MGT 875 China Antonius Case Analysis

8/2/2019 MGT 875 China Antonius Case Analysis

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MGT 875 Change Management Paper

Xiao Geng

A44302296

Contents

MGT 875 Change Management Paper.................................................................. 1

Terminology............................................................................................................ 2

MGT 875 Change Management Midterm...................................................................... 5

1. The Company and SWOT Analysis.................................................................... 5

(1) The Company.................................................................................................... 5

(2) SWOT analysis .................................................................................................. 7

i. Strength:........................................................................................................... 8

ii. Weaknesses:..................................................................................................... 9

iii. Opportunities and Threats ............................................................................. 10

2. Analysis basing on Collins prospective........................................................... 11

(1) Success and Hubris ......................................................................................... 11

(2) Flywheel and Silver Bullet.............................................................................. 13i. Flywheel......................................................................................................... 13

ii. Silver Bullet..................................................................................................... 14

3. Analysis basing on Kotter............................................................................... 18

MGT 875 Change Management Final.......................................................................... 22

4. Structure and Changeability.......................................................................... 22

(1) Structure......................................................................................................... 22

(2) The Environment............................................................................................ 26

(3) Non-External Focused.................................................................................... 28

(4) Changeability................................................................................................. 30

5. Human Capital............................................................................................... 34

(1) HR System....................................................................................................... 34

(2) Reward and Promotion System ...................................................................... 36

(3) Human Capital............................................................................................... 39

6. B2Chang Organization ................................................................................... 41


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Terminology

1. 2G: second-generation wireless telephone technology2. 3G: third-generation wireless telephone technology3. Traditional Business: the fixed phone and related Internet business, wireline

based

4. Mobile Business: the mobile phone and related wireless business, wireless based5. GSM: one interface standard in 2G era, most widely used worldwide6. CDMA: one interface standard in 2G era7. WCDMA: one interface standard in 3G era, GSM based8. CDMA2000: one interface standard in 3G era, CDMA based9. TD-SCDMA: one interface standard in 3G era, pursued by Chinese government10.TD-LTE: a testing 4G network, TD-SCDMA based11.Personal Terminal: products facing end user, like PC and cellphone12.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, morepersonal 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 era15.CP: content provider, the rising power in 3G and Web2.0 era16.iOS: iPhone Operation System


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17.PON: Passive Optical Network, enable a single optical fiber to serve multiplepremises 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.


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The names of companies in this article are fictitious, while

everything else remains absolutely factual.


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MGT 875 Change Management Midterm

1. The Company and SWOT Analysis(1)The CompanyChina 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 business2. 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.


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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

China

Augustus

China

Caesar

China

Antonius

Subscribers

(Billion)0.61 0.11 0.18

3G Subscribers

(Million)3.505 2.149 2.394

3G Subscribers

Growth Rate (%)69.3% 74.9% 70.3%

3G Subscribers

Growth (Million)1.435 0.920 0.988

Total Revenue

(Billion $)

39.20 18.84 16.38

Total Revenue 8.8% 11.7% 23.1%


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Growth Rate (%)

ARPU4

($) 10.97 8.18 7.34

Net Profit

(Billion $)9.61 1.52 0.40

Net Profit

Growth Rate (%)6.3% 10.2% -5.6%

1. The data is from the interim reports, 2011.2. The exchange rate from US dollar to Chinese Yuan is $1=6.383. 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 ThreatsThere 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 HubrisThe 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 BulletFrom 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. FlywheelThe 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 launchedWireless 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 StrategicManagement 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)StructureSince 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 2-

for 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 EnvironmentSince 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

1Life cycle: Every industry migrates through up to four development stages: emerging, growth, maturity, and

declining.


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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 FocusedFrom 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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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)ChangeabilityTo 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

2The three main operators were China Augustus, China Caesar and China Caesarion at that time. China Antonius

had never been a main operator before 2008.


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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 SystemIn 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 SystemThe 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 ofpolitical 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 today s 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.

MGT 875 China Antonius Case Analysis

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