IT WASN’T SO LONG AGO when Telus was just the Alberta telephone company with little to no presence anywhere in Eastern Canada.
Now, thanks to the exponential growth of wireless (buying Clearnet proved a good idea) and huge wins on the business telecom services side, the former provincial telephone monopoly is a national communications conglomerate with well over 10,000 employees just in Ontario and Quebec. In 2000, its workers in the two provinces numbered in the hundreds.
The man at the top of this unprecedented growth in Eastern Canada has been Joe Natale, executive vice-president and president, Telus Business Solutions. Over the past few years, the company has claimed a number of lucrative long term contracts – taken directly from Bell Canada – to serve arms of the government, hospitals, and other large enterprises.
The company’s most recent proposed acquisition, a $763 million bid for former Bell division Emergis, which serves the health care industry, is just the latest manifestation of Telus’ determination to dominate in certain business verticals.
Natale, who joined Telus in 2003, was in Hamilton last week to expand on the company’s philanthropic side, with the launch of Upopolis, a secure social networking site for hospitalized kids. After the launch, Natale sat down with Cartt.ca editor and publisher Greg O’Brien for an exclusive interview to talk about where Telus and the telecom industry has been – and where both are headed.
Greg O’Brien: Let’s start off with what was launched today, Upopolis. To me, this is a really cool idea and you said you jumped on it right away when you heard about it. Why is Telus taking part in it?
Joe Natale: At Telus we take this whole notion of corporate social responsibility very seriously. When someone says from the Telus team that we want to be Canada’s premiere corporate citizen, it’s a statement of the culture and the mindset of the organization.
You look at health care in Canada and it’s in a state of crisis. Well over 40% of the provincial budgets are devoted to health care. The population is aging and therefore the mathematical problem around cost is getting a lot worse, it’s not getting easier. And it’s one thing to write a cheque, but I believe organizations have great assets to offer in terms of their philanthropic endeavors, and that is the talents of their people… great marketing skills, technology skills, team management, organizational skills.
When I thought about (Upopolis) – and I’m a father of three young children – I put myself in the shoes of those kids or those families that might have to spend time in a hospital. And we’re not talking about kids that spend a day here and a day there in the hospital, we’re talking about kids that might spend weeks on end in a hospital or may have to come back to the hospital time after time… and, you think about how much value kids place in being connected. It has become the social recreational phenomenon of this time.
GOB: And it’s not the easiest thing to just bring in your laptop or even bring in your cell phone and using it in the hospital, because of all the networked and sensitive things that are already going on here.
JN: We spent the better part of a year working with the hospital technology team around issues with respect to security, integration – with their network or not – around issues with respect to RF interference with medical technology. I mean there are a lot of things to be considered. It’s not as simple as just firing up your laptop and saying there you go.
So, the solution we’ve built is one that is not just about the application. It’s also about all the infrastructure and connectivity and the networking and the maintenance of both content and the infrastructure – and longevity. I think now we’ve got a blueprint that can work in any hospital. And that was something that had to come out, it just couldn’t be about firing up a web site. It had to be about building longevity at a program plan that can accommodate any one of the hospitals in Canada.
GOB: You talked about using the people that each organization has. Your particular section of the organization has grown quite a bit in your tenure. You’ve grown to about 5,500 employees just in Ontario? What’s driven that growth and how do you manage it?
JN: You’re correct, the growth has been substantial on a number of different fronts. If you look at the move to central Canada, in the year 2000, we had 300 people east of Alberta. Today, we have between Ontario and Quebec alone, over 10,000 people.
Some of that’s come from acquisition, but a massive portion of it has also come through organic growth. And the growth has come really because of a focus on the growth markets of IP, data and wireless. I’m sure you’ve heard that expression from us a few times.
GOB: Yes.
JN: It is not just a mantra, it is the heart and soul of our strategy. Everything we’ve done has been to focus on those growth markets, whether it’s been acquisitions in the marketplace, rationalizing our product line, investing in sales and marketing or innovation, it’s been driving the levers hard in those areas to accommodate for some of the challenges in places where we’re getting commoditized. A classic case is long distance,
In the year 2000, 23% of our revenue was long distance. Today it’s 8% of our revenue and falling. Long distance will be a calling feature. It’s already become a calling feature in a lot of different plans and rate programs that are out there in the marketplace. So, our mandate has been very clear from the beginning and that is to step away in terms of energy and focus from those areas – still maintain them of course and do all the right things – but put the management muscle and put the resources of the organization in those new areas in a very meaningful way.
GOB: Telus has emerged on the business side with a number of significant wins over the past 12 to 24 months or more. What are you doing differently to steal that business away from Bell?
JN: If I look at that growth from the business sector – and we have had some significant wins in the last few years, I think it’s been predicated on a few things.
Number one is thought leadership. And it’s not just a phrase. We’ve worked very hard to understand the real issues in various business sectors. So, the focus on the industry verticals is very important to us. Whether it’s health care, government services, oil and gas, or banking and insurance – those are our key big verticals. And we have people with deep skills and ideas in terms of how do you solve real business problems with the use of technology and communications in those sectors.
GOB: So, you have people specific to providing telecom services to the insurance sector, for example, because it’s different than what the banking sector, what the health care sector all need or want.
JN: Exactly. That depth has been critical because then you’re having a business conversation, you’re proposing ideas and solutions that are resonating at a business level. In health care, for example, we have pharmacists and doctors on staff with a strong technology background. So, when you get clinician speaking to clinician around a powerful technology idea, it’s a whole different conversation. You’re not dealing with the procurement organization only that is looking to buy a vanilla service, you’re talking about a broader service. So, that has given us great credibility.
The second piece of that is to move up the value stack from just connectivity to manage infrastructure throughout applications. It goes on more than just connectivity, and I think we’ve done a very good job of driving innovation around applications and managed services.
Those that are network-centric. I think this industry, historically, has been accused of freelancing in the application space but my mindset has been, “no we shouldn’t be in spaces we don’t have a pretty direct link to the need for infrastructure and network.”
So, in my organization, I coined the phrase network-centric- applications. So, if we get people with deep industry skills and we’re developing solutions that are network-centric in terms of applications and business ideas, and you couple that with the ability to deliver – which is our third plank of the strategy and sounds obvious, but it’s very, very important – we’ve built a very solid reputation for delivering.
One of our first wins was a managed network for the government of Canada for HRDC at the time (Human Resources Development Canada). That lead to other key wins, the Toronto Dominion Bank, which lead to the CBC. And I can draw a tree diagram actually of how credibility begot more credibility begot more credibility. And that track record is underpinned by end of the day the strength and capability of the team. You look around my table and you look around the tables beneath my table and the strength of capability, the depth of expertise, the cultural alignment. It’s quite compelling.
GOB: Going back to the network-centric applications, can you give me like a good example of what you’re talking about there and how it’s deployed and works?
JN: Sure. Let’s take health care for example. Managing health care is about managing information – taking information from wherever it might reside and providing it at the point of care. If you look at the inefficiencies in the health care system, you can draw a lot of correlation back to the fact that somebody is treating a patient, whether it’s in the hospital, in a home, at a clinic, in the doctor’s office. It doesn’t have a full view of all the information that’s available.
So, we’ve got some solutions. An example might be our community care management solution… an application that is hosted in the Telus data center that can be used by community care organizations. So, as they’re visiting patients in the home, through a mobile device, they can call up patient data, they can take a look at what happened in the last visit to that patient in their home. They can use the information to connect with the primary caregiver for that individual. They can use the information to dial up a hospital or a nurse call centre to get further advice or support. They can call up medical facts, they can call up drug efficacy information.
So, it’s that interaction at the point of care. It’s an application like any you might see in a desktop but it’s running on a mobile device – and the network is the application… The solution’s actually about managing within a broad set of stakeholders through any mode of connectivity and deploying that information on a network centric basis.
… I could go through each of those four big verticals that are important to us and I could name 30, 40, key applications like it in each of those verticals and I put the mental energy of my team on driving those types of outcomes. If you’re going to play in this business, you’ve got to be driving value-added business outcomes that are important with the customer – and it’s not about the latest and greatest network technology that you hope somebody will buy.
GOB: Moving over to the small-to-medium business side, this is where the cable companies and others are pushing hard into. What impact have you felt from them and what are you doing on that side to defend your turf and try to grow it?
JN: There’s no question the cable companies have progressed their strategy from consumers to small business. Small business customers tend to spend more on network connectivity and technology than the average consumer. They tend to be more loyal generally than the average consumer, so, they’re a very attractive set, for any provider.
In fact if you look at the critical mass in Canada, there are about a million small businesses. And that fuels the major proportion of our economy. So, it’s a very important space, a very important segment for all of us.
We have felt competitive intensity mounting in the small business space across Canada. It’s coming from cable, it’s coming from some small local providers that have different network technologies. It’s coming from other providers that have focused in that space even outside of cable.
GOB: And I know some small business owners who have switched completely over to Skype or they use Vonage… so there’s even that playing around the fringes too.
JN: Sure there is. So to me, the value proposition of small business is a pretty straight forward one. If you’re a small business, my offer to you is why don’t you focus on the core of your business, the bread and butter of your business? Then the onus is on me to create a simple solution that takes care of your basic and intermediate communications and technology needs.
The average small business owner doesn’t have time to try to figure out security infrastructure, or managing their e-mail server, or trying to figure out all the different things that happen with technology. Your average small business looks at what big businesses are offered and says I want to get some of that technology and capability but I don’t know where to start.
In fact, a lot of them feel left out because they can’t afford to spend the capital. They can’t afford to hire a CIO or anyone resembling a CIO. Chances are that their technology environment has been built by a contractor or by somebody’s son or daughter who is studying computer technology somewhere along the way in post secondary education. So, our answer to that is to focus on the integrated solution for small business (called) Business One. What’s in it is basic connectivity, voice services, high speed Internet access services, hosted Microsoft Exchange services and elements like disaster recovery and backup. Wireless is part of the solution in the last iteration we just launched recently. You know the average small business doesn’t do a very good job of backing up the laptops and PCs that really have most of their enterprise data on them.
We’ve interviewed many small business owners and they all have the same sorts of issues or feedback: “I don’t want to worry about technology, I want to worry about my business. Provide me a simple scalable solution. Give me a strong point of contact to help me with that and make the costs straightforward and predictable – and I’ll give you my loyalty.”
GOB: Now, how does the Emergis acquisition play into all this? What does it give you that you didn’t have? How will it help you going forward?
JN: As I said earlier, we’ve reinvented the business solution space, we’ve focused on four very important verticals: financial services, oil and energy, government services and health care. I think health care is an industry that is not only important to Canadians in general, it’s also, from a technology communications point of view, one of the biggest and fastest growing sectors in Canada. And if we’re going to solve the crisis in health care, it’s going to be done through the effective deployment of information management.
Whether it’s to take cost out or to reduce wait times or improve the quality of care, it relies on having the right information in the right place at the right time. And in each of our key verticals, we’ve been making investments. Investments in solutions, investments in acquisitions, investments in key partnerships. Health care has been a place where we’ve been looking now for a while for a substantial move to make. We already have, but I think it is a strong and vibrant health care capability. We mentioned on our analyst call that right now our health care business is about $150 million and growing – one of the fastest growing businesses in my area right now.
If you couple that with what Emergis has to offer in health care, not only do you have critical mass but on top of that you combine the strength of Telus with the strength of Emergis and there’s a pretty powerful combination.
Emergis’ focus is around health information management: Electronic health records, claims management, pharmacy management, the E-health care focus… I think there’s a natural combination there with a telecom service provider with a broad application strategy like I talked about earlier. If you think about what’s important to health care and health care information management more specifically number one is ubiquity in terms of connectivity. You have to be able to get to the patient, the clinician, the health care provider regardless of where they sit. Whether they’re on the road, in the office, in the hospital… and network connectivity is extremely important in solving the electronic health record challenge.
GOB: The reaction to the purchase has been a bit mixed, as far as what I’ve been able to gauge. Do you think there’s been a bit of a misunderstanding of the purchase, about why are you doing it and did you pay too much?
JN: I look at the hundreds of phone calls and e-mails that my team has received since the announcement, and I would say to a person the response has been very, very favorable from people in the health care sector or in and around the health care sector. From CEOs of hospitals, you know today the CEO of (Hamilton Health Sciences) came up to me and said, “great move on your part.”
There’s been an overwhelmingly positive response from across Canada, from other CEOs in the health care sector. And also from other players in the space that have technology offerings that we meet on the street on a regular basis. Very, very positive. The neutral or mixed views have come largely from the analyst community.
GOB: Those are the guys quoted in the press.
JN: And those are the same guys that told us way back when in 2000 “don’t go east of Alberta you’re wasting your time.” Those are the same guys that said to us “don’t buy Clearnet, you’re wasting your money.” You know, we’ve made strategic investments along the way that show we’re looking at the long-term future of this organization – and we continue to do that. On one of the analyst’s calls, one of them asked a question, “why would you go spend $700 million plus? Why don’t you just give us the money in dividends?”
The answer to that question says it all about our strategy. I said the reason we have money today (for dividends) and the reason we had a very strong share buyback program for the last many years is because of the investments that we made seven years ago, five years ago, three years ago. And we’ll continue to make those types of investments so we can continue to perpetuate our ability to pay dividends and grow the stock price.
That’s what we’re paid for, not to manage the short-term but to manage the longer term. Certainly the operational discipline, but to manage the longer term and make the investments for the future. And we’re always having this debate with the analysts. I think for some of them it’s hard to understand the B2B (business-to-business) space.
The consumer space is more self evident. You kind of open up the newspaper, you walk in the mall, everyone kind of has a feel for it. The business space is not one business, it’s actually a multitude of businesses, applications, infrastructures, security, call centers… It’s also becoming more critical to have industry based relevance and focus, to my point earlier.
GOB: I guess you can’t have a cute ad with a gecko or whatever to talk about managed applications for the oil and gas industry.
JN: Right.
GOB: As my last question, I’d like to know what, when you come to work in the morning, are the primary obstacles you see in the future that you’ve got to jump over to keep growth going… to keep Telus, which is really at its heart, an incumbent telco, growing?
JN: That’s a great question. The primary challenge my organization faces, kind of the Monday morning challenge if I look at it that way… In no particular order I would start with understanding and planning for the shifts we’ve seen the regulatory environment in Canada. I wouldn’t use the word consistency when I think about what’s happened on the regulatory front within the last while. And it often changes your thoughts and plans based on the latest decision.
That’s I’d say one of our biggest challenges in our organization overall.
GOB: But over the past year a lot of that stuff has gone a good way for Telus and for the other incumbent telephone companies.
JN: Certainly on the forbearance side with respect to our land line business, forbearance has been a long time coming and I’m glad to see it. When I look at what’s transpired with respect to the wireless spectrum auction rules, I think you see a different point of view.
And we’re sitting there planning our business, forecasting the future, running models on growth and there are these big variables – and some of the rows and columns have to do with what might happen on (the regulatory) front.
I think the second one would be the war for talent. I spend a lot of time thinking about that. There are parts of our economy that are overheated right now (and) you look at the economic growth in places like northern Alberta and other parts of the country as well – and given the fact that we I think made great progress in our strategy, it’s also kind of raised the bar in terms of the type of person that we’re looking for in our organization.
GOB: Is that on all levels, like from technical service rep to more senior people, managers, executives?
JN: I think so. It’s on all levels and I think it’s especially true in some of the new and emerging areas that I’ve been talking about that are fundamental to our future. So, I spend a lot of time thinking about how I attract the best talent to this organization? How do I put people with the best capability in the right roles? At the end of the day, it’s a competitive battle of my team against their team is the way I look at it, it’s the way I’m wired to look at it.
The third thing has to be the competitive intensity. At the end of the day, it’s very competitive industry overall. You especially see it this time of year as you kind of walk through the shopping malls and flip through the newspapers and look at some of the various rate plans and deals that are being offered.
GOB: Well, according to some it’s a cozy oligopoly and you’re all just playing too nice.
JN: I would encourage people to read some of the reports out there that speak about wireless rates in Canada being amongst the lowest in the G7…
Overall, I’m excited. I spring out of bed every day in the morning, even more so than even four-and-a-half years ago when I first started. It is a great industry with lots going on. Someone used the phrase last week in a meeting that it’s like dog years, where one year in telecom is like seven years anywhere else, and there’s an element of truth to that, just given the pace of the industry, given the arrival of the disruptive ideas, technologies, changes in the sector. I think it’s an exciting place to be because there’s opportunity around every corner to change the competitive landscape.
It’s an exciting time. I think the last 20 years in telecom will pale in comparison to the next five in terms of evolution and change and what will transpire.
