When to walk away from a big deal

In the late 1990s, One.Tel tendered for the provision of an Australia-wide mobile phone network. The multi-billion dollar tender attracted aggressive bidding from all of the major multi-national telecommunications equipment companies.

One.Tel was a group of Australian-based telecommunications companies established in 1995, soon after deregulation of the Australian telecommunications industry, with high-profile backers such as the Murdoch and Packer families.

The Australian CEO for Siemens we'll call him Joe, led the bid for Siemens Australia, which was a front runner to win due to its advanced and proven technology.

As the tender negotiations proceeded, Joe became increasingly concerned about One.Tel's requirements for unsecured vendor financing - but approval for Siemens to provide this financing had been received from the Siemens board, and Joe was under pressure to "close the deal".

But something didn't feel right to Joe, he was concerned about the security for the financing and One.Tel's prospects. Despite the financing having been approved by Siemens's notoriously conservative commercial management cadre, Joe decided to pull out of the deal.

Joe's managers backed his decision and the main competitor won the tender.

A year or so later, when One.Tel went into receivership, Joe's competitor lost nearly a billion dollars and his brave decision was vindicated.

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Company

: Siemens

Source

: Mike Adams conversations with the main players and Wikipedia https://en.wikipedia.org/wiki/One.Tel

Reference

: https://en.wikipedia.org/wiki/One.Tel

Story Type

: Teaching

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For Story Students

The Setting

: Tendering for a new mobile phone network in late 90's Australia

The Complication

s: One.Tel required the vendors to provide unsecured vendor financing

The Turning Point

: Australian CEO made a gut decision to pull out of the tender process

The Resolution

: Siemens competitor won the tender and lost nearly $1 billion AUD when One.Tel collapsed and went into receivership

The Point of the Story

: Going with your gut feel when something feels wrong about a deal is often the best course of action but it takes courage.

How to use this story

: The story shows the importance of sticking with your convictions

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Service Recovery after Disaster - getting service back on track

The radio networks that allow communication between train drivers and central control rooms are critical to safety infrastructure. If the radios fail, trains cannot operate.

On May 2nd 2004, the Siemens-supplied train radio system had a network-wide failure which lasted several hours. Fortunately the outage occurred on a Sunday - if it happened on any other day, there would have been chaos on the entire rail network.

Siemens state manager John Chapman, realising the critical nature of this incident, rushed to the Railcorp control room and worked with the Railcorp CEO to schedule buses to ensure minimal passenger disruption.

Finally, when the radio network was restored, John turned to the CEO and said "this is going to cost us isn't it?".

The CEO's response was "let's split the bill".

What could have been a very expensive litigious issue was solved with a handshake because John had given up his Sunday and worked with his customer to return them to normal operations.

You can have great service but your service quality is only truly tested when you are in a service recovery situation.

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Company

: Siemens and Railcorp

Source

: Mike Adams conversations with former NSW Siemens state manager John Chapman

Reference:

Story Type

: Values

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For Story Students

The Setting

: 2nd May 2004, Sydney, Australia, Citylink Metro rail system

The Complications

: The train radio system failed for several hours which stopped the entire train network. Siemens was the supplier of the train radio equipment and Railcorp was the train operator

The Turning Point

: Siemens and Railcorp worked over the weekend to schedule buses while the radio network was being repaired

The Resolution

: The Railcorp CEO agreed to split the difference on the cost of the failure

The Point of the Story

: The Railcorp CEO agreed to split the difference on the cost of the failure

How to use this story

: When talking about Service and service recovery

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The Siemens art exhibition bypassing tender rules

In the early 2000s  Siemens sales manager Paul Thompson was sweating on the result of a major tender.

It was the 'radio silence' evaluation period when the customer's tendering rules precluded any contact. Paul was nervous about the result and wanted to continue to influence the tender decision process.

Paul found out that his customer did not own their corporate headquarters building, so he organised with the building owner to run a Siemens sponsored art exhibition in the main lobby which the tender evaluation team would pass through each day as they went to work.

Paul was in the art exhibition when the customer's head of procurement walked past, looked at Paul and shook his finger to say "never again", but them smiled.

Paul won that tender.

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Company

: Siemens Communications

Source

: Mike Adams discussions with Siemens Head of Sales Paul Thompson

Reference

:

Story Type

: Business Purpose

Labels

: Bending the Rules; Tenders

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For Story Students

The Setting

: Early 2000s, Melboune Australia

The Complications

: Siemens were in the 'radio silence' pahse of a very large tender evaluation

The Turning Point

: Paul organised a Siemens sponsored art exhibition in the customer's HQ building lobby

The Resolution

: Siemens got the additional advertising and marketing benefit and procurement amended their tender rules

The Point of the Story

: Siemens got the additional advertising and marketing benefit and procurement amended their tender rules

How to use this story

: When talking abut innovative ways to influence in sales

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