs (not business, will be discussed later). In China Antonius, this person is the Head of Disciplinary Inspection Team of Party Leadership Group in this case, as Exhibit 4 shows.

Exhibit 4: the Board

Under the board, China Antonius consisted by four parts headquarters, local branches, Network Company and subsidiaries (Exhibit 4). Headquarters and local branches are the main part of China Antonius. It is dealing with the core businesses along with Network Company; while subsidiaries are the supports of the core businesses. In headquarters, there are 22 functional departments dealing with the core businesses and a Communist Party Office works on the party affairs only, which is the symbol of Chinese Characteristics bureaucracy. In China, this kind of Party office is attached at each state-owned organization, such as bureau, military, school and company. Since this office will never deal with core businesses of that organization, it is actually an independent part from the organization and an exclusive channel to create the Party representative in the board. Hence, this kind of
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office just likes Gestapo, monitoring the state-owned asset and inculcating the newly announced spirit, so called Party affair. Although this office will never support the capabilities and competencies, as a result, never create value, the salary of its staffs is afforded fully by the organization. To be mentioned, the communication of Part affair is the most sufficient one all the time. Some highest spirit will be learnt semester by semester for years. If China Antonius could communicate its vision and decision making like that, the situation would be quite different today.

Exhibit 5: Structure of China Antonius

In other 22 departments, the structure is quite hierarchical. China Antonius uses 7-levels system to rank the employees throughout the company. For the departments
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in headquarters, the director of each one is level 1 and vice directors are level 1(minus). After them are advanced managers and vice advanced managers whose are level 2 and level 2-. Then, comes managers and vice managers at level 3 and level 3-. At the bottom are staffs without level.

The local branches across China are only the smaller copies of headquarters with the exact same departments. Chairman, however, is level 1 and vice presidents are level 1-. The levels of the heads of departments are level 2 for the directors, and level 2for the vice directors. There is only one manager level titled by level 3 for the manager and level 3- for the vice manager. At the bottom are employees without level.

No matter headquarters or branches, the essential of this structure is vertical integration. One big umbrella covers many smaller umbrellas while covered by the bigger umbrella. In the board, chairman is the single biggest umbrella with some vice presidents taking in charge of assigned departments. Then, below each vice president, directors of departments become the biggest umbrellas and so on, so forth. Inside this structure, orders calculated from the Three-Years Moving Plan flow down from the top to bottom, and executive reports flow back. Each employee is responsible to the direct leader only and cooperates with the few people one level higher or lower.

For Network Company, its responsibility is building and maintaining the wireless and traditional networks of China Antonius with headquarters and 32 local branches
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(Exhibit 6). Although it deals with the core business, it was newly established in the late 2010, which integrated the related departments from headquarters and braches together. Hence, it functions exactly the same as before with the same 7-levels system, except for the self-owned finance and coordination departments. Therefore, no matter Network Company or main part, the functions are all the same, which is the departments in headquarters make plans for departments in branches to execute. Hence, all the departments can be a company like Network Company, if they have independent finance.

Exhibit 6:

(2) The Environment

Since the change is happening today, the future is not just predictable, is visible. From life cycle perspective1, telecommunication industry is during the shift from growth stage to maturity stage. In the past, emerging stage, when telephone first went into household, connecting the two links by operators manually in telephone

Life cycle: Every industry migrates through up to four development stages: emerging, growth, maturity, and

declining. 26

exchange station was the only service. That is why telecommunication companies called operator today. At that time, operators were the service. Following the technology improvement, the manual service disappeared, while voice call and texting became the overwhelming service and income resource. Meanwhile, traditional and wireless internet access stared to change the world forever. Therefore, the market shifted into growth stage. As the result, operators needed to transfer from a service provider to channel provider linking customers with SPs and CPs.

Now, this industry is during the shift from end of growth stage to maturity stage. Since the raising of 3G and Cloud Time, in the future, operator will finish this transformation and be a platform provider, updated from channel provider, offer services to both end user and SPs/CPs in double directions. As platform provider, the operator will become a government, making laws and getting the money mainly by taxation from companies and almost get nothing from residents. Although customers will not be the main income resource, the scale of customer base will decide how powerful the operator will be in the value chain. Therefore, all three companies are trying their best to acquire subscribers.

This is the scenario I could see in the next 10 years. During the shift, operators actually will be more and more invisible, but also more and more important in the value chain. The basic logic here is quite simple. No matter how the future will be, all the things are still realized by network and operators are the owner of it. Basing on that, operator has the potential to be the government, to be the ruler, while
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leave the stage to SPs/CPs and let them to be the stars. The more shining they are, the more successful operator will be.

Also if there is no revolutionary innovation, I cannot image the other alternatives.

(3) Non-External Focused

From the discussion above, there is no reason for us to believe China Antonius is an external focused company. However, the most desperate thing is it is even not an internal focused company. To be honest, China Antonius is a loss-focused company.

First, there is almost no surface area for employees to contact with outside. The environment scenarios are imaged by China Antonius College and Academy, which in subsidiaries. However, there is no sufficient communication between them and core business departments. They just like labs in the university only focus on the academic without marketing focusing and business pressures.

Also, the highly hierarchical structure makes China Antonius into a one-head company. Year by year, the departments in headquarters distribute the annual tasks to the local homologous departments by multiplying the total number from the Three-Years Moving Plan with corresponding weights, then supervise the execution and make the other Three-Years Moving Plan for next year. The only thing needs local departments to do is just fulfill the assignments. Hence, within China Antonius, the information always flows from top to bottom and no way back. However, the braches around China are the front line employees, they are the largest surface
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areas who contact with end users directly and have the first hand information about future trend, customer satisfaction, market opportunities and existing problems, but no way to report. Time and time again, almost no one in the branches cares about the information they have and stop to think, because following orders is what they empowered to do and get reward from.

Therefore, the current situation is the head of China Antonius is isolated in the building located in Beijing without eyes to see the outside and decides the future by intuition and imagination.

Secondly, China Antonius is still using the Henry Fords Vertical Integration structure to run the business. For example, after setting up the partnership with Apple Inc., China Antonius established three Telecommunication Ltd. Companies as subsidiaries to be wholesalers and retailers of iPhone. Similarly, China Antonius also has Phone Number List Ltd. Company to publish Yellow Pages each year. Maybe the most ridiculous one is that it also has a hotel to treat important guests. Although most of those companies are inherited from the predecessor, there is no reason for China Antonius still taking these not non-core businesses, even unrelated businesses. And this kind of useless companies is full of the subsidiaries part. In my opinion, all subsidiaries should be dissolved and substituted by outsourcing (wholesaler and retailer of iPhone) and key-account relationship (hotel).

Although the current structure is not b2change and hard to change, China Antonius can still perform better than today. Recall the battle mentioned before, it was
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achieved by the temporary team consisted mainly by the Caesar group. During the battle, the team members found the long lost hope back, exploded the deeply buried passion out and finished the impossible mission. Hence, even under the current structure, there are still effective methods can make the situation better. With the monopolized position, only a few right things will lead to profit. However, the head did not realize the true value of the battle, the successful experience never transferred into a fixed pattern, as a result, dismissed with the temporary team. Except an amazing story, nothing left. The board is still playing the game themselves. Hence, today, even a single temporary success becomes a fantasy.

(4) Changeability
To telecommunication industry, 3G and Cloud Time are the irreversible trend can reorder the Power List. Although China Antonius knows it for true, it does not have any changeability to win this war. The only essential reason is the monopoly driven identity, which results in a vague strategizing.

The emerging environment required a customer oriented identity, while China Antonius is still insisting on the monopoly driven mind. Obviously, the political priorities did give the telecommunication company a brilliant history. At emerging stage, the company actually pushed the demands to customer, while customer even did not know they needed those services. However, when the emerging stage passed, the demands began to be driven by customers. Hence, in growth stage, operators should begin the identity transformation from monopoly driven to customer driven
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which was around 2000. But at that time, quite amount demands could be satisfied by push. And the most important thing was that the three main operators2 were running differentiated businesses with few competitions, so they still fully monopolized their own markets segment despite within same industry. Therefore, the monopoly position delayed the identity shift artificially.

But after the restructure in 2008, situation was qualitative changed. Though there are still three operators, industry turned into oligopolistic market with the disappearance of barriers to entry. As a result, the competition suddenly became fierce from zero, forcing operators change to customer driven in order to get market share. Meanwhile, at the end of growth stage, customers expectations and demands are generated in an opposite way as before. Since the industry was mature, customer knows what they need, so the demands are pulled by customer, which in turn, pulled up the urgency to change. However, China Antonius only notices there is a change, but does not know the essential of the change is the shift of business model. To survive, it needs, first, to change the logic from pusher to pullee, in other word, from monopoly driven to customer oriented.

Due to the identity, the intent fell behind the environment requirements. Demand is becoming more and more divers pulled by customer, which requires a broad breadth to cover. However, China Antonius narrowed its breadth by standing on the pusher

The three main operators were China Augustus, China Caesar and China Caesarion at that time. China Antonius

had never been a main operator before 2008. 31

point. Therefore, this misfit leads to the lowest ARPU and all the other worst performances. Moreover, although China Antonius has a highly aggressive attitude today, it did not achieve any aggressive result. Contrast to the actions took by the other two companies, we can see, they are doing a few big things which can build capabilities and competencies in the future, while China Antonius is doing lots of tiny things without strategy. Therefore, due to the misunderstanding of current business model, it has no aggressiveness to the competitors. And since the narrow breadth and low aggressiveness, China Antonius cannot differentiate its products.

Out of the strategy, the bureaucratic and hierarchal structure has already explained why China Antonius does not have the required competencies to change. However, China Antonius does have even the most advanced capability to change in fact. As said before, China Antonius has the most mature 3G technology and exclusive traditional network advantage in its core business areas. Those capacities could support it has a much better performance, even matched performance with the other two. However, due to the monopoly driven identity, China Antonius missed the first-mover advantage forever.

Since the restructure in 2008 was the hottest topic at that time, everybody got family with 3G concept and realized China Antonius owns the best 3G tech. Therefore, China Antonius got a free national PR campaign and established, if not totally new image, a much better image. Also, right after the restructure, China Augustuss 3G technology was unready for popularizing nationwide and China Caesar was preparing
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to launch north. So, there was an about one year golden time for China Antonius to lead the arm race, draw the price down and ran the IPTV business initially, then occupied the battlefield and waiting for competitors, especially in north China. But none of them was done in that golden time. The high price forbidden real target customer with needs (people under 35 years old), and its ideal target customer (successful people who above 35 years old with descent income) had no interesting to try this new stuff (or have not accepted this new concept). As the result, China Antonius was standing there waiting for its competitors got ready as a typical gentleman. When the other two got ready, they launched a deadly aggressive attach by cutting the price and arm race. China Antonius once again became a follower as it performed since the establishment. Therefore, China Antonius lost its only opportunity to be relevant in vain.

Actually, every state-owned company in China is highly bureaucratic, hierarchal and one-head structure with overload human capital, not only China Antonius. The other competitors have the same structure problems as well. But they only did two different things to make that big difference. First, their chairmen and the board can see future clearly by simply look at Apple Inc., Google and AT&T and make strategies basing on their capacities and competencies. Second, they changed the communication to from one-way to round-trip. By doing that, although they are still using the similar structure, the key information needed to make decisions is exponential increased. Therefore, these two companies are both working on technology to support current and future capacities, while began to shift from
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monopoly driven company to customer oriented. As a result, China Augustus becomes the government in advance via Mobile Market basing on the absolute customer-base advantage, and China Caesar is already the emperor in the newly rising IPTV industry. Also, they both launched partnerships with cities on wireless or traditional base which building up a skeleton and blue print of future information life of enterprises, governments and households. By doing this, all the efforts did by China Antonius become the fresh attached on the bones. Therefore, China Antonius has to run businesses under their rules and try to survive under their shadow once again.

5. Human Capital (1) HR System

In China Antonius, everyone has a portfolio contains the evaluation results each year. However, there are two different kinds of employees both in the payroll of China Antonius, listed employee and contract employee.

The listed employees are mainly senior employees worked for the company for decades, who put their portfolios under China Antoniuss HR system. They are the formal employee of China Antonius with much higher pay than contract employee despite doing the same work. The contract employees are mainly the new college graduate students, who put their portfolios under the third-party HR companies. Therefore, although they are working for China Antonius and doing the most crucial

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works, they cannot have the equivalent salary, benefit and bonus and may lose the job once finished a contract. Also, within contract employees, there are still two different groups. For the graduates from key universities (there is an official list of key universities made by Chinese Ministry of Education) majoring in telecommunication, they will become the listed employee after two years working if performed well. The rest contract employees can never become a listed employee simply due to the education background.

Thirdly, the HR system is b2ease. As the state-owned company, China Antonius has to fulfill many regulations from government. One of them is China Antonius can never layoff the listed employees. And the other one is China Antonius has to recruitment a required number of graduated students each year. These two regulations make the payroll longer and longer. After four times restructure, the entire China Antonius is heavy overload already. So once someone was assigned to one position, it is hard for him/her to change to another position because every position is overload, even his/her current is redundant. Also because of the overload, except the salesperson, all the other workloads are easy to finish. As the result, the employees of China Antonius call the company as sanatorium.

Above all, the system is actually based on, first, seniority and then, major. Therefore, under this HR system, you can see two interested things. First, you may see a new entrant with master degree and skilled expertise doing the core business while having the risk to lose the job and earning less than the entry level employee
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working in the dining hall because he/she is not senior enough. On the contrast, the dining hall employee will never lose the job due to the seniority despite the work has no relationship with core business. Second, you can see all the listed employees majoring telecommunication because one will never be a listed employee without that major.

(2) Reward and Promotion System

The information system of China Antonius is fully internal focused consisted by three parts, order distribution and fulfillment, knowledge learning and individual evaluation. It is mainly conveyed by internal network and paper works, but also by conferences and face to face sometimes.

Definitely, there is no information related to outside as said before. Also, as I know the employees do not know anything about what China Augustus and China Caesar are doing, except they are performing much better and the same level employees are earning much higher salary. And from the performance of China Antonius, we can guess that even the board knows the information of competitors, they did not take the right action to response.

Also, the internal information system has no contribution to the competencies and capabilities. As said before, the order distribution and fulfillment is the one-way trip which all about the Three-Years Moving Plan. The fulfillment is translated into KPI as part of individual evaluation. The knowledge learning is required for everybody as a

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part of individual evaluation as well. All the knowledge is technical based, such as what is 3G, how the WCDMA functions. The learning is via network mainly with few classroom teaching, usually during orientation. Most of learning is measured by hours; occasionally employees have to take the exams.

The evaluation consisted by four parts mainly, KPI fulfillment, popularity, leadership and knowledge learning. Each employee has a score evaluated by lower level, peer, one level higher and two levels higher employee with different weight. The direct boss, one level higher employee, has the heaviest weight. Like the college grading system, the score will be translated into four performance levels A, B, C and D finally. And only the A, B, C, D are collected into the portfolio, without details. Within same department, there is no evaluation across different umbrella. Obviously, there is no across department evaluation. The evaluation starts from the lowest umbrellas. When those evaluations finished, the upper umbrellas will rank all the evaluated employees by score, so on so forth, until the level 1 employee. When all the employees are ranked, China Antonius will name the best employee at each level. Therefore, the evaluation becomes the base of reward and promotion.

The reward system is quite simple. Generously, it is a level based system consisted by basic salary, benefit and bonus with no specific design for personal interests. Each level has a basic salary and benefits. The bonus is a percentage of the annual basic salary, which based on level and performance at that year. However, the extra bonus on performance can be ignored. Above all, the level actually decides everything.
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The main principle of promotion is level by level without exceptions. The criteria are based on four dimensions education, working-years, performance and one-round interview. Education means the degree of employee. Today, each entrant must be at least bachelor. From level 2 and above, the candidate should at least be a master. Under level by level principle and seniority base, anyone must have enough working-years to be qualified for promotion. For example, if one wants to promote from a minus level to a sharp level, like from level 3- to level 3, there is no strict working-years requirement. However, if one wants to promote from level 3 to level 2-, he/she needs to have at least 3 years working experience at level 3 or level 3-. Performance requires the candidates have no level C or D performance in the nearest 3 years. And the interview is scored by higher level employees. After going through the whole procedure, the picked candidate will be published for one month. If there is no rejection with strong evidences, the candidate will get promotion.

However, no matter evaluation or promotion, they are highly influenced by subjective judgment in practice. First, although KPI and knowledge learning are quantitative metrics, they almost have no practice meaning. For KPI, since the total workload is fixed by the Three-Years Moving Plan and almost every position is overload, the KPI has no pressure for employees to finish, except for the salesperson. For knowledge learning, the story is the same. All staffs are learning the same stuff regardless whether they need or not. As a result, the only two quantitative metrics in the evaluation cannot differentiate any employee, therefore, loss their meaning.

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Second, the leadership and popularity are based on subjective judgment entirely. As said above, since each employee just has business contacts with direct leader and few people one level higher or lower for years, the evaluation is highly inflated. Also, if the direct leader thinks one employee is the best one, the employee will be the best one for years and left others no opportunity. As a result, the evaluation is the opinion of direct leader singly at last. The evaluation is lost all of its meaning.

Also, there is no transparency as the book defined. One employee can only see the portfolios of lower level employees, and have no right to the peers and above. Also, since there is no cross umbrellas business connection, everyone only needs to care about few lower level employees. Moreover, since the result of evaluation is quite standard, the portfolio cannot provide any specific information about the staff, except the overall performance.

Promotion is the same story. First, due to the overload, it is hard to get promotion. Even there is a chance, the result still highly influenced by the direct leader. However, the working-years metrics could keep the right people out of the game. Finally, no matter evaluation or promotion becomes the attitude of direct leader. If the boss is responsible, he/she can pick up the right person who contributes to the capacities and competencies. But almost times, building the superior relationship with boss becomes the most important daily work.

(3) Human Capital

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Due to the bad performance in the market, China Antonius has the worst employer brand. The graduates in related majors all consider the other two companies first. Therefore, the entrants are actually the worst graduates in each year. Moreover, the best senior employees also go to its competitors because of the much better pay. As a result, all the people left are either not good enough to work for China Augustus or China Caesar or senior enough have no reason to leave.

Also, China Antonius is still wasting its bare human capital. Obviously, the Three-Years Moving Plan is the cage of human capital. All the jobs only contribute to the one year based performance with no direct contribution to the capacities or competencies needed for further development. The reward system cannot encourage any excellent performance; even it cannot build the competencies. The telecommunication major requirement is rejecting the needed knowledge in management. The board is navigating the big ship to a totally wrong direction.

However, those are not the biggest problems. The first and foremost problem still failed to balance the two groups of people. After the restructure in 2008, the principle on human capital is half-half, which means no listed employee in both former companies would be laid off and all the leveled positions were distributed equally. This principle seemed fair, but actually not. Since Caesar group had more employees than Antonius group, many leveled employees were demoted or marginalized. Moreover, in the past three years, Antonius group were keeping on political cleaning by unusual frequent promotions. Today, the Antonius group
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occupied most high level positions and most key part within the same level. This phenomenon made Caesar group felt angry first, then disappointed and unconcerned finally. As a result, Caesar group views themselves under the coercion of heretic.

However, the worst influence of political cleaning is loss of human capital, not the unconcern. Due to the political reason, the restructure in 2008 was call snake swallows the elephant in China. The former China Caesarion was still one of the most powerful companies, which much more competitive in every metric than former China Antonius. Its employees, the Caesar group now, had a set of mature management systems to run a nationwide company. The long history and rich culture shared and inspired every employee. At that time, everyone felt proud to be one of China Caesarion. On the contrast, the former China Antonius had never been a relevant company in its 17 years history and never ran a business at todays scale. The Antonius group actually needs to learn how to run a business countrywide from Caesar group, not the other way around. Therefore, the political cleaning not only destroyed all the crucial competencies China Antonius needed, but also ruined the best business model it can find. As a result, the board left a crowd of rabbles to utilize the most advanced capabilities.

That is the first and foremost reason why China Antonius has been fell behind its competitors that far within only 3 years.

6. B2Chang Organization
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China Antonius is absolutely not a b2change. Since it failed to clarify its identity and maintain its human capital, all the proximity it had is basing on the common requirements as an operator, like signal. And the few services it could provide cannot meet the expectation. As a result, the orchestration is current-focused, which cannot be transferred into a capabilities and competencies, even destroy them. When failed in the steps above, there is no hope for China Antonius to consider about changes and review it as normal. Therefore, the virtual spiral has already collapsed from the foundation, or never be built. No to mention build a dynamic virtual spiral.

Actually, I never ask China Antonius to be a 21st century b2change company because all the state-owned companies in China cannot and need not to do that basing on the government supports. However, in the 2nd profitable industry (the first is energy industry) with the most advanced capacities and well-established foundation in north China, while competing with only two competitors, China Antonius should at least be a profitable company. It is quite an easy goal to realize by just doing a few right things with even only 10% right people from all employees. But, the board is killing the company by doing no single right thing.

At the end of midterm paper I said if the leadership cannot change the current problems, all China Antonius needs to do is waiting for another reorganization. Now, it seems to be true. China government has already criticized China Antonius twice in public in October and November, 2011 via a high-profile way. Due to the close relationship between state-owned companies and government, it is extremely rare in
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China. No to mention the restructure was compelled by government in such a high-profile way only three years ago. The criticism now is seemed as an early propaganda for the next momentous restructure. Therefore, everybody throughout China Antonius feels panic without any interest on business.

At last, I want to say if we use the same criteria of American companies to measure state-owned companies in China, even no one is a good b2stable company. Their costs are sky high and their profits are all established on the monopoly or oligopoly. When the world is stocked by the increasing number of Chinese companies in the Global 500 each year, we know the only miracle in China mainland is HUAWEI, which becomes a world leader competes with Cisco without any government background in such a high-tech industry. Hence, to be a b2chang company, all the state-owned companies in China have a long way to go.

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