High-Impact Customer Councils: Executive Relationships Reshape the Way Avaya Goes to Market

Key Takeaways
Executive-level customer relationships can provide critical insight into the larger marketplace during times of rapid transition. Fostering many-to-many interactions among peers in a council setting can take customers out of the sales cycle, magnify the impact of executive-level relationships, and create meaningful dialogue about customers fundamental business challenges. Third-party guidance and support to maximize professionalism, ensure objectivity, and foster trust with customers can contribute substantially to council success. Leveraging the insight and impact of customer councils across the entire customer base and the organization itselfrequires an integrated approach involving thought leadership, broad programs for executive relationship management, and focused dialogue with sales, R&D, and other internal audiences.

Introduction
Avaya, spun off from Lucent Technologies in 2000, has successfully positioned itself as a market leader in emerging next-generation telephony. Back in 2003, however, Avaya confronted a fundamental dilemma that often strikes technology firms as they hit their stride: Many of its customers were making the shift from commodity buyers of telephone equipment to strategic buyers of communications solutions. With nearly 1 million customers worldwide, including most of the Fortune 500, Avaya found itself with many strategic buyers, yet few truly strategic customer relationships. So the company stepped out of its product- and technology-centered comfort zone and set out to build deep and meaningful relationships with executive buyers and influencersespecially CIOs, VPs in charge of call centers and enterprise communications, and some business unit leaders. The initiative involved two interlocking efforts: Customer councils. Avaya Chairman and CEO Don Peterson invited the seniormost executives of Avayas most strategic customers to participate in customer councilsnot sales events or golfing engagements, but serious, intimate, and ongoing forums of 15 to 20 noncompeting customer executives who viewed each other as peers. ERM programs. Around its councils, the Avaya chief marketing organization built a complementary array of executive relationship management (ERM) programs to deepen strategic relationships and leverage the insights emerging from council discussions. This ITSMA Case Study explores the truly profound impact these strategic programs have had on Avaya. Executive-level customer relationships have transformed not only Avayas approach to marketing and selling but also the way the entire organization is aligned around the challenge of researching, developing, making, and delivering the solutions its customers need to address their business challenges.

Background: Born in a Time of Competition and Change

Spawned from Lucent Technologies in 2000, Avaya never really enjoyed the luxury of boom-market innovation and selling that buoyed many of its peers and competitors in the emerging and converging arenas of information technology, telecommunications, telephony, and the Internet. Not that Avaya was a small startup; like a high-tech Athena, it sprang from its parents head as a full-fledged Fortune 200 enterprise boasting upward of a million customers and existing revenue streams of more than $4 billion.

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Executive Relationships Reshape How Avaya Goes to Market

But as a new company, Avaya had little chance to catch its breath before facing the double whammy of the post-dot-com, post-9/11/01 economic slowdown and the shift to IP-based technology, which was slow in adoption and, at the same time, stalled traditional sales.

Paradigm Shifts: VOIP and Strategic Sourcing

The first several years of the new millennium saw Voice Over Internet Protocol (VOIP) and related telephony technologies transition from emerging to increasingly established products in business enterprises of all sizes. By 2002, the Avaya VOIP network was sufficiently enterprise class to provide much of the communications backbone for the worlds largest sporting eventthat years FIFAWorld Cup soccer competition in Korea and Japan. (By 2005, VOIP surpassed traditional Time Division Multiplexing telecom equipment in volume of newly installed lines.) Naturally, Avaya desired this shift; the companys future technology roadmap was largely predicated on the rapid adoption of VOIP and related technologies. But success opened new challenges: The need to talk to different and often more strategic buyers was inherent in the promise of next-generation telephony, which offered not just lower product and usage costs but highly flexible, more software-based, and increasingly integrated IT and telephony solutions. Moreover, this product-to-solutions evolution dovetailed with the tightening of enterprise technology purse strings and the aggressive shift to strategic purchasing of technology from fewer, more value-adding sources. Avaya reacted quickly and strategically to the emerging demands. Led by Chairman and CEO Don Peterson, Avaya's top leaders quickly understood their fundamentaland dauntingchallenge: shifting from being a commodity product supplier to a strategic technology partner for the company's nearly 1 million customers around the world.

Building Executive Relationships: Avaya Turns to Its Customers

Making this shift would be no mean feat for a firm comfortable in the world of technical specs, telecom managers, and purchasing agents. But from sales execs to the senior team, few people at Avaya really knew how to talk technology solutions in the business language of the firms customers. However, Peterson, his leadership team, and the companys marketing and sales organizations converged on the notion of how best to learn a different selling language: by engaging and building relationships with the top executive leaders of their most strategic customers.

Opening a Many-to-Many Dialogue

In 2002, the CEO mandated the development of the initial Executive Advisory Council (EAC). With the help of strategic marketing partner Tapestry Networks, a specialist in the emerging arena of leadership networks and peer-to-peer dialogue, Avaya decided to elevate its individual, one-to-one relationships with its strategic customers. To do this, it sought to build networked, many-to-many relationships with groups of noncompeting but otherwise similar customers who would see each other as peersand who would have as much to say to Avaya, individually and collectively, as Avaya might say to them.

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These councils, or networks of leaders, now include two Executive Advisory Councilsthe original one for North America-based multinationals and one started in 2006 for EMEA customersalong with a Customer Contact Council and a public/private industry network, the Federal Government Leadership Forum. With each network, Avaya has shared its strategic roadmap, inquired about customers fundamental business challenges, and listened while top executives and industry leaders have explored new strategic approaches to improve their businesses and industries (including but not limited to Avayas technology). Subsequent meetings have continued the dialogue, with Avaya reporting back to customers each time on how it has acted on their insights.

The Executive Advisory Council Takes Shape

Initially, the Avaya customer councils were conceived primarily as intimate venues for fostering mutually beneficial strategic bonds with customers. When we started the first council, that was the number-one objectiveto build relationships ... getting to know our customer as a person, to know their families and companions and hobbies, recalls Sharon Watkinson, senior manager of global marketing for Avaya. By the time we were 18 months old, we knew we were going to be a solutions provider, but our relationships were at the IT and telecom manager level. We needed relationships at a much higher levelat the CIO and VP level.

Convening Genuine Peers

According to Nancy Maluso, Avayas global marketing director, certain core principles help ensure that the councils are effective. One key is ensuring that participants belong together around the same table. Even if its your favorite customer," she cautions, "if its not good for the group, if theyre not genuine peers, you wont have the right dynamic. Other core principles guided Avaya and Tapestry as they developed their council model, including: Engage market leaders around a broad, strategic theme. Members are CIOs or equivalent executives from market leaders in diverse industries companies earning an average of $30 billion in annual revenue. The organizing theme was broad, inviting members to explore with Avaya the challenges and opportunities of converged communications across the enterprise. Achieve critical mass with the right number of participantsbut no more. At any particular meeting, we try to keep it to no more than 15 customersand usually seven to eight Avaya executives, Watkinson explains. The ability to have an intimate discussion dwindles after youre above about 25 people. Insist on personal commitment from all participants. Council members make a personal commitment to attend network meetings, which are held once every six to nine months. They cannot send substitutes. As the EACs host, Don Peterson has led by example; to date, he has never missed a council event. With mostly the same group attending each gathering, each discussion builds on the previous one, and relationships develop among the participating customers as well as with senior Avaya executives.

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Fostering Trust
Avaya established explicit ground rules to foster trust and frank discussion within the councils. Meetings operate under a modified Chatham House Rule, with some variance in the details: in some councils, identities of participants remain confidential outside the council, while in others, the participants names and company affiliations are public. With either approach, comments and insights from the network discussions can be shared freely with the outside world but never attributed to a particular member. The most important ground rule is the prohibition against selling in the council context. Its not a sales pitch or a presentation of Avaya capabilities, explains Maluso. There are no salespeople in the meetingsthough there may be sales leadershipand we make sure it is not a sales conversation. The dialogue is around issues and opportunities that we see or customers say they see, and then how we are dealing with them.

Orchestrating Meaningful Dialogue

According to Maluso, crafting the right discussion agenda ensures that meetings take customers out of the sales cycle and set the stage for productive dialogue. Prior to the meeting, all customer members are interviewed individually to identify whats top-of-mind for them. These conversations then shape the discussion agenda around common themes. Theres an orchestration to this, Maluso says. The environment is key; its not a meeting, its an experience. Our executives and the customer executives leave having had this incredible experience. Encouraged by the resounding success of its Executive Advisory Council (which still meets after three years), Avaya launched two more councils in 2004: The Customer Contact Council (CCC) brings together nearly two dozen senior executive members from companies considered to be at the leading edge of customer service. The CCC operates similarly to the EAC but with a narrower focus around leveraging next-generation customer contact. The Federal Government Leadership Forum (FGLF), sponsored by Avaya in conjunction with Northrop Grumman, is a distinctly different gathering of public and private sector leadersincluding U.S. government, military, civilian, and intelligence agency CIOs and other technology players. The FGLF focuses on improving homeland security through assured communications and greater collaboration among government agencies as well as between the public and private sectors. As noted previously, Avaya also convened the first meeting of its EMEA EAC in 2006.

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Why Networks of Leaders Are Different

Leader-to-Leader Dialogues: The Network Difference
Mark Bonchek is the co-founder of Tapestry Networks, Avayas partner in producing its customer councils and industry forums. Bonchek identifies several factors that make Avayas leader-to-leader dialogues distinctly different and valuable relative to surveys, focus groups, one-to-one meetings, and other means of gathering customer insight: Unmediated insight from top leaders. Its direct input from customers to executives, Bonchek explains, and these are the people who have the authority and leadership to make something happen within their businesses and even across their industries. Taking off the provider/client hats. One-on-one executive meetings are almost always in the context of sales or servicethere's a deal on the table or a service issueso participants cant step back to see where value could be created, he says. In the council, Clients are able to take off their customer hat, and similarly the providers can take off their seller hat, so there can be real collaboration. The result is a change in mindset about the strategic assumptions underlying the business strategy. Market-driven thought leadership. Councils collaborate on and co-create thought leadership that is not only market-tested but market-driven. It resonates in a way that typical marketing campaigns dont, because it reflects the way that customers think and talk about the issue with their peers.

Beyond Relationships: Turning Councils into Engines of Insight and Impact

Beyond building relationships, all of Avaya's councils provide serious forums for learning and sharing ideas at a strategic level of business discussion. For example, a key goal for Avaya was getting customers to grasp the increasingly strategic impact that converged communications and IT would have on their business.

When Light Bulbs Turn On

Finding common conversational ground has not always been easy. We had been talking about voice applications really lying within the business applicationstrue convergence, Watkinson says. It took, I think, three meetings before the light bulb went off and there was an aha moment for the council membership. You could see the changes, even the expressions on their faces. It was, she says, a visceral reminder for a company that lives and breathes our technology that even though weve been talking about [these things] for years, for our audience [these ideas are] still quite new. Equally important to the ongoing strategic dialogue is enabling customers to find common conversational ground among themselves. One tremendous benefit of the councils is that the customer members "realize they are not alone," Watkinson explains. "Their peers in the room have the same concerns, the same things keeping them up them up at night. As a result, The conversations are very stimulating to everyone ... Sitting down with people who are leaders in their industry, with very large and complicated communications networks, talking about where things are going, how things will change. It's qualitatively different, she says, from listening to an analyst relate an important emerging trend. Its exciting to hear that, but its much more exciting to partake in it.

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Accountability to the Customer

The councils ability to set the stage for aha moments has had as great an impact on Avaya itself as on its customers. In fact, thats a key element of the value proposition for participantsthat they have an opportunity to shape Avayas strategic direction and hence Avayas ability to support participants businesses and serve their customers. Demonstrating accountability to council members is an essential part of the program. According to Maluso, We can now track key inputs from these customers and see what we did with themdid we shape our business strategically?and sometimes we find out we didnt do enough. Because we made a commitment to report back to customers, we do a report card on ourselves. After she and her colleagues synthesize key council learnings, Maluso also leads the critical effort of driving those lessons throughout the organization. The Executive ViewPoints that Tapestry Networks publishes after council meetings help (Figure 1), but Maluso notes that different internal audiences need to hear different things. For example, after the November 2005 EAC meeting, I had 42 different conversations at Avaya, Maluso says, noting that what sales, marketing, R&D, IT, and other groups need to hear is very different. I take the synthesis and share it with them, emphasizing the points relevant to them as an audience. Maluso also notes that its not a scientifically significant sample sizelearnings from the council are not marching orders. You have to take them as trends, insights, color commentaries to the other data and inputs you have. But council meetings help Avaya senior leadership gel together a lot of input points into something they can visualize and intuitively feel, she explains. This dialogue gives them this step-away perspectiveand what better way to see the big picture than through the eyes of your customer? Figure 1. Sample Avaya Executive ViewPoint

Source: Avaya, 2006

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Thought Leadership and ERM: Leveraging the Council Effect

Since the first meeting, Avaya has used council discussions to continually refine its external marketplace messages and go-to-market strategy. Avaya also quickly realized that it needed to develop an organizational infrastructure to not only manage the councils but also to use the issues and ideas that surface in the councils to help the company connect with a broader set of customers.

A Foundation for Executive Relationship Management

With the councils as the foundation, Avaya built its ERM programs to reach beyond the small set of customer leaders engaged in the councils themselves (Figure 2). These ERM programs include: Executive forums. Thought leadership accelerates when customer executives are given an opportunity to discuss top-of-mind issues with other executives who have common business issues. Avaya's peer-to-peer forums for 60 to 80 C-level executives from its top customers are more educational and informational than its councils, which are purely advisory. Executive sponsorship program. Select customer executives are matched in a one-on-one relationship with Avaya executives, who become the customers executive advocates throughout Avaya. By knowing the customer as an individual, each sponsor opens doors for Avaya's account teams and executive leadership to increase revenue and drive the company's business strategy to prosperity. Figure 2. Program Structure: Avaya Executive Relationship Management
Thought Leadership Content Executive Councils Executive Forums Executive Dinners Regional Executive Forums Federal Government Leadership Forum Executive Workshops Communication Plans Member Database Metrics/Reporting
Source: Avaya, 2006

Sponsorship Program Customer Value Report

Strategic Planning

Member Tracking

In the fall of 2005, the first Avaya Executive Forum brought together 57 attendees for a dinner and daylong event. Avaya leveraged its councils during the event in several high-impact ways. The theme, communications as a source of competitive advantage, had been vetted thoroughly in Avaya Customer Contact Council (CCC) discussions, and three CCC council members actually

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anchored the event on Avayas behalf. The venue was also organized to foster peer-to-peer interaction, with small tables of eight, where customers could interact with each other and a senior Avaya executive. It was the most amazing thing," says Ross, former director of executive relationships. "We really couldnt get the customers to stop talking. And customers talking to customersthat's the most powerful kind of networking you can do. Avaya's sponsorship program helps build executive relationships in a more traditional way, by focusing on key individuals. Maluso tracks approximately 300 strategic customer executives in a custom database. The personalized data she collects ensures that Avayas top leaders are fully briefed prior to meetings with customers, especially when they are asked to parachute in to help the account team. The personal information also supports executive sponsorshipspairing senior Avaya and customer executives. Weve made a lot of progress in matching the right executive with the right customers, looking for opportunities for natural relationships, Maluso says. For both of these customer programs, the Avaya councils have functioned as powerful content engines, generating valuable thought leadership, marketing, and sales support materials, including: Strategic discussion starter documents Briefings Case examples Guiding questions This content becomes another way for councils and ERM to support the sales process. We talk about it as solution selling, but its really scenario selling, Maluso explains. In a council environment, you draw from each others experience, and that becomes a scenariohere's what we did, we changed this process, created this network. Relationships allow you to get to that information. This gives Avaya sales reps the capability to elevate conversations that happen every day.

Results: Bringing the Marketplace Close to the Organization

The value customers receive from the councils is evident in their high levels of participation. In fact, Avaya is considering splitting its councils into multiple sessions to accommodate customer interest in the strategic dialogue. In addition, companies that are members of one of Avaya's councils have seen their own use of communications technology evolve to the point where many of them are now leading the innovation curve in this area and creating real differentiation for their firms. The benefits to Avaya are similarly impressive. With the deeper insight the councils provide on specific industry issues, Avaya is learning how to more effectively market its solutions within specific vertical industries. Its driving us to talk to our customers differently, to really focus on messaging from a vertical perspective, Maluso says. Customers have to be able to apply it to their business. Customers need to hear technology in their language. At a more fundamental level, the Avaya councils and ERM efforts help sustain the companys continued evolution from a high-tech firm into a customer- and market-driven provider of technology-based business solutions. At Avaya, councils have influenced the offers we bring to market, the marketing messages we use, the sales organizational structure, and, of course, the direction in

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which we evolve our technology. For example, council members (all from global companies) complained that Avaya was fragmented in its global execution, Maluso explains, so we have executed a number of improvements in this area." The most important outcome our relationship-building program has created is an avenue for our executives to learn from our customers, without there being a sales or service issue involved, Maluso concludes. It enables them to keep the marketplace up front in their minds as they develop their business. Culturally, it brings the customer closer to our organization.

Lessons Learned
Launched amid the tumult of the new millennium, Avaya embraced its need to build strategic customer relationships, not merely to influence customers buying decisions but also to enable customers to exert their influence on the Avaya organization and go-to-market strategy. As the company has developed and learned how to run its councils and ERM initiatives, five critical lessons have emerged: Success takes sponsorship from the topand senior-level managers to run it. Councils and ERM programs dont require large staffs to support them, but theres no substitute for senior-level involvement. At Avaya, the CEO is the champion, his entire top team participates, and very experienced marketing and sales executives oversee the day-to-day programming. Leverage third-party guidance. Tapestry Networks had a big part in this, and I would advise anyone to have a third party help you get going, at least, Maluso says. [Tapestry] provided an independent view about what needed to happen with an important set of customers we had high emotions around. They give advice on content and interview our customers, who trust them as an objective player. Make learning sticky after council events. Because it is soft learning, its easily lost after the event [when] the next tactical thing comes up, Maluso warns. Its very important that what is learned with the council is disseminated enough so it sticks, so you can revisit the data before the next meeting. Otherwise its nice to learn but at the end of the day doesnt really change anything. Listen more than you talkand dont be afraid of not knowing the answers. I think Avaya has learned over the past three years that its okay not to have the answer, Watkinson says. Its okay for a customer to bring something up and for us to say, We'll go and work on it. Iterate and leverage. Think of this as an iterative process, Maluso says. The first time you hold a council, you may justify it by saying, We can get more salesbut you have to push to make sure its not a sales meeting. Then you get excited about the learning, and when you learn, it ends up fostering more sales.

Acknowledgments
ITSMA would like to thank the Avaya Global Marketing team, including Nancy Maluso, Jill Ross, and Sharon Watkinson, as well as Mark Bonchek of Tapestry Networks, for their assistance in preparing this ITSMA Case Study. Rob Leavitt and John DeWitt, July 2006

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